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Summary: FY 2002 National Drug
Control Budget
April 2001
IV. Agency Budget Summaries
Department of the Treasury
Internal Revenue Service
I. RESOURCE SUMMARY
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(Budget Authority in Millions) |
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2000
Final
| 2001
Enacted | 2002
Request |
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| Drug Resources by Goal |
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| Goal 2 |
$41.484
| $31.418 | $20.730 |
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| Goal 5 |
32.029
| 25.926 | 19.655 |
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| Total |
$73.513
| $57.344 | $40.385 |
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Drug Resources by Function
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| Investigations |
$54.046
| $36.856 | $18.416 |
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| Intelligence |
17.574
| 18.505 | 19.252 |
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| International |
1.893
| 1.983 | 2.717 |
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| Total |
$73.513
| $57.344 | $40.385 |
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Drug Resources by Decision Unit
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| Narcotics Crimes |
$56.379
| $39.359 | $21.678 |
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| Currency Transaction Reports |
17.134
| 17.985 | 18.707 |
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| Total |
$73.513
| $57.344 | $40.385 |
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| Drug Resources Personnel Summary |
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| Total FTEs (direct only) |
817
| 679 | 496 |
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| Information |
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| Total Agency Budget |
$8,118.7
| $8,624.5 | $8,879.8 |
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| Drug Percentage |
0.9%
| 0.7% | 0.5% |
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II. METHODOLOGY
- The Internal Revenue Service (IRS) Drug Control Budget contains two components: Criminal Investigation (CI) and Currency Reporting Forms Processing.
- Traditionally, IRS-CI calculated its support to the federal counterdrug effort based upon percentages of Direct Investigative Time (DIT) applied to the Narcotics Program. Pursuant to IRS-CI's recent reorganization and restructuring, accounting for Narcotics Program resources has been changed beginning with FY 2001. Accordingly, program commitment will now be reported utilizing the total number of Full Time Equivalents (FTE) in lieu of DIT percentages.
- The IRS-CI Narcotics Related Financial Crimes Program supports Goals 2 and 5 of the National Drug Control Strategy through the investigation and prosecution of narcotics and narcotics money laundering organizations. IRS-CI has set the FY 2001 Narcotics Program resource level at 797 FTE, comprised of 365 direct and 432 reimbursable FTE. The IRS request for appropriated Narcotics Program resource levels will decline as the IRS continues the implementation of its reorganization. Ultimately, the IRS intends to rely on reimbursement for all of these investigations. In FY 2001, the reduced appropriation level for the IRS was offset by increases in ICDE reimbursements.
- Currency Reporting Forms Processing: IRS resources are expended to process Currency Reporting Forms required by the Bank Secrecy Act (Title 31), namely, Currency Transaction Reports (CTR's) and Casino Currency Transaction Reports (C-CTR's), Suspicious Activity Reports (SAR's), and Foreign Bank Account Reports (FBAR's) as well as Form 8300, Cash Payments in Excess of $10,000 Received in a Trade or Business, required by the Internal Revenue Code (Title 26). The forms are processed for reporting banks, financial institutions, and money services businesses, as well as retail businesses. This program activity is reported in a separate account in the IRS's budget activities and is scored as 100 percent drug-related, supporting Goals 2 and 5 of the National Drug Control Strategy.
III. PROGRAM SUMMARY
- The mission of IRS-CI in federal law enforcement's anti-drug efforts is to utilize the financial expertise of its agents to identify and impede the transfer of illegal proceeds generated by the manufacture and distribution of illegal drugs. The mission focuses on the disruption and dismantling of the country's major domestic and international narcotics and narcotics money laundering organizations through investigation, prosecution, and asset forfeiture proceedings. Prosecutions involve the criminal statutes contained in the Internal Revenue Code (Title 26), the Bank Secrecy Act (Title 31), and the Money Laundering Control Act (Title 18) of the United States Code.
- IRS-CI promulgated an international strategy that placed special agents in strategic foreign posts to facilitate the development and use of information obtained in host nations in support of criminal investigations. The international strategy provides for direct foreign source support to the investigations over which IRS-CI has investigative jurisdiction.
