Proposed higher penalties, internat'l tax evasion transfers

[Famspear]

Yesterday, April 28, the U.S. Senate passed Senate Bill 386 (the proposed Fraud Enforcement and Recovery Act of 2009) which, if enacted into law, would (among other things) amend 18 USC section 1956(a)(2) to read as follows (in part):

(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States—

(A) (i) with the intent to promote the carrying on of specified unlawful activity; or

(ii) with the intent to engage in conduct constituting a violation of section 7201 [tax evasion] or 7206 [filing false returns, aiding and abetting, etc.] of the Internal Revenue Code of 1986 [ . . . . ]

shall be sentenced to a fine of not more than $500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater, or imprisonment for not more than twenty years, or both. [ . . . . ]

(bolding and italics added).

The language in (ii) would be added to the statute. This would make international money laundering penalties apply to international transfers, etc., that are part of a tax evasion, etc.

I’m not sure, but I think the bill may be going to conference committee now. (The CCH report says that the House has passed a “similar” bill; no indication that anything is ready to be sent to the President.)

Here is the CCH news release this morning (April 29):

Senate Passes Fraud, Tax Evasion Bill

The Senate on April 28 approved, by a 92-4 margin, a measure that would apply the federal international money laundering statute to tax evasion in an effort to stem the spread of financial crimes. The Fraud Enforcement and Recovery Bill of 2009 (Sen 386) amends [i.e., if enacted, would amend] the federal international money laundering statute to create a new money laundering crime to cover moving money from or through the United States with the intent to engage in tax evasion. This amendment changes [i.e., would change] the previous understanding of the crime of money laundering, which has focused on punishing financial transactions designed to launder the proceeds of criminal activity.

Under Sen 386, the act of tax evasion itself, without the need or any subsequent financial transaction, would be treated as money laundering. This allows tax evasion to be punishable both under the Internal Revenue Code and [if money is transferred internationally] under the federal money laundering statute, which carries far greater penalties.

[ . . . ]The Obama administration on April 20 released an official Statement of Administration Policy (SAP) indicating strong support for the bill and the House Judiciary Committee on April 28 approved a similar measure by voice vote.

By Jeff Carlson, CCH News Staff

--from CCH Tax Research NetWork (online) (from 2009 Tax Day, April 29, 2009) (with my editorial comments in brackets).

[Nikki]

This could have a very serious impact on the sovereignoramuses as they attemp to move their FRNs from one of the 50 States to any of the others, specifically outside the United States.

If any of that transfer happens to go through any part of the Federal Zone, they're in violation.

[ASITStands]

This could have a very serious impact on the sovereignoramuses as they attemp to move their FRNs from one of the 50 States to any of the others, specifically outside the United States.

If any of that transfer happens to go through any part of the Federal Zone, they're in violation.

Silly! You're not supposed to move FRNs but Gold and Silver Eagles.

[Arthur Rubin]

This could have a very serious impact on the sovereignoramuses as they attemp to move their FRNs from one of the 50 States to any of the others, specifically outside the United States.

If any of that transfer happens to go through any part of the Federal Zone, they're in violation.

Especially if they were to mail FRNs, as post offices are clearly Federal enclaves....

[SteveSy]

So putting money off shore which may avoid some taxes nets you the same punishment as murder or being a serial bank robber...boy if that isn't draconian. Maybe they can make excessive bonuses punishable by death next. The way I read it even filing a false return regardless if you put money offshore can net you 20 years.

If I were rich I would just say f-it and move my happy ass to another country where I don't have to deal with the government's total horseshit anymore. The only people who are going to get hit with this are people making around 30k or less. All the rich folk are just going to stick up their middle finger and take their businesses to foreign countries or have top notch lawyers get them out of it.

