Monday, October 23, 2017

TIGTA Report: Criminal Investigation Business Results

TIGTA recently issued a report titled Declining Resources Have Contributed to Unfavorable Trends in Several Key Criminal Investigation Business Results (Ref. #  2017-30-073 9/13/17), here.

Here is the excerpt of the summary of the findings:


Since FY 2011, reductions in staffing and available funding for CI activities contributed to a decrease in the number and size of CI field offices throughout the United States. While managing its core mission tax work with declining resources, the IRS continued to work general fraud, international, and Bank Secrecy Act (BSA) cases as well. 

For FY 2016, CI was budgeted approximately $576 million to fund programs that investigate potential criminal violations of the Internal Revenue tax laws and certain other laws, and recommend prosecution as warranted. Since FY 2012, the attrition of field special agents resulted in a decline in the number of cases initiated and completed. In FY 2016, CI initiated 3,395 cases, an overall decrease of 34 percent compared to the 5,125 cases initiated in FY 2012.  

Overall, special agents have consistently maintained inventory levels over an average of 5.30 cases per field special agent. Special agent inventories included a focus on international cases. In FY 2016, international cases resulting in sentencing improved approximately 33 percent from FY 2012.  

CI relies on a variety of internal and external sources to initiate cases. The percentage of cases initiated from functions within the IRS has decreased 5 percent from FY 2012 to FY 2016. The percentage of cases initiated from the United States Attorney’s Offices and other Government agency sources increased, representing 64 percent of the 3,395 initiations. 
Between FY 2012 and FY 2016, CI implemented policy changes that affected the BSA and identity theft cases. CI will no longer pursue seizure and forfeiture of funds related to legal source structuring cases under the BSA unless justified by exceptional circumstances. In September 2012, the Department of Justice implemented an expedited and parallel review of proposed indictments arising from stolen identity refund fraud cases resulting in a spike of initiations and completions for FY 2012 through FY 2013 of identity theft cases. 
TIGTA identified a trend of special agent inventory taking longer to turnover because of the increased time it takes for special agents to determine a case did not contain prosecution potential. In FY 2016, it took an average of 540 days (1.5 years) to determine that there was no prosecution potential, while it took an average of 422 days in FY 2012.

Guest bloggers previously wrote about the Microsoft case and the Stored Communications Act.  Peter D. Hardy and Carolyn H. Kendall, Guest Blog on Stored Communications Act Reach to Cloud Storage Outside the U.S. (4/25/15), here.  The panel decision in Microsoft is here, and the order denying rehearing en banc (with concurring and dissenting opinions) is here.
The Supreme Court has granted certiorari in the Microsoft case.  Orin Kerr, Supreme Court agrees to review Microsoft Ireland warrant case (Volokh Conspiracy 10/16/17), here; and Robert Barnes,Supreme Court to consider major digital privacy case on Microsoft email storage (WAPO 10/16/17),here.

The question presented in the petition, here, filed by the United States is:
Whether a United States provider of email services must comply with a probable-cause-based warrant issued under 18 U.S.C. 2703 by making disclosure in the United States of electronic communications within that provider’s control, even if the provider has decided to store that material abroad.
Readers wanting to track the case in the Supreme Court may do so on the SCOTUSblog, here.

In a somewhat related development, a district court has granted search warrants, as modified, issued in a tax fraud and identity theft investigation to obtain emails stored by email service providers. United States v. In the Matter of the Search of Information Associated with Fifteen Email Addresses, 2017 U.S. Dist. LEXIS 159535 (M.D. Ala. 2017), here.    The district court's conclusion is:
The Magistrate Judge's denial of the search warrant applications was not clearly erroneous. Because the constitutional infirmities can be corrected with moderate alterations, however, the Government's search warrants will be issued with the specific modifications described in the accompanying Order. Those limitations impose (1) a date restriction on the data to be turned over by the provider based on an individualized assessment of the accompanying probable cause evidence for each email account, and (2) an instruction applicable to all the accounts that the searches be conducted through keyword searches and other appropriate protocols so as to limit the universe of data to be reviewed to that which is more likely to be pertinent. The Government is free to return and seek additional search warrants based on the new evidence it discovers.
This case apparently does not involve the issue of emails stored on servers outside the U.S., and the opinion does not even mention the Microsoft case.  Still, practitioners should be alert to the possibility of Government investigators obtaining search warrants requiring email service providers providers to produce emails.  Even though Microsoft involves the issue of foreign servers, the Supreme Court's opinion will likely address a number of issues in this increasingly important context.

Switzerland agrees to share tax information on multinationals Reuters
Cites TJN Director and Chair John Christensen: ”There are still some issues in Switzerland regarding tax transparency, but there has been progress, and the move to country by country reporting is a major step forward” 

#TaxJustice Tour in Hungary Global Alliance for Tax Justice

Austalia: Come hide with us – bean counters raid big law firms The Conversation
“Could the incursion be designed also to allow the accounting firms to assert legal professional privilege over tax advice for their multinational clients so they can keep that advice out of the hands of the Australian Tax Office?”

Strengthening regional collaboration in international taxation Tax Justice Network Latin America & Caribbean (In Spanish)

Hong Kong Group to Acquire Liechtenstein Bank finews Asia
‘Just weeks after Luxembourg’s oldest bank was sold to Chinese firm Legend Holdings, a Hong Kong listed conglomerate has also moved into European private banking

Shell Executives Charged With Bribery In Italy PM News Nigeria
“In April, Global Witness and Finance Uncovered revealed that Shell executives knew that $1.1bn they paid for OPL 245 would go to Dan Etete and were likely to be used in a vast bribery scheme”
Rio Tinto: where were the auditors? Tax Research UK