- IRS-CI supports the overall IRS mission by the investigation of criminal violations under its jurisdiction through three program areas: the Legal Income Tax Crimes Program, the Illegal Income Financial Crimes Program, and the Narcotics-Related Financial Crimes Program (Narcotics Program). The Narcotics Program supports the National Drug Control Strategy and the National Money Laundering Strategy through continued support to joint agency task forces, including the ICDE, The High Intensity Drug Trafficking Area (HIDTA), and the High Risk Money Laundering and Financial Crimes Areas (HIFCA). Additionally, IRS-CI is implementing a series of Task Forces to be used as a catalyst for the development of significant tax, narcotics, and non-narcotics money laundering cases. IRS-CI has identified two emerging issues in the narcotics arena to be implemented in concert with the established task forces that require orchestrated and coordinated focus: The Wire Remitter Services Project and the Bulk Transportation of Currency Project. To ensure coordination of activities, IRS-CI participates in the money laundering section at the Drug Enforcement Administration Special Operation Division and is an executive-level member of the Counterdrug Intelligence Coordinating Group. IRS-CI also assists in developing money laundering and asset forfeiture legislation through international training and assistance programs.
IV. BUDGET SUMMARY
FY 2001 Program Level by Strategy Goal
Goal 2: Increase the safety of America's citizens by substantially reducing drug-related crime and violence.
- Of the total counter-narcotics funding received by the IRS, $31.4 million supports IRS-CI's effort in the investigation and prosecution of drug organizations, including domestic money laundering organizations. IRS-CI utilizes the financial investigative expertise of its special agents to increase the safety of America's citizens by substantially reducing drug-related crime and violence. Through resources applied to the Narcotics Program, IRS-CI supports joint agency task forces including ICDE, HIDTA, and HIFCA, and sponsors and assists in covert money laundering initiatives to identify, disrupt, and dismantle the systems and criminal organizations that launder narcotics proceeds.
- IRS-CI directs its investigative efforts in drug enforcement towards financial investigations that meet standards set by the ICDE program. IRS-CI's financial investigations of tax and money laundering violations, arrest and prosecution of the leaders, and seizure and forfeiture of the narcotic organization assets, contribute to strengthening law enforcement for the purpose of dismantling major domestic and international criminal narcotic organizations.
- IRS-CI is implementing a series of Task Forces to facilitate the development of significant tax, narcotics, and non-narcotics money laundering cases.
- IRS-CI will implement projects targeting narcotics money laundering organizations that uses wire remitter services and the bulk transportation of currency in their narcotics money laundering activities. The illegal use of wire remitter services by sophisticated narcotics organizations offers the narcotics trafficker/money launderer an immediate, efficient, secure, and reliable method of transferring huge sums of illicit funds over short period of time. Another IRS-CI initiative targets the Bulk Transportation of Cash. The transportation of large sums of cash is a very reliable warning sign of drug trafficking activity and widely used method for the movement of millions of dollars in narcotics proceeds.
Goal 5: Break Foreign and Domestic Drug Sources of Supply
- Of the total counter-narcotics funding received by the IRS, $25.9 million supports IRS-CI's Goal 5 activities.
- The IRS-CI strategy in counterdrug activities is to prevent the smuggling of narcotics into the U.S. by reducing the profit motive to criminal organizations. This is accomplished through continued support to joint agency task forces including ICDE and HIDTA, use of asset forfeiture, and through assistance in developing money laundering and asset forfeiture legislation.
- IRS-CI is currently organizing two projects, the Wire Remitter and Bulk Transportation of Currency initiatives, in order to identify domestic and international criminal money laundering organizations that are utilizing the non-bank wire remitter industry, or transporting large quantities of currency from, into, and within the United States.
- IRS-CI is participating in the money laundering section at the Department of Justice, Special Operations Division (SOD), which is heavily concentrated on domestic and international narcotics-related organizations.
- IRS-CI is also an executive-level member of the Counterdrug Intelligence Coordinating Group that focuses on international counter-narcotics efforts.
