Inspector General criticizes the IRS for seizing money from innocent people

https://www.washingtonpost.com/news/wonk/wp/2017/04/05/the-irs-took-millions-from-innocent-people-because-of-how-they-managed-their-bank-accounts-inspector-general-finds/

by jackgavigan • 9 years ago

186 56 9 years ago

washingtonpost.com

efoto• 9 years ago

TL;DR Do not try this at home: "The IRS’s own internal watchdog found that the IRS had a practice of seizing entire bank accounts based on nothing more than a pattern of under-$10,000 cash deposits."

lutorm• 9 years ago

I would think the vast majority of cash deposits are under $10k, so I assume what they mean is repeated deposits of close to, but slightly under, $10k.

freditup• 9 years ago

Also called "structuring" - intentionally making small transactions to avoid the oversight that comes with large ones [0].

[0] https://en.wikipedia.org/wiki/Structuring

protomyth• 9 years ago

You would think that, but that's not what is happening. A gas station was doing ~$800 per day and got grabbed. This is the type of stuff the really makes people lose faith in a rational system.

hvs• 9 years ago

The problem is that a lot of small businesses just naturally make a lot of transactions in cash and then have to deposit that money in their accounts.

Well, the problem is an aggressive government more interested in taking from citizens than proving wrongdoing.

spqr0a1• 9 years ago

Many small business insurance policies only cover <$10,000 in cash on hand. So plenty of legit businesses get flagged for trying to maintain their coverage and minimize risk.

chiph• 9 years ago

I worked for a record store in college and we had a Ticketmaster machine (back when they were actual ticket printers). We could only accept cash for tickets, per Ticketmaster policy. So on days that big concerts and sporting events went on sale (like The Grateful Dead, Charlotte Hornets, etc) we would make several large deposits of this cash throughout the day to keep our theft risk under our insurance limit. Under modern structuring/forfeiture laws, we could have lost all that money to the feds and still owed Ticketmaster for the sales we made - because the insurance policy had an exception for government seizure.

hirundo• 9 years ago

Stories like this make it hard to maintain the illusion that government employees are public servants, except in the sense that cowboys are servants to cattle.

programmarchy• 9 years ago

Fool me once, shame on you. Fool me a thousand times, well, what choice do I really have anyway?

dmichulke• 9 years ago

I know it's so 90s to bash neither the current nor the last POTUS but I can't resist

Fool me once, shame on - shame on you. Fool me - you can't get fooled again. - G.W.Bush

Gibbon1• 9 years ago

Observation: When people are ordered to 'take care of this thing' and there is no 'thing' they'll find one.

I say thing because the supposed target vary. Everything from restaurants serving alcohol to minors. The FBI looking for terrorist, to drug dealers.

cbanek• 9 years ago

So now you can take my money if I keep it in cash and travel with it, or if I deposit it to a bank in under $10k increments, and if it's more than that, that's also suspicious. I guess just having money is suspicious these days... we're all supposed to spend it on fancy phones.

Overall, it just feels like the IRS felt jealous of the civil forfeitures.

helthanatos• 9 years ago

Nope. Only the government and those who fund the government are allowed. Luckily, I don't have much money for them to take.

gefh• 9 years ago

The article hints that civil forfeiture may be the mechanism used here as well - if i had to pick a single policy to change in the USA it would be civil forfeiture. It just seems so glaringly unfair, surely both sides of the aisle could agree on this one

stevenwoo• 9 years ago

The problem is police departments across the country use civil forfeiture to fund day to day activities and it's a policy that gets a candidate the support and endorsement of law enforcement at the municipal and state level. https://www.nytimes.com/2014/11/10/us/police-use-department-... The situation was depicted in the fictional TV show The Shield fifteen years ago but it turns out, the truth is not worse than the crazy stuff they told in those fictional stories.

somethingsimple• 9 years ago

So now you can take my money if I keep it in cash and travel with it

What do you mean by that? Just curious.

MichaelGG• 9 years ago

Having cash can be suspicious and there's cases where agents just confiscate the money until you prove it's "clean". There was an article here years ago where they did this to poker winners - even had a website where cops traded tips. Follow target around, wait for some cause to pull them over, then take the cash.

mc322• 9 years ago

Those things are not illegal per-se but can be signals of things resulting from illegal transactions. So, they are more a heuristic --but not following procedure because it can be used to evade detection is made illegal.

