The Department of the Treasury has primary responsibility for implementing and enforcing the BSA. The Secretary of the Treasury delegated the authority to administer the BSA to the Director, FinCEN. 31 CFR 1010.810(b)(8) delegates the responsibility to examine and assure compliance with the requirements of 31 CFR Chapter X, Financial Crimes Enforcement Network, Department of the Treasury, for certain entities to the IRS.

31 CFR 1010.810(b)(8) delegates authority to the Commissioner of Internal Revenue to examine all financial institutions, except brokers or dealers in securities, mutual funds, futures commission merchants, introducing brokers in commodities, and commodity trading advisors, not currently examined by Federal bank supervisory agencies for soundness and safety.

FinCEN’s delegation of authority to conduct Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, examinations under Title 31 enables the IRS to share the results of such examination with FinCEN and other federal and state governmental agencies, without Title 26 disclosure issues. IRS retains penalty authority for all Form 8300 filing requirements. A Form 8300 filing requirement under a Title 31 Geographical Targeting Order would be addressed only under Title 31. Starting a nonfinancial trade or business examination under Title 31 and then converting the case to a Title 26 to assess penalties requires special procedures which are discussed in this chapter.

31 USC 5318(b), Limitations on Summons Power, limits the Secretary of the Treasury to act against a domestic financial institution or nonfinancial trade or business or to issue a summons for the purpose of determining compliance with the BSA.

Director, Examination – Specialty Policy is the executive responsible for BSA Examination policy and procedures.

Director, Examination – Specialty Examination is the executive responsible for BSA examination operational compliance.

Chief, BSA is responsible for ensuring general information about basic BSA examiner responsibilities and IRM sections is communicated to and carried out by BSA examiners.

Reports to monitor the current year’s work plan, as well as specific programs, are generated from the Title 31 Non-Bank Financial Institution database. These reports provide Headquarters and Field Examination with timely and reliable information. There are a variety of reports designed to meet the needs of the group or function. Reports used to monitor examination processes include:

Periodic program reviews are conducted to:

The following table is a list of acronyms, and their definitions, used in this IRM

The following table lists terms, and their definitions:

The following is a list of resources related to the information found in this IRM.

A financial institution or nonfinancial trade or business may use Form 2848, Power of Attorney and Declaration of Representative, to authorize their representative to represent them before the IRS in an examination conducted under Title 31. The representative must be eligible to practice before the IRS (see listed categories on Part II of Form 2848).

A Form 2848 used in a Title 31 examination should be completed as follows:

Part II, Declaration of Representative. The representative must complete and sign. The instructions may be used for assistance.

A properly completed Form 2848 meets the requirements in the Statement of Procedural Rules found at 26 CFR 601.503(a), Requirements.

When a related statute determination has been made linking a tax examination with a BSA examination, a Form 2848 should be used. Form 2848 Part 1, Item 3, Description of Matter, should reflect either income tax in the first column or Form 1040, U.S. Individual Income Tax Return, in the second column. When a related statute determination has been made linking a tax examination with an examination for FBAR compliance, examiners should refer to IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures.

A general Power of Attorney (POA), valid under state law, may be accepted for any financial institution or nonfinancial trade or business examined under Title 31. The POA must meet the requirements in the Statement of Procedural Rules found at 26 CFR 601.503, Requirements of power of attorney, signatures, fiduciaries and Commissioner’s authority to substitute other requirements. Examiners must review the POA to ensure these requirements are met.

The first requirement is that the POA must be valid under state law.

The document must contain the essential elements required for representation before the IRS. The essential elements are set out in 26 CFR 601.503(a), Requirements. The elements to check for in the general power of attorney include:

IRS will not accept a POA which fails to include the information required in (a) through (e) above as per 26 CFR 601.503(b)(3), Special provision. The representative may cure any defect by executing a Form 2848, Power of Attorney and Declaration of Representative, (on behalf of the financial institution or nonfinancial trade or business) which includes the missing information.

The direct contact provisions of IRC 7521(b)(2), Right of consultation, and IRC 7521(c), Representatives holding power of attorney, require IRS employees to:

Group managers must ensure employees are properly following the direct contact provisions. Case and workload reviews must address direct contact issues. See IRM 5.1.23.5, Bypassing of Taxpayer's Representative, for a more detailed discussion of bypass criteria and procedures.

A Form 2848, Power of Attorney and Declaration of Representative, or other POA is processed based on the type of examination.

The examiner must prepare the summons by providing all information required on the form. To be enforceable, a summons must be prepared in sufficient detail to meet legal requirements. The summons shall provide:

The BSA summons package must be reviewed prior to being issued.

