Understanding the IRS Emphasis on BSA Filings in Tax Crime Investigations

The Internal Revenue Service (IRS) places significant emphasis on the role of Bank Secrecy Act (BSA) filings in supporting the work of its Criminal Investigations (CI) division. Their recent report indicates that an impressive 88% of investigations initiated in FY2023 were linked to BSA filings, which include suspicious activity reports (SARs), currency transaction reports (CTRs), and other related documents. 

The IRS January 2024 report on the use of the BSA filings is here.  The report raises important observations about the IRS’ CI investigative priorities and procedures.

Key Considerations and Trends:

• Focus on Complex Financial Crimes: The strong correlation between BSA filings and CI investigations suggests the IRS is primarily targeting complex financial crimes that leave traceable patterns within the banking system. This focus aligns with the BSA’s purpose, which is to detect and deter money laundering, tax evasion, and other illicit financial activities that often involve intricate concealment tactics.

• Increasing Reliance on BSA Data: Compared to the previous year’s figure of 83% of CI investigations involving BSA filings over three years, the FY2023 report’s 88% demonstrates a potential trend of increasing reliance on BSA data within IRS investigative strategies.
• IRS Internal Prioritization: Investigating how the IRS-CI selects cases and whether BSA filings serve as a significant filter in case prioritization would shed light on the agency’s broader approach to tax crime enforcement.

Conclusion

By analyzing these considerations, we can develop a more nuanced understanding of the IRS’s investigative priorities and how BSA reporting shapes its approach to tax-related crimes. Taxpayers impacted by BSA filings, including suspicious activity reports (SARs) and currency transaction reports (CTRs), show be concerned.

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