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you and members of your staff in coming up with improvement in that legislative area-rather than just say one at a time that there is merit to these proposals, I would first commit to you that we would look forward to working with Tax Policy and Enforcement at Treasury as well as you because, I think in all of the areas that you mentioned earlier, there is basis for improvement but we want to look at them very carefully so they can get the job done.
Chairman PICKLE. We will do that. We will probably be making recommendations to you that we would like your response. I can understand why you would not want to spur of the moment say, yes, I think we have to increase this to 100 percent.
I think we have to be careful in the definition of cash to include money orders. I appreciate that we have to be careful in making changes.
I think we will be making recommendations to you and we want you to respond.
Mr. MURPHY. We will do that.
Chairman PICKLE. Most of all, we have to take action. I am encouraged by the scope of your investigation and activities now. I am glad to see all the activity that is going on within the Department. I would like to see it brought through to conclusion so that we won't be just a big testimony that you can present, come up here before us and say we are doing all those things.
I want to know what has been accomplished. That is what the committee is after and that is why we are holding this hearing. Mr. MURPHY. We look forward to reporting back to you.
Chairman PICKLE. It is a bad development against our society that we would allow this to go on and everybody look the other way. That simply can't be permitted. Mr. Shaw.
Mr. SHAW. Thank you, Mr. Chairman.
Mr. Murphy, other than much publicized prosecution, what would you suggest that we may do or that you might do to encourage further compliance, whether it be voluntary or whether it be by fear of being caught-is there any type of reporting mechanism that we can put in place?
Mr. MURPHY. What you may do, first of all, in my opinion, is, what you are doing today. I meant what I said about giving us the opportunity to talk about it because I think your interest and our interest is really important. I think the proposals that the chairman mentioned, specific proposals that he is going to put forth for Treasury and IRS and others to consider is another positive step. On the IRS side, continuing to work with Treasury and receiving all the analysis that comes out of the FinCEN operation that you heard about earlier is one, and we do have a very close working relationship with that office and other law enforcement agencies. More specifically with IRS and the subject of this hearing, we have a great obligation, I think, to make sure that the business community has a clear understanding of what is expected and we have to reinforce that. With just having education out there, that is not going to do it. We have to follow through on the investigations, the 50 that are in process, the examination work that is being done looking for leads, and I noted what was said earlier about unreported income that is escaping taxation, it is still money
that is not being reported so we have to broaden our education there. But I think criminal prosecution is the real key.
Mr. SHAW. You referred to an attorney making a large deposit in the bank and then filling out and filing an incomplete 8300-is that common, and what does the IRS do automatically to follow up on such a report that is received, if anything?
Mr. MURPHY. It started with a project where we saw this pattern. I forget the numbers that I had in my testimony on that-about 900 and several were incomplete and resulted in the assertion of attorney/client privilege. There are 21 cases that are now at the Department of Justice.
I am sure the representative from Justice would comment on it. It is a problem that has gotten a lot of publicity. We are getting excellent support on it
Mr. SHAW. Has that been litigated to determine whether there is an attorney/client privilege?
Mr. MURPHY. I mentioned that there was one case.
Mr. SHAW. I know when I was on the Judiciary Committee we debated that and had defense attorneys coming and trying to get an exemption for attorneys, but the congressional intent is certainly otherwise.
Mr. MURPHY. I am glad to hear that. I think Mr. Keeney will get into that in his testimony. I was just handed a note. We are trying to administer the laws that have been laid down by Congress, and we are getting support through the use of the summons enforcement.
There were 80 summons issued, Mr. Shaw, and as a result 26 cases were referred to the Department of Justice for enforcement. The Department declined five of these referrals and the remaining 21 are currently at the Department awaiting a decision on the initiation of the enforcement litigation that you queried about.
Mr. SHAW. It would appear then that this may be an area of unsettled law at the time until one of the cases is prosecuted or pursued to some type of a appellate conclusion.
Mr. MURPHY. I think that is essentially correct. The Department of Justice is working with us on this.
Mr. SHAW. Does the IRS automatically follow up on an incomplete return that is received?
Mr. WASHBURN. Yes, we do.
Mr. SHAW. Thank you, Mr. Chairman.
Chairman PICKLE. Mr. Murphy, I don't want to take any more of your time-earlier Mr. Anthony inquired of Treasury about the processing of these CTRs and other forms.
A year ago nearly, one of our investigators did go, I think, to Detroit to look into this situation.
We were told at the time before the congressional hearing that these forms were being processed and everything was in good order.
We found out that some 300,000 of the CTRs were not being processed and perhaps as much as a million others of the abbreviated CTRs were way behind, not even being processed.
Essentially, is that a fair appraisal of the situation that existed at that time?
Where are you now with respect to processing these various forms?
It does no good to get these forms filed. They are not even being filed, but if they were-are we up to snuff on it now or are we way behind?
Mr. MURPHY. What you described as taking place a year ago is accurate.
I am pleased to tell you that today we are on top of that processing.
In fact, I am going to the Detroit Computing Center Monday to swear in a new director and will be happy to look into it again. The turnaround today on CTRS is 33 days. On the form 8300, it is 12 days.
We are staying current and Mr. Nunez does a real good job of also keeping an eye on that in his role as the Assistant Secretary. Chairman PICKLE. It sounds like we have a much better condition. I don't recall who testified that all these forms were being processed-it is in order.
I assume it wasn't you that asserted that to us.
Chairman PICKLE. I have heard what you have said now and we are going to take it from that point on and see how we progress. I appreciate your testimony and helpfulness and your cooperation, Mr. Murphy.
On the form 8300s, that was one of the primary reasons for this hearing. We simply have got to do better. If it is the law and the Congress put it in place, it has to be enforced.
We are just going to enforce it now, looking at it seriously.
We want action taken. If we should improve it, we want your suggestions on how to improve the forms and what action we should take.
This goes to the heart of our voluntary tax compliance system and we must address it and do it quickly and do it right so we appreciate your testimony and your cooperation.
Mr. MURPHY. Thank you, Mr. Chairman.
Chairman PICKLE. Give our regards to Mr. Goldberg.
[Additional questions submitted to the IRS and their responses follow:]
36-883 0 - 91 - 6
Enclosed are the responses to the nine questions posed in your October 2, 1990 letter seeking additional information for the record for the September 20, 1990 Subcommittee hearing on money laundering.
Should you have any questions please contact Gayle Morin on
What is IRS's strategy for enforcement of Section 60501?
The IRS strategy to improve compliance with the section 60501 reporting requirements is being developed by drawing from district experiences to develop better methods of educating businesses, conducting civil compliance checks, and coordinating publicity of criminal convictions. There will also be improved methods of tracking IRS accomplishments in both civil and criminal cases. We have established a cross functional group to prepare the details of this strategy and an implementing plan. The group will have recommendations and implementing plans by the end of 1990.
What are the procedures and standards for referral of potential criminal cases for violation of section 60501 to the IRS Criminal Investigation by other functions of IRS?
The procedures and standards for referral of violations of section 60501 having potential for criminal prosecution are outlined in IRM 4234 section 733 (copy attached).