All summons packages, except the FBAR, are reviewed and approved by the SB/SE BSA Liaison to FinCEN prior to issuance.

FBAR summonses are reviewed and approved by SB/SE Division’s local Counsel prior to issuance. (See IRM 4.26.17.5.3.1 , FBAR Title 31 Summons Approval).

Any delegate of the Secretary authorized to issue a BSA summons, or any other person authorized by law to serve summonses or other process, is authorized to serve a BSA summons. See 31 CFR 1010.914 , Service of Summons, Delegation Order No. 25-13, IRM 1.2.52.14(9) , Delegated to:, and IRM 1.2.52.14(12) , Delegated to:, for a list the IRS officers and employees authorized to serve BSA summonses. The person summoned is given Part A of a BSA summons.

Service of a BSA summons may be made upon any:

Instructions for the handling of the pages and parts of the BSA Summons are as follows:

Certificate of Service. The summons must contain a certificate of service to be signed by the server of the summons. It must be completed immediately after the service. The certificate of service provides proof of the actual service of the summons. The certificate of service signed by the person serving the summons is evidence of the facts it states during a hearing of an application for enforcement of the summons.

Any person authorized to issue a Bank Secrecy Act summons, or any officer or employee of the Treasury Department who is designated by that person, may receive evidence and examine witnesses pursuant to the summons. See 31 CFR 1010.915(a) , Examination of witnesses and records.

Any person authorized by law may administer any required oaths and affirmations. Testimony of any person may be taken under oath and shall be written down or transcribed if under oath. A transcript copy shall be given to a witness upon request, unless for good cause the person issuing the summons determines, under Title 5 USC 555, Ancillary matters, that a copy should not be provided, in which case the witness may only inspect the official transcript. See 31 CFR 1010.915(b) , Examination of witnesses and records.

31 CFR 1010.916, Enforcement of summons, allows any person authorized to issue a summons to request the appropriate U.S. Attorney’s office to enforce the summons in case of refusal to comply with a BSA summons. The request is made from the examiner through their group manager to the territory manager, who will notify the BSA Policy Program Manager. The territory manager indicates approval of the enforcement request by signing it. After approval by the territory manager, the examiner will forward the request through SB/SE Division Counsel to the U.S. Attorney, who may bring an action to compel compliance in any U.S. court within the jurisdiction in which:

When a referral is made for enforcement of a BSA summons, prompt notification must be made through the BSA Liaison to FinCEN’s Associate Director, Office of Regulatory Policy and Programs Division.

Prepare requests for enforcement of a BSA summons using a memorandum report format, to include the following information:

The territory manager signs the memorandum and the request is routed back to the examiner who transmits the original and one copy of the summons through SB/SE Division Counsel to the U.S. Attorney’s office in which the venue lies.

The court may issue an order requiring the person summoned to appear before the Secretary or delegate to produce documentation or to give testimony explaining how the documentation was compiled and maintained, and to pay the costs of the proceeding. Any failure to obey the order of the court may result in a contempt charge. All processes in any case under this section may be served in any judicial district in which such person is found.

Under 31 CFR 1010.915(c) , Disclosure of summons, testimony, or records, delegates of the Secretary or other officer or employee of the Treasury Department may not:

Exceptions to the disclosure prohibitions of 31 CFR 1010.915 :

Disclosures must be approved by FinCEN, except as provided above. A written request for disclosure must be submitted to the Chief, BSA Examination who will forward the request to FinCEN through the BSA Liaison to FinCEN.

The decision to refer a case to FinCEN will depend upon the facts and circumstances of each case. The general standard for a FinCEN referral is significant BSA violation(s) or AML program deficiencies. This, along with indications of willful blindness or recklessness, may warrant a referral to FinCEN.

Willfulness blindness is established when an individual takes deliberate actions to avoid confirming a high probability of wrongdoing and [when he] can almost be said to have actually known the critical facts. Willful blindness can also be made when a person made a conscious effort to avoid learning about the reporting and recordkeeping requirements. The failure to learn of the BSA requirements, coupled with other factors, such as the efforts taken to conceal the existence of the transactions, may lead to a conclusion that the violation(s) was due to willful blindness.

The reckless standard is met if the entity clearly ought to have known that currency transactions were not being reported or records were not being made and the entity was in a position to find out for certain very easily.

In many situations there will not be direct evidence to establish willful blindness or recklessness; therefore, examiners will often need to establish these through circumstantial evidence.

