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Published February 1998 in the National Association of Attorneys General newsletter, June 1998 in Money Laundering Monitor newsletter and September 1998 in Banker's Hotline newsletter
Do you ever wonder what happens to those currency transaction reports (CTRs) and suspicious activity reports (SARs) that you file with the IRS Detroit Computing Center (DCC)? Whether they are filed in paper or electronic format, a number of things happen before the information is made available to authorized persons in law enforcement agencies.
Receipt of Currency Reports
After the currency reports are received at the DCC, they are sorted by the type of currency report and reviewed for completeness. The chart below demonstrates the various types of reports and the volumes received in a calendar year.
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Report
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Requirements
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Filed in CY 96
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Currency Transaction Report (CTR)
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Filed by financial institutions that engage in a currency transaction in excess of $10,000 |
12,752,124 |
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Currency Transaction Report Casino (CTRC)
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Filed by a casino to report currency transactions in excess of $10,000. |
151,314 |
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Report of Foreign Bank and Financial Accounts (FBAR)
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Filed by individuals to report a financial interest in or signatory authority over one or more accounts in foreign countries, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. |
149,149 |
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IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business
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Filed by persons engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or two or more related transactions within a twelve month period. |
128,772 |
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Suspicious Activity Report (SAR)
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Filed on transactions or attempted transactions involving at least $5,000 that the financial institution knows, suspects, or has reason to suspect the money was derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and financial reporting requirements (structuring) |
56,114
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Building the Currency Banking and Retrieval System (CBRS)
Most financial institutions file their reports via magnetic tape which is uploaded directly into the Currency Banking and Retrieval System data base at the DCC. In fact, approximately 60% of the currency reports are filed on magnetic tape. The remaining 40% arrive at the DCC in paper format and are entered onto magnetic tapes by IRS and uploaded onto the CBRS.
There are specific time frames in which CTRs and SARs are required to be posted to the CBRS. All CTRs (plus Forms 8300 and FBARs) must be entered into the CBRS within 30 days of receipt and all SARs must be entered within 10 days of receipt.
In addition to the currency forms filed, the CBRS contains information from Currency Monetary Instrument Reports (CMIRs). These reports are filed with the U.S. Customs Service by an individual who physically transports, mails, or ships, or causes to be physically transported, mailed, shipped or received currency or other monetary instruments in an aggregate amount exceeding $10,000 into or out of the United States. There were 162,389 CMIRs filed in calendar year 1996.
The Currency Banking and Retrieval System
The data in the Currency Banking and Retrieval System, except for the information from Forms 8300, can be accessed by federal, state, and local law enforcement agencies and is used as an investigative tool. Because of the disclosure restrictions of the Internal Revenue Code, the information on Forms 8300 can only be viewed by employees of the Internal Revenue Service (IRS), and a limited few agencies meeting certain IRS safeguarding requirements. Only Department of Treasury agencies have direct access and download capability to the CBRS data. Each month, there are an estimated 100,000 queries to CBRS by Department of Treasury agencies.
Although the CBRS data base resides at the IRS Detroit Computing Center, Financial Crimes Enforcement Network (FinCEN) is the regulatory agency responsible for the information contained on currency transaction reports. FinCEN was appointed official responsibility under the Bank Secrecy Act (BSA) statute. FinCEN contracts with the DCC to input and preserve the data for access by federal, state, and local law enforcement agencies.
Other Federal, State, and Local law enforcement agencies can gain authorized access to CBRS through the FinCEN Project Gateway. The foundation of Project Gateway is providing access to BSA information to assist state and local law enforcement agencies with their anti-money laundering and financial crimes investigations nationwide. All 50 states, the District of Columbia and the Commonwealth of Puerto Rico maintain signed agreements with FinCEN authorizing their access to the Gateway system. During Fiscal Year 1997, Gateway’s authorized users completed over 57,660 queries on the system.
The Gateway system saves investigative time and money because subscribing agencies conduct their own research on the system. Subsequently, Gateway electronically captures the information gathered on incoming inquires and automatically compares this information to prior queries. This enables state and local agencies to coordinate investigations among themselves and with Federal agencies. After obtaining the required dissemination authorization, FinCEN provides an automated report to each agency that has an interest in their same investigative subject. These reports are called "Gateway Alerts," and contain the index-level data and contact points so that the agencies involved may coordinate their investigations and share intelligence.
Analyzing the Data in the Currency Banking and Retrieval System
The combined currency information in the Currency Banking and Retrieval System is extremely important for tax administration and law enforcement. The information provides a paper trail or roadmap for investigations of financial crimes and illegal activities, including tax evasion, embezzlement, and money laundering. IRS Criminal Investigation special agents and Assistant U.S. Attorneys can site case after case where the in-depth review of information contained in one or more of these currency reports has led to a significant guilty plea, conviction, or asset forfeiture action. All in all, these reports often serve as an important method of identifying leads utilized by our special agents in conducting investigations.
Storage and Destruction on Currency Reports
After seven years, the original CTRs and SARs are inventoried, boxed and shipped to the Federal Records Center. The documents are then stored there for an additional three years. After the total life span of 10 years, the original reports are destroyed.
The electronic data in the Currency Banking and Retrieval System is kept current for ten years. After ten years, the information is archived at DCC to an electronic environment for needed historical research.
Conclusion
Does the IRS really use those reports filed by financial institutions? Within a four year period (Fiscal Years 1994, ‘95, ‘96 and ‘97), IRS Criminal Investigation Division initiated 1,030 investigations as a result of information reported by financial institutions. This does not include the number of investigations where the CTR, SAR, CTRC, etc. provided a roadmap to an already on-going investigation. They have proven to be extremely effective investigative tools used in the identification of financial crimes.
Criminal Investigation (CI)
Tax Fraud Alerts
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