Purpose: This IRM provides guidance on processes and procedures for all undercover operations.

Audience: All employees working in Criminal Investigation.

Policy Owner: Director, Special Investigative Techniques (SIT).

Program Owner: Director, SIT.

Primary Stakeholders: Director, SIT.

Contact Information: N/A.

Goal:

The use of undercover operations is a lawful technique used in the detection and investigation of tax fraud, political corruption, organized crime, money laundering, narcotics trafficking, questionable return preparers, and other priority areas related to tax crimes.

Undercover operations may be controversial and potentially dangerous undertakings requiring significant financial and personnel resources. Therefore, judicious decision making must be practiced with regard to the use of undercover techniques.

The successful use of undercover techniques rests on the prudent and judicious application of the technique. The long term success of this technique is a direct function of the ability, training, and support of our undercover operatives. To ensure that our operations are supported, management must demonstrate unwavering concern for the welfare of our undercover agents.

When not functioning as undercover agents, special agents with undercover training assigned to field offices, are expected to work a complete range of assignments. Because planned or ongoing undercover operations may require the services of a particular undercover agent on short notice, field office management officials must ensure that undercover agents are available when needed.

Field office management officials, especially those with several trained undercover agents may be required to shift or defer completion of assignments so the undercover needs of another field office are met. This spirit of cooperation is essential for the continued success of the undercover program.

An UPM from Special Investigative Techniques (SIT) will be assigned to each area office and have the following responsibilities:

Undercover activities are classified as either Group I or Group II. All Group I undercover operations must be approved by the Chief, Criminal Investigation (CI). Group II undercover operations are approved by the Director, Field Operations.

Requests for undercover operations, including required funding, will be submitted using Form 8354.

Targets for undercover operations must be generated from either a numbered general, primary, or subject investigation. Separate funding should be approved for each specific operation.

An initial undercover request must include sufficient information to evaluate the particular request. In addition to the information required to be provided on Form 8354, each request must include a narrative set forth in the following order:

When it is determined an operation should be elevated from Group II to Group I, a Form 8354 will be forwarded through the Director, Field Operations, to the Chief, CI, Attention: Director, SIT, for approval. The narrative will include the following:

All other requests relating to undercover operations (i.e., additional funding, extension of time, significant deviations) will be made on Form 8354. The narrative will be attached and contain sufficient details to justify the request. The narrative for significant deviations should stand alone and not refer to sections approved in previous requests or sections pertaining to other approved operations.

In multi-Federal agency investigations (e.g., a joint grand jury investigation with another agency), IRS approval for participation in an undercover operation is not required if all of the following conditions are met:

In multi-Federal agency investigations where the IRS is assuming a prominent role and may be funding part of the operation, IRS approval for participation is required even though the controlling Federal agency has obtained authorization.

When an undercover agent from another agency performs undercover activities solely to benefit the IRS and is not connected to an investigation with his/her own agency, IRS approval must be obtained before the undercover agent begins the undercover operation.

An IRS undercover special agent who performs undercover activities on behalf of another agency and is not connected to an IRS-related investigation must be detailed to that agency.

The SAC in the field office in which the undercover operation occurs is responsible for the supervision of the undercover agent.

Within 30 days of the close of each undercover operation, or within 30 days of the completion of an undercover agent's assignment, the SSA for the operation will evaluate the performance of the undercover agent. The evaluation should be in a narrative format and address the critical job elements applicable to that operation.

Generally, the evaluation of the undercover agent is required at the completion of the undercover operation and should accompany the closing report. However, during long-term undercover assignments an intermediate appraisal may be completed to coincide with the agent’s annual appraisal requirements. All appraisals should be forwarded to the agent’s SSA through the appropriate UPMs.

The agent’s SSA will consider evaluations of an undercover agent’s performance in his/her annual appraisal.

During long-term undercover assignments, the SAC of the field office where the undercover assignment occurs may temporarily promote the undercover agent after a period of 90 consecutive days. This temporary promotion may not exceed the GS-13 level.

Agents will be allowed to continue their status as undercover agents, based on a yearly review by the Director, SIT. The review will consider, but is not limited to:

Undercover agents will avoid acts of entrapment and must observe the Constitutional rights of persons they come in contact with during assignments. However, while acting in an undercover capacity, agents are not required to advise a subject of his/her Constitutional rights as contained in IRM 9.4.5, Interviews.