An examiner should consider the following factors in determining whether willful blindness or recklessness exists and whether violations should be formally referred to FinCEN:

Additional violations which may warrant a referral:

The Form 5104 , Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, narrative contains the following sections:

In drafting the FinCEN referral narrative, it is important that the proper font, sentence and paragraph spacing, punctuation, grammar, and proper spacing for numbered and bulleted lists are followed. The narrative must follow the Federal Plain Language Guidelines. Specifically, the following must be adhered to:

The Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, can be downloaded at http://publish.no.irs.gov/catlg.htm.

Items to consider in completing Form 5104 include:

BSA Examination will designate a field staff person to be the BSA Field FinCEN Liaison. This liaison will be responsible for submission of the Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, package to FinCEN. The Liaison’s responsibilities / role is primarily administrative in nature. Examples of duties include:

The examiner will discuss the findings with their group manager to ensure concurrence with the examiner’s recommendation that the violations and AML program deficiencies support a potential referral to FinCEN using Form 5104. It is the examiner’s responsibility to develop the examination and to prepare a professional, complete and technically accurate Form 5104 Package.

The group manager will email their respective BSA Policy Technical Advisor/Program Analyst, with a "cc" to the BSA Policy Program Manager to request a "pre-recommendation" conference to discuss the facts, law, and supposition for making recommendations. The advisor/analyst may provide recommended exam steps if additional issue development is agreed upon.

The examiner will follow the procedures in IRM 4.26.8.7 if there are indications of "willful blindness" or "recklessness" present and a FTA assistance is requested.

The BSA Policy Technical Advisor/Program Analyst will assist with:

The Form 5104 package is completed when apparent violations warrant a referral to FinCEN for potential civil enforcement. The examiner will use the FinCEN Referral Process Training material and the Sample Form 5104 when preparing and assembling the Form 5104 Package. Both documents are available on the BSA SharePoint.

The examiner will forward the completed Form 5104 Package and FinCEN Referral Lead Sheet, (#410-1.1), to their group manager. If edits are recommended, the group manager will return the case to the examiner.

After the group manager reviews the final Form 5104 Package and concludes the referral is acceptable, the group manager will sign the Form 5104 and forward the Form 5104 Package to their territory manager.

The territory manager will review the Form 5104 Package and will return the Form 5104 Package to the group manager if edits are recommended. The territory manager may seek BSA Policy Technical Advisor/Analyst assistance with questions while reviewing the package.

The territory manager will forward the Form 5104 Package to the BSA Policy Program Manager who will assign it to a technical advisor/analyst. The technical advisor/analyst is responsible for performing a "material quality" review. The technical advisor/analyst is to ensure the Form 5104 Package does not contain any material misrepresentation of facts or improper legal conclusions.

BSA Policy will return the Form 5104 Package to the territory manager, along with any recommendations, within 10 business days of receipt.

The territory manager will meet with the group manager to discuss BSA Policy recommendations. If necessary, the Form 5104 Package will be returned to the examiner for editing.

The group manager will forward the final Form 5104 Package to their territory manager for submission to the BSA Field FinCEN Liaison. The BSA Field FinCEN Liaison will forward the final Form 5104 Package to FinCEN electronically and retain a record of the submission.

Examiners do not inform the financial institution that a referral has been made to FinCEN.

No oral or written communication should be given to the financial institution respecting whether the violations appear to have been willful.

The examiner should not contact the financial institution concerning the examination unless requested to do so by FinCEN after the referral has been submitted.

FinCEN may contact the examiner for additional information or documentation on referrals; however, the examiner should not contact FinCEN.

If the financial institution contacts the examiner after FinCEN has contacted them regarding the referral, the examiner is to call the BSA Field FinCEN Liaison who will notify FinCEN that the entity has contacted the examiner. The examiner’s contact with the entity is limited to advising them to contact FinCEN directly.

If it has not been adequately established that the violations were willful:

If the FTA considers that additional examination is warranted:

After the additional examination steps outlined in the FTA's plan of action, the examiner, group manager and FTA will discuss the results and reach a conclusion regarding a criminal referral. The FTA may memorialize this conclusion on the initial Form 13639 or a second follow-up FIRM may be completed and stapled to the initial FIRM.

The FTA will indicate in Part 6 of the FIRM (original or follow-up) the final referral recommendation (either that criminal investigation is recommended, or criminal investigation is not appropriate). The FTA will provide in the Explanation section the reason(s) why criminal referral is not appropriate or, if criminal referral is recommended, the FTA will detail in the Explanation section the firm indications (as may be evidenced by affirmative acts) of willfulness.

The examiner may prepare a BSA - Prime Lead Memorandum when they determine that a referral to Criminal Investigation (CI) is not appropriate because the facts do not show violations which meet criminal/local criminal criteria requirements; however, the examiner believes CI may be interested in the facts. A fillable copy of the Prime Lead Memorandum is available on the BSA SharePoint.

