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Part 4. Examining Process

Chapter 26. Bank Secrecy Act

Section 3. Role of the Bank Secrecy Act Coordinator

4.26.3  Role of the Bank Secrecy Act Coordinator

4.26.3.1  (12-12-2006)
Overview

  1. This section describes the role of the Bank Secrecy Act (BSA) Program Coordinator. The BSA coordinators will be responsible for coordinating, monitoring, and reporting the activities of the BSA and/or Form 8300 compliance programs.

4.26.3.2  (12-12-2006)
BSA Coordinator Responsibilities

  1. The BSA coordinator is responsible for:

    1. Identifying non-bank financial institutions (NBFIs) under IRS jurisdiction subject to the BSA and non-financial trades and businesses (NFTBs) subject to Form 8300 requirements;

    2. Clearing identified NBFIs and NFTBs through CI;.

    3. Notifying newly identified NBFIs using Letter 1052;

    4. Maintenance of databases;

    5. Building case files for selected workload;

    6. Assigning the initial grade of case using the case assignment guidelines;

    7. Coordinating, monitoring, and reporting the results of BSA and Form 8300 compliance examinations and compliance activities stemming from BSA leads;

    8. Acting as the contact point for technical or procedural questions and problems related to Currency and Banking Retrieval System (CBRS) and the Title 31 database;

    9. Providing management information reports;

    10. Coordinating with other operating divisions to ensure the accuracy of data, as well as proper customer contact and coordination;

    11. Assisting in the preparation of the BSA Territory work plan; and

    12. Selecting BSA and Form 8300 workload for Territory BSA examiners using a risk-based approach that includes such factors as:

    • Utilizing law enforcement or other regulatory agency tips

    • Concentrating on High Intensity Drug Trafficking Areas (HIDTAs) and High Intensity Money Laundering and Related Financial Crimes Areas (HIFCAs)

    • Detecting unusual Currency Transaction Reports (CTRs) and/or Suspicious Activity Reports (SARs) filing patterns

    • Focusing on the Money Services Businesses (MSB) principal (as opposed to the agents)

    • Examining entities with previous problems

    • Identifying entities with a non-functional anti-money laundering compliance program.

  2. If Form 8300 and Title 31 coordination responsibilities are handled by different people, they must work together closely, since the two programs together comprise the IRS SB/SE BSA program.

4.26.3.2.1  (12-12-2006)
Identification of BSA Entities

  1. The BSA coordinator will identify for examination those entities for which IRS has BSA jurisdiction. Most entities under IRS jurisdiction are commonly referred to as nonbank financial institutions (NBFIs). IRS also has delegated authority to examine banks and other financial institutions that are not examined by federal bank supervisory agencies for safety and soundness. Thresholds determine if some financial institutions are subject to the BSA. ( See IRM 4.26.5.) NBFIs currently include:

    1. Money Services Businesses (MSB), subject to certain transaction thresholds

    2. Casino and Card Clubs (including Indian tribal casinos)

    3. Insurance companies subject to the AML compliance program requirements of the BSA

    4. Dealers in precious metals, jewels and gems subject to the AML compliance program requirements of the BSA.

  2. MSBs (subject to certain threshold amounts) under IRS jurisdiction include:

    1. Currency Dealer or Exchanger

    2. Check Casher

    3. Issuer of Traveler's Checks, Money Orders or Stored Value

    4. Seller or Redeemer of Traveler’s Checks, Money Orders or Stored Value

    5. Money Transmitter.

  3. The following sources may be used to identify NBFIs:

    1. External databases

    2. Field contacts

    3. Physical observation

    4. Telephone books

    5. Currency Banking and Retrieval System (CBRS)

    6. Neighborhood publications

    7. Trade or Business Associations

    8. Office of Research and Analysis

    9. Detroit Computing Center (DCC) special reports

    10. The Internet

    11. State and local licensing and/or regulatory agencies

    12. Criminal Investigation Referrals

    13. MSB agent lists received from examiners.

  4. The BSA coordinator will rely on input from field examiners for some information sources.

  5. The Integrated Data Retrieval System (IDRS) or other tax-based systems may not be used to locate information for BSA purposes.

  6. When it is determined that an entity is an NBFI, the entity should be added to the Title 31 database.

  7. BSA compliance activities at a particular financial institution may identify other BSA entities.

  8. CBRS is one of the most effective tools in BSA compliance efforts. For more information on CBRS and the program coordinator’s use of CBRS, refer to IRM 4.26.4.

