Accountability Regarding Currency

Currency Reporting Rules

Potential tax crimes are identified through currency reporting rules. Their purpose is to notify the Internal Revenue Service (IRS) that a potential crime has been committed and that evidence has been gathered to support prosecution.

In order to control the flow of currency of questionable origin into U.S. financial institutions, Congress passed the Bank Secrecy Act (BSA) in 1970. Also in 1970, Congress passed the two-part Bank Records and Foreign Transactions Act, which consists of two sections:

Title I requires banks and other financial institutions to retain certain financial records for periods of up to five years; and
Title II (known as the BSA) has the express purpose of requiring "certain reports where there is a high degree of usefulness in criminal, tax or other regulatory proceedings."

In other words, the BSA requires financial institutions and businesses to file currency transaction reports with the IRS, Customs and the Treasury Department for use in "criminal, tax or regulatory investigations or proceedings."

Additional Business Filing Requirements

In 1984, Section 6050I was added to the Code. It applied to businesses not covered by the BSA and required them to file information reports regarding currency transactions over $10,000. This information, under authority of the IRS, must be filed under Section 6050I on Form 8300.

Whatever other purposes the reporting requirement under Section 6050I serves, there is definitely one notable concern. A properly completed Form 8300 provides the IRS with information needed to verify the source and amounts of certain cash income over a specific figure. A taxpayer who reports cash income without revealing its source may underreport their income. Unless the IRS is able to identify the payer, it must simply take the taxpayer's word regarding this income. The IRS compares the information contained on a completed Form 8300 against the taxpayer's bank deposits to determine the potential for commission of a tax crime.

BSA/Section 6050I Reporting Requirements

The reporting rules for the BSA and Section 6050I, as related to currency transactions, are contained in two statutes: Title 31 and Title 26 of the U.S. Code. As such, responsibility for anti-money laundering and financial crime detection is shared by the Treasury and the IRS.

Currency Offenses

A currency offense my involve something as simple as failure to report a transaction of more than $10,000 to the crime of money laundering. Money laundering became a crime in 1986, when it was added to the Money Laundering Control Act.

Legislation Directed at Currency Transactions

During the 1990s, currency reporting transactions were extended to legislation and regulations enacted during the 1970s and 1980s. In 1992, the Annunzio Wylie Anti-Money Laundering Act authorized mandatory reports on suspicious transactions. Two years later, the Money Laundering Suppression Act directed the Treasury Department to reduce the number of filed currency transaction reports by 30 percent; mandate registration of money transmittal businesses; and clarify the criminal intent required for violation of anti-structuring laws. More recently, in 1998, the Money Laundering and Financial Crimes Act established a new strategy to coordinate federal and state money laundering programs.