The undercover agent will report to the storefront cover agent and security cover agent illegal activities which come to his/her attention during the course of the operation. The undercover agent will also specify his/her involvement in the criminal activity.

Information obtained as a result of an undercover operation, which pertains to violations of laws administered by other law enforcement agencies, will be transmitted to the appropriate agencies through channels, provided the dissemination of the information does not jeopardize the undercover operation or agent or violate 26 USC §6103.

If during the undercover operation significant violations of laws enforced by other Federal law enforcement agencies are uncovered, the SAC should consider alerting those agencies for joint participation in the operation. In all instances 26 USC §6103 and the disclosure guidelines will be followed.

The SAC at the field office location of the undercover operation will assign a trained security cover agent.

The principal security cover agent duties and guidelines are outlined in LEM 9.14.3.

The duties of the security cover agent will not be assigned to the case agent or to the tech agent.

In addition to the security cover agent, a storefront cover agent will be assigned to assist the field office. The storefront cover agent will work with the security cover agent on all Group I and Group II operations to ensure the safety of the UCA. The storefront cover agent is responsible for all financial aspects of an undercover operation.

The purpose of the review is to ensure the field office is conducting the operation within the authority of the Plan of Action, there is adequate management involvement, the expenditures are reasonable and necessary, and proper accounting procedures are being followed. In all undercover operations (Group I and II) operational and financial reviews must be conducted upon the conclusion of the first 90 days of the undercover operation and every 90 days thereafter. The financial review should be completed within 30 days of the due date and the operational review should be completed as expeditiously as possible. The specific starting point for the 90 day period when operational and financial reviews are first required to be conducted is the approval date of the undercover operation. The approval date is the date the approving official signs the Form 8354. For example, the specific starting point for a Group I undercover operation is the date that the Chief, CI or designee signs the Form 8354 approving the operation. The specific starting point for a Group II undercover operation is the date that the Director, Field Operations signs the Form 8354 approving the operation.

Operational reviews are scheduled and conducted by the area Undercover Program Manager or a SIT Senior Analyst. Financial reviews are scheduled and completed by the SAC or designee. The only exception is for non-target specific storefront operations, which will be reviewed after the first three months, then every six months thereafter. The review should take place with the SSA, the case agent, the security cover agent, the storefront cover agent, and the undercover agent, if possible. A summary discussion of the review results must occur with the SAC or his/her designee.

A summary of the review of both Group I and II operations, prepared by the UPM, should cover the following areas:

A review summary will be forwarded to the Director, Field Operations, by the Director, SIT. If a review is not conducted, a brief memorandum stating why it was not conducted will be substituted for the review summary.

A Year End Account Report will be prepared by October 31 only for each undercover operation which had approved offset authority (churning) during the previous fiscal year only. (see LEM 9.14.3)

When the SAC determines the objectives of the undercover operation have been accomplished, or cannot be accomplished, or cannot be accomplished without expending an unreasonable amount of resources, he/she should terminate the operation.

Within 30 days after each operation, the SAC will prepare a closing report. The issuance of the operational closing report should not be delayed by expenditures still being made to terminate the operation. The closing report should include the following:

The SAC will forward the closing report through the Director, Field Operations, to the Director, SIT. This report is to be received by SIT no later than 60 days after the close of the operation.

Costs of the operation include:

After operational aspects are closed down, the field office may continue to make expenditures from the approved imprest fund authorization necessary to terminate the operation. These additional expenditures will be reported via a memorandum from the SAC, through the Director, Field Operations, to SIT. This report is to be received by SIT no later than 30 days after the final expenditure. A final closing financial review should be conducted when the imprest fund is closed. (see LEM 9.14.3)

At the discretion of the Director, SIT, a post operational meeting may be conducted, especially involving long term or complex undercover operations. Participants should include the area UPM; the SAC; the SSA; the case agent; the security cover agent; the storefront cover agent; and the undercover agent. Counsel should also be invited to attend this meeting. The Director, Field Operations, and the Director, SIT, may also attend. A formal debriefing should be completed prior to the submission of the closing report. The purpose of this meeting is to assess the operation and evaluate the positive and negative events that occurred.