4.26.3.2.1.1  (12-12-2006)
Notification After Identification

  1. Notification of the BSA reporting and recordkeeping requirements is accomplished by issuance of Form Letter 1052 and the required attachment. See Letter 1052 at See Exhibit 4.26.3-1.

  2. The requirement to furnish a copy of the current regulations (31 CFR, Part 103) to MSBs has been eliminated. For MSBs, the Letter 1052 must include as an attachment a copy of the FinCEN publication " Money Laundering Prevention, A Money Services Business Guide." In an effort to minimize shipping costs and to coordinate BSA group orders, SB/SE BSA Territories should submit one publication order for each Territory. FinCEN has specifically asked that individual BSA Examiners refrain from placing individual orders. These free publications are currently available by calling 1-800-386-6329. Orders can also be placed online at the FinCEN web site: www.fincen.gov.

  3. The requirement to furnish a copy of the current regulations (31 CFR, Part 103) to NBFIs which are not MSBs, e.g., casinos, will continue until FinCEN publishes further industry specific guidance.

  4. Prior to notification, the names of financial institutions will be furnished to CI for clearance. CI clearance must be documented in the case file.

  5. The date that the Letter 1052 was issued must be documented in the file.

  6. A copy of Letter 1052 will be retained in the file.

4.26.3.2.2  (12-12-2006)
Identification of Form 8300 Entities

  1. The BSA coordinator is responsible for identifying for examination, trades or businesses that regularly conduct transactions in excess of $10,000. Resources that can be used to identify trades or businesses include:

    1. Classified section of the phone book and the business to business phone book for listing of trades or businesses that may engage in transaction(s) requiring the filing of Form(s) 8300.

    2. Realtors’ listings

    3. Leads from Criminal Investigation (CI)

    4. Currency and Banking Retrieval System (CBRS)

    5. State law enforcement agency data

    6. Information from other compliance examinations

    7. Internal and external databases

    8. Field contacts

    9. Physical observation

    10. Neighborhood publications

    11. Office of Research and Analysis

    12. Detroit Computing Center (DCC) special reports

    13. Newspapers, magazines or other periodicals

    14. The Internet.

  2. For 8300 cases to be examined under IRC 6050I, the BSA coordinator should review IDRS to verify that there are no assignments controlled to W&I, SB/SE, LMSB, TE/GE or CI.

  3. CBRS is one of the most effective tools in our compliance efforts. For more information on CBRS and the program coordinator’s use of CBRS, refer to IRM 4.26.4.

4.26.3.2.3  (12-12-2006)
Database Maintenance

  1. The BSA coordinator is responsible for maintenance of the Title 31 database and any other inventory databases.

  2. The BSA coordinator can accurately respond to management inquiries and complete management information reports if the databases are properly and timely updated at all levels in the organization.

  3. The BSA coordinator acts as the contact point for questions regarding the databases.

4.26.3.2.4  (12-12-2006)
Selection For Assignment

  1. The BSA coordinator should select entities for Title 31 or Form 8300 examinations using risk-based analysis to identify those entities with the highest potential for noncompliance for examination such as:

    1. Entities with a high volume of cash transactions or abnormal cash activity

    2. Entities in local geographic areas with high potential for money laundering such as HIDTAs and HIFCAs

    3. Entities which have a previous history of non-compliance

    4. Entities which have been cited for poor or inadequate recordkeeping

    5. Entities with unusual CTR/SAR filing patterns

    6. Entities that are the subject of law enforcement/regulatory agency tips

    7. Entities with gross revenue disproportionate to CTR filings

    8. Anomalies in bank CTRs/SARs filed on the entity

    9. Entities that are not registered as MSBs but appear to be MSBs by other indications

    10. Entities identified through other BSA examinations, such as those identified during a centralized examination of another entity.

  2. When selecting NBFIs or NFTBs for compliance examinations, the BSA coordinator should consider the priorities in the current BSA program letter, the annual work plan, available resources, case grading guidelines, and balanced coverage (geographic area and industry).

  3. Input from the FinCEN and other IRS operating divisions (e.g., TE/GE or CI) can assist the coordinator in assessing risk.

  4. Prior to opening the examination, the names of selected entities must be forwarded to CI for clearance.

  5. The BSA coordinator will provide the examiner with the administrative file for the selected entity. The administrative file will include the following items as part of the case building process:

    1. Prior case history or prior case file, if applicable

    2. Documentation of CI clearance

    3. Case selection method or origination (i.e., referral, CBRS analysis, Internet, etc.)

    4. CBRS data – summary sheet of transactions

    5. Other information to confirm address and business type – for example, web page print or yellow page information

    6. Case grading checksheet

    7. Copy of Letter 1052 (Title 31 cases)

    8. Customized checksheet if applicable

    9. Case control document.

  6. The BSA coordinator should prepare a Case Control Document (CCD) to update the status, as well as document case assignments and case actions.

