IRS Use of Suspicious Activity Reports of Financial Institutions (11/24/12)

Financial institutions are required to file Suspicious Activity Reports with the Financial Crimes Enforcement Network (FinCEN).  31 USC § 5318(g), here; the SAR form is here; FinCEN guidance is here; see also Wikipedia entry here.  For general background, I offer the following from my Federal Tax Crimes book (footnotes omitted):

Although there is no general duty under American law to report crimes, certain financial institutions (including money services businesses and high cash businesses such as casinos) are required to file with FinCen a report, called a Suspicious Activity Report (“SAR,” but not to be confused with the Special Agent’s Report with the same acronym which we encountered earlier).  This SAR combines features of earlier reports and is in addition to the CTR if required.  The SAR is required if the financial institution “knows, suspects, or has reason to suspect the money was derived from illegal activities” or the transaction was “part of a plan to violate federal laws and financial reporting requirements (structuring).”  The financial institution is not required to investigate or confirm that a crime has been committed. The financial institution is prohibited from telling its customer of the filing of the report, even in response to a subpoena.  The financial institution is protected from liability to the customer.  The IRS may share this SAR with the IRS examination function having civil tax responsibility, but components of the IRS receiving the information are required to keep the information secure to the same extent as if received from a confidential informant.

Recently, some divisions of the IRS have released memoranda advising personnel about the control and confidentiality requirements with respect to accessing SAR information.  See e.g., a recent SB/SE Division Memorandum (SBSE-04-1012-063, dated 10/16/12), here, and an estate and gift tax memorandum dated July 13, 2012, here.  See also an earlier Memorandum of Understanding -- in Government acronym-speak, "MOU," referenced and available at IRM 4.26.14, here, Exhibit 4.16.14-2, here.  For some reason, the MOU is reviewable only on line and then on a page by page basis.