"itlnittd errata 55mins WASHINGTON. DC 20510 March 8, 2019 Commissioner Charles P. Rettig Internal Revenue Service I 1 I 1 Constitute Avenue, NW Washington, DC 20224 Dear Commissioner Rettig: We write to express our concern about US. efforts to combat money laundering after reports that the Internal Revenue Service (IRS) has in recent years been pursuing fewer cases of violations of the United States tax code and related laws governing ?nancial crimes. We urge you to strengthen enforcement efforts at the IRS, including focusing on tax code violations and ?nancial crimes that may be linked to money laundering. A failure to fully commit to investigating and prosecuting tax fraud can have serious implications in the investigation and prosecution of more serious financial crimes, such as terrorist ?nancing or money laundering. The Financial Action Task Force recommended in 2012 that tax crimes serve as predicate offences to money laundering given that tax and money laundering violations are closely related.' Various divisions of the IRS coordinate to review data collected and enforce money laundering statues. including under the Bank Secrecy Act, in order to expose disguised illicit ?nancial proceeds. However, according to the Treasury Inspector General for Tax Administration (TIGTA), the Bank Secrecy Act efforts have been hamstrung by a lack of funding as well as a lack ofplanning and coordination, and signi?cant staf?ng cuts across the agency.2 Republican-led efforts to cut IRS funding have led to staf?ng decreases throughout the IRS and undermined the agency?s ability to pursue a broad range of civil and criminal enforcement actiOns. Despite the importance of enforcement efforts, a report from the IRS released on November 14, 2018, shows that the number of special agents in the Criminal Investigations unit responsible for investigating money laundering, violations ofthe Bank Secrecy Act, and criminal violations of the tax code is at its lowest level in almost 50 years.3 According to TIC-TA, reductions in staf?ng and funding for I activities have contributed to a signi?cant decline in C1 presence around the United States, as well as a decline in the number ofcases initiated and completed.?I Financial Action Task Force. Best Practices Paper: Managing the Anti-Money Terrorist Financing Poiicy impiications of Voitmtaijv Tat Cainpiiance Programmes. October 2012. 2 Treasury Inspector General for Tax Administration. Tire internai Revenne Service ?s Bank Secrecy .4 ct Program Has lirt'inimai impact on Compiiance. September 24. 2013. ury.govitigtaiauditreoortsi20 I {imports-?20 83607 I 3 Internal Revenue Service. Criminal investigation reicascs Fiscai Year 201' if Report. November 14, 2018. S-annual?report. 4 Treasury Inspector General for Tax Administration. Deciining Resources Have Contributed to Unfavorabic Trends in Severn! Key Criminai investigation Business Resrtits. September I3, 201?. [ll Treports?tfitltl? Recent reports indicate that fewer ?nancial crime investigations may also be the result of a larger shift of enforcement priorities at the IRS. ProPublica investigations for example,5 paint a picture of the IRS preforring to investigate crimes such as Ponzi schemes or the IRS disproportionately focusing on working class Americans who claim the earned income tax credit rather than investigating more straightforward tax code violations that could be linked to money laundering. According to a TIGTA July 2018 report, the IRS has also taken little to no action on compliance under the Foreign Account Tax Compliance Act, which would require banks with American account holders to report information to the United States. As such, there have been a number of recent reports of wealthy Americans hiding money from the IRS overseas, with exposure of criminal activity only resulting from investigations pursued for other matters. In addition, the European Commission this month adopted its new list of countries it identi?ed as having weak anti-money laundering and countering terrorist ?nancing regimes, which troublingly included 4 out of 5 American territories." When the IRS pursues fewer civil and criminal enforcement actions, it also forfeits billions of dollars in lost revenue. Every $1 invested in tax enforcement could produce $6 in revenue, with additional, indirect savings from deterring tax evasion potentially worth more than three times that amount? Increased investments in enforcement could go a long way in reducing the estimated $458 billion tax gap. 8 We will continue to ?ght for increased IRS funding so that the IRS has the resources it needs to fully enforce our tax laws. However, the threat of money laundering in the United States only continues to grow and money laundering is closely linked to tax evasion, it is critical that the IRS strengthen its efforts to crackdown on criminal activity. As such, we urge you to strengthen enforcement efforts at the IRS, and correctly prioritize tax violations and ?nancial crimes, including money laundering. Sincerely, be MM Senator Richard .I. Durbin Senator Sheldon Whitehouse 5 Pro Publica. Who More Likeiy to Be Attditeci' .4 Person Making or 3-100, 000? December l2, 20l3 European Commission. Commission Delegated Reguiutton C(20t9} t326 Directive (EU) 20i5f849 oftite European and ofthe by high?risk third countries H-?ith strategic deficiencies. February 13, 9. reguiation Department of Treasury. interred! Revenue Service 9 Budget in Brief: 2018. 3 Internal Revenue Service. Tax Gap Estimatesfor Tar Years 2008-201? 0. April 2016. . go it i uh." newsroomi taxilfol? gap @432 Uesti matesWiQGfo ugh%2020 I 0.pd f. [444/ enator Elizabeth Warren Senator Richard Blumanthal Senator Barnard Sanders