Maybe they should try and figure out why so many are avoiding taxes rather than trying to punish people excessively. While they're at it let's punish people like Feinstein who are robbing us blind and engaging in insider trading....oh that's right being a criminal in congress is not looked down upon its envied and everyone who is put in the elite positions in government don't "evade" taxes they make easily forgivable errors.

Putting someone like Hendrickson in prison for possibly 60 years serves no purpose. I certainly don't want to support someone like him for that long. I assume each bogus return nets a new count.

[SteveSy]

It's not about having off-shore account. It is about having off-shore account and NOT telling the IRS about them and not reporting the interest/return of the offshore account(s).

So...not reporting interest nets you 20 years come on Cpt....that's very excessive.

Also, moving money off shore is not always about taxes, for a number of folks it is about hiding assets, from spouses, children, business associates, etc. Unfortunately, hiding those assets may contravene things like divorce decrees, business contracts, bankruptcy proceedings, child support, etc.

So because you're hiding money from your ex-wife you get 20 years? Come on!

You get 20 years for robbing multiple banks or killing someone, actually the average for murder is 200 months, about 16.6 years. You could rape someone and get less.

This is about not paying a bill, not paying a bill should never net you 20 frigging years. Doesn't matter who it is you owe.

[jg]

(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States—

(A) (i) with the intent to promote the carrying on of specified unlawful activity; or

(ii) with the intent to engage in conduct constituting a violation of section 7201 [tax evasion] or 7206 [filing false returns, aiding and abetting, etc.] of the Internal Revenue Code of 1986 [ . . . . ]

shall be sentenced to a fine of not more than $500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater, or imprisonment for not more than twenty years, or both. [ . . . . ]

SteveSy, I have highlighted the part that you seem to have ignored.

The penalty is not more than twenty years. So, there is the potential for that amount of time as a sentence; but that would rarely be the sentence for all but the most egregious offenders.
Yes, it is a law with a potentially severe penalty; which by the mere existence of the maximum penalty will have a deterrent effect.

Your disagreement that tax evasion should be deterred does not change the fact that this change in the law will have a deterrent effect on tax evasion.

[SteveSy]

Yes, it is a law with a potentially severe penalty; which by the mere existence of the maximum penalty will have a deterrent effect.

Your disagreement that tax evasion should be deterred does not change the fact that this change in the law will have a deterrent effect on tax evasion.

No it won't....but you can dream if you like. It will merely put people making little in prison for longer periods of time accomplishing nothing. Anyone hiding any significant amount is either connected enough to not get the penalty or will simply move their situation elsewhere.

They tried stiffer penalties for drug related crimes, it hasn't worked, in fact it failed miserably by filling up our prisons with a bunch of nonviolent offenders who we now have to support.

Longer Sentences Do Not Deter Crime
http://www.nytimes.com/1987/10/03/opini ... gewanted=1

Your and the government's inability to accept the facts are a problem of ignoring reality.
Again, its pathetic that we have to threaten people with a potential prison sentence that is more lengthy than the average murder and certainly more than rape.

I don't care if someone hid 10 million dollars, that's not worse than murdering someone or raping them. If we have to resort to these types of draconian laws just to collect revenue for the government purse we have bigger problems than tax evasion. What's next the max penalty of death? A 20 year sentence is considered "life" now in most parts.

They've already increased the penalties for a host of other tax crimes...has it deterred anyone, obviously not they're going for the KGB effect and threatening people with basically life.

[jg]

No surprise at all that increased potential penalties do not deter drug related crime, or crime committed as the means of sustenance and generally any crime that is impulsive or irrational.
But, tax evasion is an economic crime of corruption for which rational analysis is applicable and deterrence can be achieved with increased potential penalties.