  7. 8300 compliance examinations under IRC § 6050Imust be controlled on ERCS.

  8. The selected case files will be sent to the BSA group on a Form 3210.

4.26.3.2.4.1  (12-12-2006)
Monitoring Examinations in Process

  1. The BSA coordinator will monitor all in-process BSA and Form 8300 compliance examinations in order to meet overall program goals through review of Monitoring Reports.

4.26.3.2.5  (12-12-2006)
Screening of Closed Cases

  1. The BSA coordinator will receive all closed case files and review them to capture pertinent information needed to prepare reports and update the Title 31 database and ERCS.

  2. The Title 31 database, ERCS and any other inventory monitoring database must be updated to reflect the date and results of the compliance examination.

4.26.3.2.6  (12-12-2006)
BSA Information Leads

  1. A by-product of the BSA program is information about the financial transactions of businesses and individuals that may have material Title 26 compliance potential.

  2. The BSA coordinator will forward the income tax leads that are generated from BSA or 8300 examinations to the appropriate PSP coordinator on the Form 5346.

  3. The number of Forms 5346 prepared will be monitored and reported.

4.26.3.2.6.1  (12-12-2006)
Referrals From Criminal Investigation for Use in Title 31 Compliance Activities

  1. Referrals may be received from CI on Form 3449 , Referral Report, about the activity of a NBFI. The source of this information may be from a Suspicious Activity Report (SAR) filed by a financial institution.

  2. Because this information is to be used in a Title 31 matter, information from the SAR, including the name of the filing financial institution, can be included in the case file.

  3. The BSA coordinator is to exercise independent judgment on the appropriate BSA compliance activity to be taken as a result of receiving a CI referral. Any action, such as assigning the case for a BSA compliance examination, is to be based on the same criteria used to identify any other BSA work. The BSA program staff is not to work at the direction of CI.

  4. No SAR information, including the existence of a SAR, may be disclosed in the course of any BSA activity to the examined entity or to any other person or entity outside the IRS.

  5. Civil and criminal penalties may apply with respect to the unauthorized disclosure of SARs. Such disclosures undermine the very purpose for which the suspicious activity reporting system was created - the protection of our financial system through the prevention, detection, and prosecution of financial crimes and terrorist financing. The unauthorized disclosure of SARs can compromise the national security of the United States as well as threaten the safety and security of those institutions and individuals who file such reports. An unauthorized disclosure of SAR information is a very serious matter. All such unauthorized disclosures by IRS personnel will be investigated. The IRS is committed to continuing to work with the Financial Crimes Enforcement Network (FinCEN), the federal functional regulatory agencies, law enforcement, and the financial services industry to ensure that the information contained in SARs is safeguarded.

  6. Any requests for a copy of a SAR or for information relevant to the SAR will be forwarded to the BSA Policy Program Manager.

  7. SARs, like all reports filed under the BSA are exempt from the disclosure provisions of 5 USC 552, Freedom of Information Act (FOIA).

4.26.3.2.6.2  (12-12-2006)
Form 8300 Compliance Review Leads From Criminal Investigation

  1. Referrals may be received from CI on Form 3449, Referral Report about the activity of a trade or business subject to Form 8300 reporting requirements. The source of this information may be from a SAR filed by a financial institution.

  2. Because this information is to be used in a Title 26 matter, information from the SAR may be included in the case files but without any reference to the SAR. The name of the filing financial institution may never be included.

  3. The BSA coordinator is to exercise independent judgment on the appropriate Form 8300 compliance activity to be taken as a result of receiving a CI referral. Any action, such as assigning the case for a Form 8300 examination is to be based on the same criteria used to identify all other Form 8300 work. The BSA program staff is not to work at the direction of CI.

  4. Since it has been determined that disclosing SAR information would identify a confidential informant and would seriously impair a civil or criminal investigation, the use of these leads in Form 8300 compliance activities is restricted in the same manner as their use in income tax examinations ( See IRM 4.2.15). The Form 8300 examiner is prohibited from doing the following:

    • Disclosing to anyone outside the IRS that a report has been filed;

    • Proposing a reporting violation based solely on information contained in Form 3949, Criminal Investigation Information Item;

    • Disclosing a source or possible source of the information;

    • Conducting the review in a manner in which the trade or business could reasonably conclude any of the above. See also IRM 4.26.3.2.6.1(4) and IRM 4.26.3.2.6.1(5).

