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What is Money
The term “money laundering”
refers to the activities and financial transactions that are undertaken
specifically to hide the true source of the money. In most cases, the money
involved is earned from an illegal enterprise and the goal is to give that
money the appearance of coming from a legitimate source.
Why is IRS Involved in Money
One look at the daily news
is proof that the crimes dealing with or motivated by money make up the
majority of criminal activity in the nation. Tax evasion, public corruption,
health care fraud, money laundering and drug trafficking are all examples of
the types of crimes that revolve around money. In these cases, a financial
investigation often becomes the key to a conviction. For this reason, IRS is
one of the key agencies involved in money laundering investigations.
Money laundering is a very complex crime involving intricate details, often
involving numerous financial transactions and financial outlets throughout the
world. Criminal Investigation has the financial investigators and expertise
that is critical to “follow the money trail.”
Criminal Investigation focuses on money laundering where the underlying conduct
is a violation of the income tax laws or violations of the Bank Secrecy Act.
According to the IRS, money laundering is the means by which criminals evade
paying taxes on illegal income by concealing the source and the amount of
profit. Money laundering is in effect tax evasion in progress.
When no other crimes could be pinned to Al Capone, the Internal Revenue Service
obtained a conviction for tax evasion. As the astonished Capone left the
courthouse he said, "This is preposterous. You can't tax illegal
income!" But the fact is income from whatever source derived (legal or
illegal) is taxable income.
Had the money laundering statutes been on the books in the 1930's, Capone would
also have been charged with money laundering. However, since October 1986, with
the passage of the Money Laundering Control Act, organized crime members and
many others have been charged and convicted of both tax evasion and money
When a criminal has a large amount of illegal income, they have to do something
with it in order to hide it from the IRS. They attempt to launder it to make it
appear as if it was from a legitimate source, allowing them to spend it or
invest it in assets without having to worry about the IRS and tax consequences.
One of the ways to launder illegal proceeds is to move the money out of the United States
and then bring it back in a clean form, often disguised as loan proceeds.
Another method is to channel or co-mingle the money through various business
activities to give the appearance that the money was derived from a legal
a Financial Investigation?
are by their nature very document intensive. They involve records, such as bank
account information or real estate files, which point to the movement of money.
Any record that pertains to or shows the sequence of events involving money
movement is important. The major goal in a financial investigation is to
identify and document the movement of money during the course of a crime. The
link between where the money comes from, who gets it, when it is received and
where it is stored or deposited, can provide proof of criminal activity.
IRS investigations of illegal income cases involving money laundering are
critical components of the nations National Money
Laundering Strategy. The long hours of tracking and documenting financial leads
allows an investigation to go right to the door of the money launderers and
eventually to the leader of the illegal enterprise. A complete financial
analysis and reconstruction of the illegal activity (i.e. a drug organization
or an abusive trust scheme) will document the financial activities related to
unreported income on tax returns and money laundering which is usually key to
securing a conviction.
Money laundering creates an underground, untaxed economy that harms our
country’s overall economic strength. It is a global threat that erodes our