- The IRS-CI's International Strategy places special agents in strategic foreign posts to facilitate the development and use of information obtained in host nations in support of criminal investigations. The IRS-CI maintains permanent overseas posts in Bogota, Colombia, Mexico City, Mexico, Frankfurt, Germany, Hong Kong, China, and Ottawa, Canada. A second special agent was posted in Mexico in FY 2000. IRS-CI Special Agents assigned to foreign posts work with their host governments to develop laws that establish and/or enhance anti-money laundering statutes, criminal tax statutes, and asset forfeiture statutes. Numerous foreign governments worldwide have requested IRS-CI assistance in developing money laundering and asset forfeiture legislation. The international strategy provides for direct foreign source support to the investigations over which IRS-CI has investigative jurisdiction, to include money-laundering violations.
FY 2002 Significant Program Changes
- The President's FY 2002 Budget includes a total of $40.4 million in drug-related resources for the IRS. The FY 2002 request reflects a decrease of $17.0 million from the FY 2001 level.
- The $17.0 million reduction in drug-related funding is attributed to the IRS's continued implementation of recommendations in the Webster Report. As a result of the IRS decision, IRS-CI will continue to rely more heavily on reimbursements through the Interagency Crime Drug Enforcement appropriation to fund narcotics investigations.
- In FY 2001, the reduced funding of IRS-CI narcotics investigations was offset by an increase in funding for those investigations through ICDE. In FY 2002, the ICDE request for funding to reimburse IRS-CI for narcotics investigations was maintained at the FY 2001 level.
V. PROGRAM ACCOMPLISHMENTS
- In FY 2000, IRS-CI:
- Initiated 1,029 narcotics-related investigations,
- Recommended prosecution on 812 narcotics-related investigations,
- Achieved a narcotics-related conviction rate of 88.4 percent,
- Applied 21.8 percent of Direct Investigative time to the Narcotics Program, and
- Realized $45.7 million in forfeited narcotics-related assets.
- The effectiveness of CI's Counternarcotics operations is demonstrated by the results of our investigations. The following are highlights of a few of our significant investigations:
- Operation Cash Back (Alemania). In a blow against narcotics money laundering, 24 indictments were returned in Miami, Florida, and more than $4 million was seized, against 60 defendants in the United States and Colombia. Operation Cash Back began in 1996 and centered around the IRS Form 8300, which is required for cash transactions of $10,000 or more. Those indicted were part of a black market peso exchange, a money laundering method that utilizes drug proceeds in the purchase of domestic merchandise that is eventually shipped to Colombia for resale. This IRS-led OCDETF operation was the largest Form 8300 enforcement project ever undertaken by the IRS. The defendants face money laundering and failure to file Form 8300 charges, punishable by up to 20 years and five years imprisonment respectively.
- Operation Capricorn. This IRS-led OCDETF investigation determined that two brothers from the Somerville, NJ, area were members of a Colombian money-laundering cell that frequented various post offices for the purpose of converting large amounts of currency into numerous U.S. Postal Money Orders. These money orders were subsequently mailed to Cali, Colombia for sale on the black market. The investigation identified targets in New Jersey, New York, and Colombia through the analysis of financial records, tolls analysis, trash retrieval, physical surveillance, and electronic surveillance, including wire interception. The main defendants and several conspirators have entered guilty pleas but have not yet been sentenced. Other defendants are either awaiting trial or are in fugitive status.
- Operation Hotwheels. A marijuana distributor and 26 associates were investigated for money laundering and drug sales in the Long Island, New York area. The investigation documented the movement of drugs by a parcel shipping company from California to New York, and the bulk shipment of over $3.5 million in cash to recipients in California by the US Postal express mail. Thirteen arrest warrants and 6 search warrants were executed in New York and California. In addition to the arrest of 22 individuals, several hundred thousand dollars in assets were seized including 8 homes, currency, bank and brokerage accounts, and jewelry.
- Operation Weed Whacker. This IRS-led OCDETF investigation involved the activities of a cocaine and marijuana smuggling organization that operated in Hillsboro, Texas. The organization was responsible for importing narcotics from Mexico at points of entry in South Texas, and distributing it throughout the Michigan, Illinois, North Carolina, and Arkansas via concealment in boat hulls transported by tractor-trailers. Seven defendants have pled guilty to narcotics conspiracy and money laundering and are cooperating with law enforcement in this continuing investigation. Sentences have ranged from 12 to 37 months incarceration with varying degrees of fines.
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