II. METHODOLOGY

• The Internal Revenue Service drug control budget is composed of two components:



• Currency Transaction Reports (CTR) Processing -- The resources expended to process the CTR forms are taken from agency accounting records. This program activity is reported in a separate account in IRS's budget activities and is scored 100 percent drug-related.



• IRS Criminal Investigation resources used to investigate drug organizations are determined by calculating Direct Investigative Time spent on drug investigations and applying a cost model.

III. PROGRAM SUMMARY

• Internal Revenue Service - Criminal Investigation (IRS-CI) had its formation in the creation of the Intelligence Unit on July 1, 1919. The Revenue Acts of 1913 and 1917 caused the rapid growth of the Bureau of Internal Revenue and resulted in serious complaints relative to alleged tax frauds and employee misconduct. The Intelligence Unit was established in response to these concerns to investigate income tax fraud, employee misconduct, and to perform background investigations on Service and Treasury applicants. In 1952 the Unit became known as the Intelligence Division and on July 2, 1978, was renamed the Criminal Investigation Division.



• The mission of IRS-CI is to foster compliance with the laws under its purview through the effective enforcement of tax and money laundering statutes. A substantial portion of this enforcement activity is applied to narcotics related investigations. IRS-CI has made significant contributions to the nation's anti-drug effort and has fully supported the priorities of the National Drug Control Strategy. IRS-C's assets best support the National Drug Control Strategy in the following areas:

• IRS-CI has fully supported the Interagency Crime and Drug Enforcement (ICDE), and the High Intensity Drug Trafficking Area (HIDTA) Task Force, since their inception. Both the ICDE and the HIDTA Programs are increasingly used to investigate and prosecute money laundering violations associated with narcotics organizations. Since the enactment of the Money Laundering Control Act of 1986 and the Anti-Drug Abuse Act of 1988, IRS-CI has used its expertise in financial investigations as the primary tool to investigate currency crimes and money laundering violations related to narcotics distribution. The added forfeiture provisions of this legislation has made financial investigations an even greater asset in task force cases.



• IRS further supports the National Drug Control Strategy through the improved intelligence capabilities and products of automated information systems. The financial information filed with the Detroit Computing Center (DCC), greatly assists in the investigation and prosecution of money laundering and narcotics-related organizations. The data contained on the currency forms filed with the DCC is used to assist in tracking the flow of currency. This information often provides the basis for the initiation, investigation and related enforcement actions associated with currency crimes, money laundering and narcotics-related violations.

• IRS-CI supports the focus of Federal efforts on large-scale drug trafficking and money laundering organizations.



• Enforcement efforts relative to large-scale drug trafficking organizations are accomplished through IRS-C's efforts to attack money laundering. IRS-CI places great emphasis on asset seizure and forfeiture in these types of investigations.



• IRS-CI is an important contributor to the nation's anti-drug effort and focuses approximately 24 percent of its enforcement activity on the financial disruption of money laundering and drug-related organizations. The wide statutory authority of IRS-CI and its expertise in financial investigations have aided in the identification, disruption and dismantling of major drug-related enterprises.



• IRS-CI is responsible for enforcement of currency reporting, money laundering, criminal tax and forfeiture laws. To enhance its money laundering enforcement efforts, IRS-CI provides foreign source support to the investigations over which it has jurisdiction. This include providing assistance to foreign governments in the establishment and/or enhancement of money laundering, criminal tax, and asset forfeiture laws; developing or improving the exchange of information agreements; conducting financial investigative techniques and money laundering training, and providing liaison with U.S. and foreign law enforcement officials.

IV. BUDGET SUMMARY 1997 Base Program

• The 1997 base program includes $37.6 million for drug-related activities which support Goal 2 of the National Drug Control Strategy. This includes $22 million for investigative activities and $15.6 million for regulatory and compliance activities.



• The FY 1997 base program contains an estimated $33.1 million for drug-related investigative activities which support Goal 5 of the National Drug Control Strategy.



• In addition, IRS anticipates receiving $35.3 million in reimbursable funding to support 361 FTEs from the ICDE for its drug task force activities. Of this amount, approximately $14.1 million and 144 FTEs will support Goal 2 of the Strategy. The remaining balance of

• The total FY 1998 drug control FY 1998 budget request is $72.9 million, an increase of $2.2 million over the FY 1997 enacted level.

• The total drug control request for Goal 2 activities for FY 1998 is $38.3 million, an increase of $0.7 million over FY 1997. Increases represent base adjustments only. $21.2 million and 217 FTEs will support Goal 5 of the Strategy.



• In addition, IRS is requesting $14.5 million (supporting 144 FTEs) in reimbursable funding from Treasury's Interagency Crime and Drug Enforcement Account for Task Force activities that support Goal 2 of the Strategy.

• The drug control request for Goal 5 activities for FY 1998 is $34.6 million, an increase of $1.5 million over FY 1997. The 1998 request includes a $0.5 million enhancement to place special agents in critical overseas posts. Assignment of special agents to strategic foreign posts will facilitate the development and use of information obtained in host foreign nations in support of criminal investigations over which IRS-CI has enforcement responsibility.



• In addition, IRS is requesting $21.8 million (supporting 144 FTEs) in reimbursable funding from Treasury's Bureau of Interagency Law Enforcement for Task Force activities that support Goal 5 of the Strategy.

V. PROGRAM STATISTICS

	1996 Actual	1997 Estimate	1998 Projected
Narcotics Convictions
Non-ICDE Convictions	320	235	235
ICDE Convictions Non-Reimbursable	238	180	180
ICDE Convictions Reimbursable	329	240	240
Total Convictions	887	655	655

VI. PROGRAM ACCOMPLISHMENTS

• Money Laundering is a significant aspect of the IRS-CI Narcotics Program. Money Laundering convictions involve individuals attempting to avoid CTR filings through financial institutions and or Form 8300 filings by businesses. Over eighty percent of narcotics cases include money laundering violations. The remaining narcotics investigations generally involve tax related crimes. For FY 1996, 13.9 million CTRs were processed.