The FTA may suggest a BSA Prime Lead Memorandum to CI when they determine that a referral for criminal investigation is not appropriate. The examiner will complete the Prime Lead Memorandum as set out above.

The examiner will issue the Letter 1112, Title 31 Violation Notification Letter, and follow the guidance on making a Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, referral to FinCEN, if appropriate.

If firm indications (as may be evidenced by affirmative acts) of willful BSA violations exist and criminal criteria (criteria used by CI for case acceptance) are met, the FTA will:

The examiner will suspend all civil examination activity in most cases; however, the examiner and group manager should consider the Parallel Civil and Criminal Referral procedures found in IRM 4.26.8.6.5 if the statute of limitations is of concern, another regulatory authority has made a referral to FinCEN, or any unusual factors are known.

The examiner’s manager will record the suspense on the BSA database by entering the date that the Form 2797 was sent to CI in the appropriate field.

The responsibility for protecting the statute of limitation rests with the examiner and the group manager.

The determination to allow the BSA statute of limitations to expire will be made at a decision meeting attended by CI, the FTA, the examiner and the examiner’s manager.

When preparing Form 2797, Referral Report of Potential Fraud Cases, the examiner will use the most current version of Form 2797. If a related tax examination is ongoing and the tax case is also being referred for criminal investigation consideration, a joint referral will be prepared. Both the tax and BSA violation issues may be placed on one Form 2797. The examiner will follow the instructions attached to the form and insert BSA Violation in Item 2 (f).

Forward the completed Form 2797 to the group manager, via secured messaging, for consideration. A copy of the form will be retained in the case file.

The group manager will review the referral and approve it by entering their name and the date. The form will then be forwarded to the FTA, via secured messaging, for consideration.

The FTA will review the referral and approve it by entering their name and the date. The FTA will also prepare a one-page narrative (used to describe additional facts and/or the willfulness development process). The form and narrative will then be forwarded to the FTA manager, via secured messaging, for consideration.

The FTA manager will review the referral and approve it by entering their name and the date. The form and narrative are forwarded to the appropriate CI field office for consideration. The Fraud Policy Analyst will send a copy of the Form 2797 package to the BSA Liaison to FinCEN. Contact information is available on the BSA Policy SharePoint.

Procedures thereafter are governed by the instructions for the Form 2797. A disposition conference will be held within thirty (30) workdays of receipt of the referral by the CI field office to discuss CI’s decision to accept or decline the referral. If the referral is declined, CI will provide a statement indicating the reason(s) for the declination.

Prior to the disposition conference, it may be helpful for the participants to contact the SB/SE BSA Liaison to FinCEN and/or CI’s Liaison to FinCEN for assistance in determining whether parallel civil and criminal action may be appropriate.

The disposition conference should include a discussion regarding the possibility of parallel civil and criminal actions. A civil monetary penalty may be imposed notwithstanding the fact that a criminal penalty is imposed with respect to the same violation. Parallel referrals may be desirable to protect the statute of limitations, where a referral to FinCEN has been made by another regulatory authority or for other reasons.

If it is determined to have parallel civil and criminal actions, the fact should be noted in the Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, Referral Package.

The Letter 1112, Title 31 Violation Notification Letter, will not be issued due to the criminal referral. The History section of the Form 5104 narrative must include the following statement, "A parallel criminal referral has been made to IRS Criminal Investigation, no Letter 1112 was issued to the entity" .

The CI Liaison to FinCEN will review the package for compatibility with CI needs before the civil referral package is considered by FinCEN. FinCEN will not receive the file for civil penalty action until this review is completed.

If FinCEN reaches out asking for the status of the referral, the examiner should advise them to contact the CI Liaison to FinCEN.

While all items should be completed fully and accurately, items marked with an asterisk (*) must be completed according to the following provision:

IRS completed SARs field information includes:

The examiners must complete the SAR narrative section following FinCEN’s guidance, Guidance on Preparing a Complete & Sufficient Suspicious Activity Report Narrative, which can be found on their website. The SAR narrative is critical. The care with which it is completed may determine if the described activity and its possible criminal nature are clearly understood by investigators. Provide a clear, complete, and chronological description of the activity, including what is unusual, irregular, or suspicious about the transaction(s). The description should cover the material indicated in Parts I, II and III, but the examiner needs to describe any other information that they believe is necessary to better enable investigators to understand the suspicious activity being reported.

The examiner must include a statement at the beginning of the narrative as to why the IRS is filing the SAR.