The Internal Revenue Service's Efforts To Combat Narcotics Traffickers

The Internal Revenue Service (IRS) has two types of efforts to combat drug traffickers. It initiates some criminal and civil tax investigations as a result of leads provided by the Drug Enforcement Agency (DEA) and it self-initiates others. Although neither of these efforts has produced significant results, the independent efforts of IRS have produced better results. During the 3 years ended June 30, 1979, DEA provided IRS with information on 868 high-level drug traffickers, class I violators, but to date only 11 violators have been convicted on criminal tax charges. Overall statistics on the results of civil tax actions against class I violators were not readily available. While IRS has had some definite successes in the drug area, its impact on reducing the Nation's drug trafficking problem has been limited. Factors which have inhibited the IRS ability to combat drug trafficking effectively include: IRS does not have a well- defined national strategy for its criminal investigative activities; its ability to cooperate and coordinate with other law enforcement agencies has been reduced by the 1976 Tax Reform Act; its ability to obtain quickly financial records from third parties has been reduced by the 1976 Tax Reform Act; IRS has limited its use of jeopardy and termination assessments as a means for getting at traffickers assets; and currency and foreign bank account reports required by the Bank Security Act of 1970 have not been used effectively to identify major traffickers. Criminal investigations are the best means IRS has for dealing with the extensive amount of unreported income from illegal sources. The ability of IRS to detect and deter related tax evasion is limited by the complex and devious nature of schemes involving these activities. IRS faces a dilemma in determining the extent to which it should allocate its resources against narcotics traffickers, as opposed to other persons or groups not reporting income from other illegal or legal activities. Positive action to resolve this can be taken by IRS by implementing recommendations previously made by GAO. Unless the Federal Government makes a more coordinated and concerted effort to immobilize the financial resources of drug traffickers, the drug business will continue to flourish. IRS, with its financial and tax expertise, can play an important role. However, the key issue is still the Government's overall lack of a well-integrated, balanced, and coordinated approach to the problem.