IRS Bank Secrecy Act Investigation Closed With No Penalties
IRS Bank Secrecy Act Investigation Closed With No Penalties
A Tennessee business owner received IRS letters scheduling a Title 31 Bank Secrecy Act (BSA) examination of his company. The IRS wanted to determine whether the business was operating as an unregistered money services business. The examination covered a six-month period, and the agent scheduled the initial interview at the client’s home.
What we did
We reviewed the IRS notices, the company’s records and its termination documents against the federal definition of a money services business. We also took over all communication with the examiner and to move the interview out of the client’s home and into our office and advocated for the examination to be closed with no penalties assessed.
The result
The IRS closed the examination, confirming the company was not a money services business. The case closed before the first scheduled appointment, with no on-site examination, no interview and most importantly no penalties assessed.
Why it matters
A BSA examination is not an ordinary income tax audit. It is run by a specialized IRS group that enforces anti-money-laundering rules. Businesses that move money across borders, handle large amounts of cash, cash checks or deal in virtual currency can be flagged as unregistered MSBs. The consequences can include daily civil penalties for failing to register, penalties for missed reporting, and in some cases referral for criminal investigation. These examinations also tend to bring related problems to light, such as unfiled foreign bank account reports (FBARs). An attorney who knows this area can often resolve the examination early and keep it from expanding into a broader investigation or even criminal prosecution.
Every case is different. Prior results do not guarantee a similar outcome.
