Don't Mess With Taxes

Special agents with the Internal Revenue Service Criminal Investigation have an impressive conviction rate on their case. (Photo by Unsplash+ in collaboration with Getty Images)

Fiscal 2023 was a good year for the Internal Revenue Service Criminal Investigation division.

The law enforcement unit initiated more than 2,676 criminal investigations, identified $37.1 billion from tax and financial crimes, and obtained an 88.4 percent conviction rate on prosecuted cases.

Those figures were part of IRS CI's Fiscal Year 23 Annual Report released this week. They were attained by following the money, which is a key technique of the only federal law enforcement agency that spends 100 percent of its time on financial investigations.

"Following the money is what we have done for more than 100 years," said CI Chief Jim Lee in announcing the annual report's findings. In FY 2023 (FY23), IRS CI seized $271 million in assets. That's around the same amount as previous years.

It's also why, added Lee, "We continue to be one of the highest, if not the highest, contributors to the Treasury Executive Office for Asset Forfeiture year in and year out."

IRS CI by the numbers: CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code. But in addition to alleged tax crimes, the unit's cases include narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft, and more.

IRS CI had particular success in FY23 in closing the tax gap. The 1,409 tax crime investigations initiated during that period resulted in CI officers recommending prosecution in 655 cases, and — wait for it — 655 criminal sentences imposed.

Of its 1,267 non-tax investigations the last fiscal year, IRS CI reports 1,173 prosecutions recommended, and 824 individuals sentenced.

"The flow of illegal funds around the world is estimated to be in the hundreds of billions of dollars," according to the report. "CI special agents are experts at uncovering money trails through traditional and virtual financial banking systems."

Data to break down, and break up crimes: To stay hot on the many money trails, IRS CI uses data analytics to identify and investigate complex financial crimes.

During FY23, CI investigators queried Bank Secrecy Act (BSA) data in over 89.6 percent of their investigations, and 14 percent of CI's investigations were initiated based on BSA information.

CI also utilized data analytics to support over 1,300 questionable refund and return preparer investigations, 231 of which included identity theft, in FY23.

Additionally, CI's team seized over 1.7 petabytes of digital data from over 3,300 computer devices in support of investigations during the fiscal year.

Partnerships abroad: That approach during the fiscal year from Oct. 1, 2022, through Sept. 30, 2023, included digital money tracking and partnering with law enforcement agencies, both within the United States and internationally.

In July 2023, a CI investigation conducted with assistance from the Joint Chiefs of Global Tax Enforcement led to the indictment and arrest of an international tax advisor accused of concealing millions of dollars of income for high income Americans.

CI's participation in the Joint Criminal Opioid and Darknet Enforcement (JCODE) Task Force played a major part in the success of Operation SpecTor. In addition to a wide array of U.S. agency involvement, this investigation involved the international partners Eurojust, as well as officials in Austria, France, Germany, the Netherlands, Poland, Brazil, Switzerland, and the United Kingdom.

This global financial crime fighting operation netted 288 arrests and the seizure of 117 firearms, 850 kilograms of drugs that included 64 kilograms of fentanyl or fentanyl-laced narcotics, and $53.4 million in cash and virtual currencies.

And at home: Domestically, the IRS CI report includes case examples for each of its 20 U.S. field offices.

Seattle, Oakland, Los Angeles, Phoenix, Denver, and St. Louis comprise IRS CI's Western Area. The Northern Area is home to CI offices in Chicago, Cincinnati, Detroit, Boston, Newark (N.J.), New York, and Philadelphia. The Southern Area's field offices are in Dallas, Houston, Atlanta, Tampa, Miami, Charlotte, and Washington, D.C.

The report has an interactive map for each area (PDF document pages 17, 18, and 19) where you can find details on the cases investigated by CI officers near you.

Since Central Texas is under the Houston office's purview, I checked out its cases last fiscal year.

H-Town CI agents' investigatory highlights included a former Mexican governor and presidential candidate going to prison for money laundering; a former Air Force civilian employee who got a more than 15 year jail sentence for a 10-year bribery scheme that targeted the Air Force, Army, and U.S. General Services Administration; and a prison honeymoon for the ringleader of a sham marriage scheme that targeted immigrants.

Tax Felon Friday: The success of IRS CI means the good guys, not the tax criminals get the spotlight in this week's Tax Felon Friday feature.

The tax agency's criminal investigators' 88.4 percent conviction rate is near the top among all law enforcement agencies. "What that means is if you get in the crosshairs of an IRS CI special agent, it's highly likely that you're going to go to jail," said Lee.

IRS Commissioner Danny Werfel also lauded the investigative team.

"IRS Criminal Investigation plays a vital role for tax administration and law enforcement, and the results from the past year dramatically illustrate the results," said Werfel. "Criminal Investigation's work has identified tens of billions of dollars on issues including tax fraud, money laundering and cybercrimes. The work of Criminal Investigation employees – who often put themselves in harm's way to get the job done – continues to make a difference in helping uphold tax laws and protect taxpayers."

You can catch up on previous tax crime posts, including those that were published long before I gave them a special designation, in the, what else, tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.

You also might find these items of interest:

• IRS criminal unit stops $10 billion in tax fraud despite steep drop in staff
• IRS-Criminal Investigation tax crime efforts pay off domestically and globally in FY22
• Top 10 IRS criminal tax cases in 2022 include reality TV stars, a celebrity attorney, and Ponzi schemes

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