This Week in AML

IRS-Criminal Investigation 2021 Annual Report

This week the IRS published the IRS-Criminal Investigation (IRS-CI) Fiscal Year 2021 Annual Report. IRS-CI is the criminal investigative arm of the IRS. The report provides detailed information about enforcement actions and partnerships from IRS-CI. John and Elliot discuss some of the highlights in the report, including the international scope of IRS-CI investigations and the breadth of its activities outside of tax enforcement, including in the cybercrime space.             




IRS-Criminal Investigation 2021 Annual Report TRANSCRIPT


Elliot Berman: Hi, John, how are you today?

John Byrne: Hi, Elliot. Good, thanks. How are you?

Elliot Berman: I'm good too. So I saw today that the IRS put out its annual report that highlights its investigations just came out of a criminal investigation group. And it's about law enforcement partnerships.

John Byrne: I did. I've always been sensitive to the notion that I think our community fully understands the value of IRS-CI in terms of financial crime prevention and detection, but the public doesn't always.

So I think it's really important that we highlight when the IRS is involved in something that impacts our community. As you know, obviously on our advisory board, we have the former Chief of IRS-CI Don Fort, and he's been great about public-private partnership and the importance of working together.

And you see those themes in this report. The report people should go to the IRS website. We'll put it on our site as well, but there's a number of things, themes that they cover. COVID fraud, money laundering, cybercrime, also some from the various offices around the country. Some of the cases there, some specifics from the global perspective, this is something that Don actually started and his successor, Jim Lee, has continued, and that's the IRS's Alliance with what they call the Joint Chiefs of Global Tax Enforcements, the J5.

They work in a number of areas but push hard on public, private partnerships to deal with financial crimes in various places across the globe. So I thought that was interesting. That's highlighted in there, but also the case examples that are in there [are] very interesting. But as I said upfront, the themes, the areas that they cover, the last thing I'll mention is, according to the press release, 2,500 criminal investigations with a 90% conviction rate, pretty darn good in anybody's book.

Elliot Berman: Absolutely. That's absolutely, if not pretty good; it's actually outstanding. I just think it's fascinating to see. All the things that IRS-CI is involved in, you know, you think about tax enforcement. A lot of people, I think, view that as a pretty narrow area. As a practical matter because, in the United States, any commercial or personal activity that generates anything defined in the tax code as income requires the payment of taxes, or at least the filing of a return to explain why you shouldn't. And so, so many other crimes that we talk about, frauds and thefts and all kinds of things, fall into IRS-CI's purview because of the taxation issue. So they end up crossing into a huge number of areas that our community is interested in because those funds have more often than not flowed through a deposit account or some other instrument in a bank or other financial services company.

So, paying attention to what the IRS is doing, I think is a smart thing and a valuable thing because they're often really looking at stuff on the cutting edge. It's important for all of our listeners and our colleagues to put them right up there, to be honest with FinCEN and, you know, the FBI, and pay attention to them.

John Byrne: Yeah. In fact, and the sections of the report, they obviously go into tax crime, but then the non-tax crime area, they highlight the fact that, as you just mentioned, while FinCEN is the agency that administers the bank secrecy act, they have no criminal enforcement authority. So treasury delegates that to IRS-CI.

So CI actively reviews all the BSA data, and they make the statement. But we've heard many times before they made the statement in the report that they are one of the largest law enforcement consumers of BSA data. So we've always talked about the value proposition of the information. They clearly show that it's not only valuable, but it's essential. The things that they do. 

So that's one. And then, you know, another area that we've been paying attention to in the past year is corruption. They investigate elected and appointed individuals who act in [a] corrupt manner. And you know, that is very important too. Obviously, the FBI does that as well, but, you know, as they point out, corruption by public officials impacts the loss of, results in the loss of taxpayer dollars.

You know, to your point, there's a lot more that IRS does outside of tax, which is pretty important. They also say in the report that they've seized 3.5 billion in value of cryptocurrency, which is pretty amazing. I know they're fairly focused on that, and they have their own cybercrime unit, as well.

So just a lot that's going on there. I'm glad they're starting to get some of the resources that they need, but I think there needs to be more appreciation for what the IRS-CI is able to do

Elliot Berman: Agreed, and we've been, I think, very vocal about the importance of public-private partnership.

I, to the extent that opportunities arise to work with your local, IRS-CI offices and team members, you know, there's a lot of value there because, again, the breadth of what they do and their focus on things that are really specifically aligned with financial crime, enforce compliance and enforcement.

John Byrne: Yeah. The last thing I'll mention to our global partners and clients around the world, IRS-CI has special agents at test chaise in 11 foreign countries. So there is clearly a global nexus to what they do. It's not all solely based on crimes committed in the United States.

Elliot Berman: Right. And that is valuable.

Just like, several other law enforcement agencies in the US have a foreign anti [inaudible], because as we've talked many times, crime doesn't really know any borders.

John Byrne: That's right.

Elliot Berman: So I'll do the first shameless plug. If you liked today's podcast, you can find other podcasts in this series and other podcasts that we've done on Spotify, Apple Podcast, or wherever you get your podcasts.

I also want to remind everybody that we're taking off next week, but we are going to repost an archive edition. So if you can't go a Friday without a hearing from John and I, there will be an archive edition available to you next week. And John, how about our next webinar?

John Byrne: Alright, the next webinar will be on December 16th. It's going to deal with updates in the anti-human trafficking space. We'll have panelists from academia, the financial sector, and one of our great partners from Polaris. So, look for that on December 16th. And then, if you get another opportunity to, go to our website. I recently did a two-part podcast with a law professor and lawyer practicing lawyer, Tom Vartanian. He's got a book out about financial panics in the US as sort of a historical look at those. We did it in two parts because he had so much information. I think you'll find that both interesting and valuable.

Elliot Berman: Okay. John, have a great weekend. And if I don't talk to you, have a wonderful and safe Thanksgiving.

John Byrne: Thanks. Same to you. Take care.

Elliot Berman: Yep. Bye-bye.