Your linked article is not on point. Instead see, for example, the concepts (and references) listed at http://www.nps.edu/drmi/docs/DRMI%20Wor ... 009-02.pdf

According to Becker, any individual with an opportunity to be corrupt evaluates the potential benefits of their actions against the expected costs if detected and punished. Becker conjectures “… individuals become criminals because of the financial and other rewards from crime compared to legal work, taking account of the likelihood of apprehension and conviction, and the severity of punishment.” (p.176) The framework was later extended to include ethical costs of crime. (Block & Heineke 1975; Rasmussen 1996)

Granted, the budget for enforcement will have to be greatly increased in order to make such a statute have significant and lasting effect. For that, I am hopeful that the economic times will force our Congress to take the appropriate measures to adequately increase enforcement.

[SteveSy]

No surprise at all that increased potential penalties do not deter drug related crime, or crime committed as the means of sustenance and generally any crime that is impulsive or irrational.

That's a good way to rationalize the irrational.

Granted, the budget for enforcement will have to be greatly increased in order to make such a statute have significant and lasting effect. For that, I am hopeful that the economic times will force our Congress to take the appropriate measures to adequately increase enforcement.

So why not make the max sentence for all economic crimes 20 years? I mean, they don't have to apply it to everyone its the max after all....your reasoning is flawed. No one should get 20 years for not paying a bill. This is just another step towards a KGB style system where any illegal act against the government shall be punished to the point of absurdity as a deterrent. The only increase after this is life without the ability of parole or death...just asinine.

This law will not fix anything, the problem isn't prison length its how the tax system is applied.


As far as the document you posted that needs to be applied to congress, the most corrupt organization in the U.S. If the government is looking to save money, they need to clean up their own house first before looking in others. There's a hell of a lot more to save there than the 300+ billion in uncollected taxes. Let's set the max to 20 years for any member of congress who is intentionally diverting funds to a business or organization from which they profit from either directly or indirectly. Let's see how they like that economic deterrent....but we all know that isn't going to happen is it.

[jg]

...This law will not fix anything, the problem isn't prison length its how the tax system is applied.

Indeed!
There is far too little enforcement in the current application of the income tax.
But, although not really essential the increased penalties, especially higher fines, can be of some assistance in pursuing more cases, I trust.

...As far as the document you posted that needs to be applied to congress, the most corrupt organization in the U.S. If the government is looking to save money, they need to clean up their own house first before looking in others. There's a hell of a lot more to save there than the 300+ billion in uncollected taxes.

Sorry, I should have known that you were unable, or unwilling, to consider the concepts presented in that article and apply them to another set of circumstances, as I had asked.

[SteveSy]

Sorry, I should have known that you were unable, or unwilling, to consider the concepts presented in that article and apply them to another set of circumstances, as I had asked.

jg, that document was pretty much tailored to government and those who they provide for. That document has nothing whatsoever to do with tax evasion. Certainly if you can claim the article I posted related to crime isn't precise enough to deal with economic crimes then certainly a document showing how to deter corruption in public investment is equally non-applicable to tax evasion or filing a frivolous return.

Furthermore that document is a theory of resolution and has no basis in fact. Where are the statistics that show that increased penalties for crimes reduces said crime? When a criminal faces 5 years for tax evasion vs. 20 years there is no deterrent. Both are ominous but one is draconian. No one is going to say, "hey, the most I'll get is 5 years for doing this." People who commit tax evasion that might receive the 20 year sentence are just as afraid of receiving 5 years as they are 20. Both would destroy their life, they would have nothing when they got out. Their business would be gone and their marriage most likely destroyed. If they're willing to risk 5 years they're just as likely to risk 20.

Consider this...

You said that the 20 year term would only be applied in the most egregious situation, I think that's nonsense besides being subjective but, assuming you're right let's look at it.

Someone who has committed tax evasion and has evaded say 2 million in taxes may qualify in your book. That person certainly is providing jobs and revenue to the people, people who are paying taxes. wouldn't it be in the public's best interest to keep this person making money to pay the taxes he owes and providing economic activity if only they were compliant? Why not focus on getting that person compliant rather than nothing but a tax burden. Yes they avoided 2 million in taxes but what are you losing by sticking them in prison? Well to begin with you're not going to be getting anymore taxes from this person nor are they going to be providing jobs, in fact you've lost jobs, with the added bonus that we now have to pay for his well being at 22k a year for 20 years. Why not severely punish him economically, the thing he seems to cherish most because that's why he evaded, and let him continue to be a contributing member of society?

