By Paul N. Gada, CCH Toolkit Staff Writer
Federal and state governments are stepping up their efforts to combat illegal money laundering activities by businesses across the United States, and the Internal Revenue Service will play a vital role.
The IRS announced on April 27, 2006, that agreements have been reached with 33 states and Puerto Rico to share Bank Secrecy Act information. These agreements will allow the IRS and participating states to share information and leverage their resources to ensure that money services businesses (MSBs) are complying with their federal and state responsibilities to register with the government and report cash transactions and suspicious activities. The agreements will also help the IRS and the states present a united compliance front to MSBs and their representatives.
"We already work cooperatively with over 40 states to combat abusive tax shelters," said IRS Commissioner Mark W. Everson. "This new agreement will help the federal and state governments leverage resources while attacking illegal money laundering."
The Bank Secrecy Act authorizes the Secretary of the Treasury to require financial institutions to keep records and file reports that the Secretary determines may be useful in criminal, tax, or regulatory investigations or proceedings. The regulations issued under the authority of the Bank Secrecy Act generally require financial institutions, including banks, casinos, and brokers, to keep records of, and in some instances report, transactions involving large amounts of cash or cash equivalents. The regulations also require certain nonbank financial institutions to register with the Treasury.
Transactions reportable under the Act include domestic currency transactions exceeding $10,000, exports of currency or monetary instruments, casino or currency exchange transactions exceeding $10,000, and transactions involving foreign bank accounts. Currency transaction reports are required by nonfinancial businesses as well as banks and money transmitters.
Banks, depository institutions and securities dealers and brokers are also required to file reports of suspicious transactions under the Bank Secrecy Act with the Financial Crimes Enforcement Network (FinCEN), an office within the Department of the Treasury that has been designated to receive suspicious activity reports.
Recordkeeping requirements are imposed for transactions by banks, money services businesses, casinos, and dealers in securities who extend lines of credit or otherwise engage in currency transactions. Examples of money services businesses include a currency dealer or exchanger; check casher; issuer of traveler's checks, money orders, or stored value; seller or redeemer of traveler's checks, money orders or stored value; and a money transmitter.
The IRS and participating states hope that the sharing of enforcement leads and better coordination of their efforts will efficiently insure that MSBs are complying with their requirements under the Bank Secrecy Act. Their agreements also provide a united compliance front to MSBs and their representatives.
"These agreements have ushered in an era of enhanced cooperation. Combining the expertise of the IRS with the supervision and examination of MSBs traditionally performed by state banking departments will produce greater results at lower cost," New York State Banking Department Superintendent Diana L. Taylor said. "Just as the IRS is able to leverage the expertise of state financial regulators, our own examination and compliance programs will benefit from access to their critical examination information."
Along with Puerto Rico, the following states have signed partnership agreements with the IRS: Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.
Colorado, Hawaii, Montana, New Hampshire, New Mexico and Montana are prohibited from entering into these partnership agreements with the IRS. Their state laws either don’t allow such agreements or they don’t regulate the industry.
"The states and the federal government need to share information to track the increasingly sophisticated activities of criminal organizations and others," Minnesota Commerce Commissioner Glenn Wilson said. "By establishing a method to report and track cash transactions, we will shed light on a currently little watched aspect of commerce."
Additional information about money services businesses and the Bank Secrecy Act is available on the IRS web site or the FinCEN web site.
Added to the news on May 10, 2006.
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