4.26.3.2.7  (12-12-2006)
Administrative Procedures

  1. The BSA coordinator is responsible for monitoring and reporting on all BSA Program activities. This includes:

    1. Maintaining BSA inventory on the Title 31 database;

    2. Establishing and maintaining Form 8300 cases examined under IRC § 6050I, on ERCS;

    3. Preparing reports;

    4. Shipping historical files to DCC;

    5. Assisting with training;

    6. Responding to requests from management;

    7. Coordinating with other divisions, as well as local, state and federal agencies;

    8. Monitoring the BSA web site at http://sbse.web.irs.gov/FR/BSA; and,

    9. Physical control of unassigned BSA inventory.

  2. The BSA coordinator will establish the initial year of an 8300 examination under IRC § 6050I,on ERCS as:

    1. Non-Master file record

    2. Activity Code: 509

    3. MFT: A2

    4. Source Code: 99

    5. Primary Business Code: 201

    6. Secondary Business Code: 89900

    7. Employee Group Code: locally identified

    8. Tax Period: year and month case established on ERCS, i.e., 200508 for a case established in August 2005

    9. Tracking code: see See Exhibit 4.26.3-3. ERCS tracking codes for 8300 cases

    10. Status: 08

    11. TIN – If unknown, locally assign "Dummy" TIN using this format: XX 2YYYMM ZZZ where:

    • XX is the two digit Territory code

    • 2YYYMM is the six digit year and month established.

    • ZZZ is a three digit chronological number.

  3. When the 8300 case is assigned to the field, the ERCS status code will be updated to status 10. ERCS will automatically generate a Form 3210 which will be used to physically transmit inventory to the field.

  4. If the BSA coordinator needs additional technical or procedural assistance not found in this IRM chapter, the following steps should be taken:

    1. Consult with the manager

    2. Consult the BSA web site at http://sbse.web.irs.gov/FR/BSA

    3. Contact with the BSA Policy staff for additional assistance

    4. Contact the BSA Policy Liaison to FinCEN for FinCEN assistance

  5. All contacts with FinCEN are made through the BSA FinCEN Liaison who is on the BSA Policy staff.

  6. All contacts with other Federal Agencies must be made through the BSA Policy staff.

4.26.3.2.7.1  (12-12-2006)
Monthly Reports

  1. A monthly report for 8300 examinations is generated from ERCS and shared with the territories approximately a week after the ERCS closing cycle.

  2. Monthly Reports are generated for Title 31 cases as required by the BSA MOU with FinCEN. See Exhibit 4.26.3-2.

4.26.3.2.7.2  (12-12-2006)
Historical Files

  1. The historical records and documents of Non-Bank Financial Institutions (NBFIs) will be shipped to the Detroit Computing Center (DCC) by the BSA coordinator.

4.26.3.2.7.3  (12-12-2006)
Training

  1. The BSA coordinator may assist in training of examiners assigned to conduct BSA and Form 8300 compliance examinations.

  2. On an ongoing basis, the BSA coordinator will disseminate current BSA technical and procedural information to examiners and management.

  3. The BSA coordinator is the technical expert on CBRS and may be responsible for the training of all new users on CBRS. The program coordinator is the contact point for technical or procedural questions and problems related to CBRS.

  4. The BSA coordinator may be asked to teach BSA classes.

4.26.3.2.7.4  (12-12-2006)
Response To Management

  1. The BSA coordinator will assist in responding to all management requests or questions on a timely basis.

4.26.3.2.7.5  (12-12-2006)
Liaison

  1. Each BSA coordinator should establish a liaison with:

    1. Criminal Investigation

    2. Wage and Investment Division

    3. Large and Mid-Size Business Division

    4. Tax Exempt and Government Entities

    5. State and local government agencies (coordinate with the IRS Governmental Liaisons)

  2. The BSA coordinator should coordinate with the other BSA coordinators with issues affecting BSA activities in other Territories.

  3. The BSA coordinator will follow the most current Memorandum of Understanding (MOU) for each individual state agency, for the exchange of BSA information to ensure that appropriate information is provided to and received from the state agencies.

4.26.3.2.7.6  (12-12-2006)
BSA Web Site

  1. The BSA web site address is http://sbse.web.irs.gov/FR/BSA.

  2. The BSA coordinator should frequently access the web site to obtain the most current program information.

Exhibit 4.26.3-1  (12-12-2006)
Letter 1052

Here is the link to Letter 1052.

Exhibit 4.26.3-2  (12-12-2006)
BSA MOU with FinCEN

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Exhibit 4.26.3-3  (12-12-2006)
ERCS Tracking Codes for 8300 Cases

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