It's the same with Joe six pack who evades 10k in taxes. To stick him in prison for a couple of years its costs us 44k not to mention he pays no taxes whatsoever in prison. Furthermore when he gets out he'll likely be making minimum wage because that's all he'll be able to get meaning no revenue and likely be on the government pay list for welfare services. You've lost far more than 10k by going down that road. You ever hear of the adage to "cut off your nose to spite your face"?

btw, how much has that 5k penalty for filing a frivolous return or making frivolous arguments deterred those things...my guess none at all. We need to bump it to a million!

[Number Six]

Clarence Darrow once suggested that if you really wanted the "death penalty" to be a deterrence, the form of death should be so horrific that the criminal would be fully aware of consequences for capital crimes.
My guess is that the public humiliation of the most egregious examples of white collar crime is creating enough fear and dread with those tempted to act on their bad impulses, that those areas of crime will be on the decrease for a good while. Those who are hiding a past crime which could get them a listing on their state's US Attorney hit parade, have serious burdens on their psyche--some would do better to turn themselves in to the authorities and let the chips fall where they may or try and work out a plea agreement through their lawyer.

Any illegal activity offshore creates a visceral presumption of guilt in most citizens. It is sensible to move assets offshore to avoid the sort of full exposure wealthy people may find themselves in if they are a target of a frivolous lawsuit. Only the wealthy could afford to go offshore legally to advantage. There are numerous legal US trusts that can be set up to shield assets.

[Judge Roy Bean]

Deterrence is simply part of the challenge for the determined.

Having said that (you can quote me), any part of the writing of such penalties is as much to placate the public hysteria over recent revelations as it is to actually deter further acts.

[Gregg]

I think you're being a little naive myself. Take my favorite criminal, Andy Fastow. By your reasoning, he just didn't pay a bill. Okay, so he moved a bunch of money around and in the process stole $32 Million give or take, but in the process ruined the retirement accounts of how many people? Wrecked the 7th largest company in the world? Put how many out of work and not to mention the ripple of effects it had on the whole economy? And though he faced something like three lifetimes of potential sentences, he got I think 10 years.

And quit crying about people making $30K a year going to get 20 years, people who make that kind of money don't have the resources to do a lot of offshore money laundering, they mostly fall for two bit scammers like Peter Hendrickson and such. I do agree though that this is a headline law, it's more about looking like they want to go after big rich tax cheats than actually going after big rich tax cheats.

[SteveSy]

I think you're being a little naive myself. Take my favorite criminal, Andy Fastow. By your reasoning, he just didn't pay a bill. Okay, so he moved a bunch of money around and in the process stole $32 Million give or take, but in the process ruined the retirement accounts of how many people? Wrecked the 7th largest company in the world? Put how many out of work and not to mention the ripple of effects it had on the whole economy? And though he faced something like three lifetimes of potential sentences, he got I think 10 years.

And quit crying about people making $30K a year going to get 20 years, people who make that kind of money don't have the resources to do a lot of offshore money laundering, they mostly fall for two bit scammers like Peter Hendrickson and such. I do agree though that this is a headline law, it's more about looking like they want to go after big rich tax cheats than actually going after big rich tax cheats.

Fastow didn't just owe a bill he actually committed fraud and stole money. He wasn't just avoiding a debt. Your comparison is not even close. On a side note he could have never done what he did without help from people in the government.

Owing the government and owing any other entity is the same. The difference of course is that the other entities don't have the luxury of arbitrarily creating a law that can imprison people. We might as well throw everyone in prison who tries to evade paying a debt.