The U.S. Treasury Department has proposed that all transactions above $10,000 in virtual currency, such as Bitcoin and Dogecoin, should be reported to the IRS. The proposal would subject virtual currency to reporting requirements similar to cash transactions, including the filing of currency transaction reports (“CTRs”) by banks and other financial institutions. The proposal reflects numerous factors, including virtual currency’s increased public profile and wide fluctuations in value; the U.S. and other governments’ increased desire to regulate if not suppress virtual currencies; and the Biden Administration’s stated policy to crack down on non-compliance with tax laws.
Under the Anti-Money Laundering (“AML”) provisions of the federal Bank Secrecy Act (“BSA”), cash transactions of $10,000 or more generally must be reported to the federal government. These federal procedures, as well as the financial industry’s self-regulation, are intended to detect, track, and deter the movement of illicit funds. CTRs are filed with the federal Financial Crimes Enforcement Network (“FinCEN”), and the IRS may use the data from CTRs to enforce tax compliance. The new proposal would require large transactions in virtual currency to be reported directly to the IRS.
Financial institutions are not required to inform the customer when they file a CTR, but must do so if asked. If the customer, upon learning that a CTR may be filed, modifies or cancels the transaction, then the institution must file not only a CTR but also a Suspicious Activity Report (“SAR”). Unlike CTRs, the filing of a SAR may not be disclosed to the customer. A SAR must also be filed if the institution suspects that a customer is breaking up a larger transaction into several smaller ones in an attempt to avoid the $10,000 threshold. Such conduct, called structuring, is a criminal violation of the federal money laundering statute.
If you or someone you know is under investigation for or charged with tax evasion, structuring, money laundering, or other financial offenses, consult with an experienced criminal defense attorney who is familiar with developments in the applicable law.