The one thing I don't understand is why some of those figures rarely keep up with inflation. I think they should. 10,000 isn't what it used to be.

nhebb• 9 years ago

From the article:

The IG took a random sample of 278 IRS forfeiture actions in cases where structuring was the primary basis for seizure. The report found that in 91 percent of those cases, the individuals and business had obtained their money legally.

That's not a very good signal. Even if the numbers were reversed and 91% had obtained their money illegally, I'd say that a 9% false seizure rate would still be way too high.

paulmd3• 9 years ago

they are more a heuristic

This is kind of an ironic claim on a community that believes so strongly in "black boxes" like machine learning. Golly, if their heuristics point in a particular direction isn't that a ~signal~ with predictive power and market value?

Take heed of this the next time you extoll the virtues of blind inference - whether human or machine. Maybe the next time it'll be _your_ soap dispenser that doesn't recognize black people. Or redlines black people and keeps them from getting a credit card, or mortgage, etc.

Because the reality is - there are all kinds of signals like these that are real. People in certain areas are more likely to be poor, to default on their loans, etc - that's a real signal, just like these high-value financial transactions. People doing big transactions in cash are way more likely to be involved in crime - just like people in certain areas are way more likely to default or whatever.

But relative risk says nothing about the false positive rate. People do cash transactions all the time, legitimately. Poor people manage to pay their mortgage without defaulting all the time.

Also - the reason people are trapped in that area in the first place is social, and economic. The decision to value a particular signal - or trust a model that blindly ignores confounding factors - ultimately lies with you, the human creating the model. Never hide behind it.

The machine is just a machine, it just does math for you. It only calculates the model you tell it to. If you let your model be racist, that's on you. You designed it that way. You designed it to be racist.

The creation of the "black box" model is one of the scariest things we've done in the last couple decades. Because now, nobody can tell you why it happened, it just was a bunch of neurons that attributed various weights to factors in your profile. If you're lucky they'll even be able to tell you what some of the weighting factors might be (but usually not). And now it's nobody's fault, it's just ~the model~. It's a blatant abdication of any responsibility for the faults or consequences of your work.

nannePOPI• 9 years ago

This is happening in all western countries, it's just a way to strip normal people of any kind of power.

matt4077• 9 years ago

There's this recent story which makes it seem likely the practices of asset forfeiture won't stay as they are for too much longer: https://www.theatlantic.com/politics/archive/2017/04/clarenc...

Shivetya• 9 years ago

One can hope. Still, it just amazes me how the police forces of this country can just take actions known to cause even more public distrust and continue them when they know they are in the wrong morally if not legally.

mistermann• 9 years ago

It amazes me that otherwise intelligent people can observe this and still believe we live in a genuine democracy.

draw_down• 9 years ago

You should see what law enforcement does.

caf• 9 years ago

It seems to me that data processing capacity must have increased to the point where they could just reduce the reporting level to zero (ie every transaction is reported) and so remove the entire need for rules against "structuring".

known• 9 years ago

IRS algorithm is screwed :)

tomohawk• 9 years ago

The previous president appointed Loretta Lynch as AG, who made a name for herself with civil asset forfeiture.

http://www.rawstory.com/2015/01/loretta-lynch-civil-forfeitu...

If he didn't want this sort of nonsense to be a front and center policy of the DOJ, then he would have appointed someone else.

What about Jeff Sessions? Policy wise, he's also a supporter of this policy, although he doesn't have the proven track record of using it as a tool like Lynch did. Maybe there's a small ray of hope there, but I doubt it.

nickpeterson• 9 years ago

I wonder if you would just be better off refusing these kinds of actions as a private citizen. I'm pretty sure you could make enough noise about it that it wouldn't be worth their while. Same with those videos of police officers trying to cease cash from people after pulling them over. I would just refuse to give it to them. Are they going to shoot me for money on the side of the road?

bitexploder• 9 years ago

You can't. From the article they would seize entire bank accounts before even talking with you or giving you a legal notice. They often take physical assets with violent force, too. (E.g. they show up with guns)

talmand• 9 years ago

> I would just refuse to give it to them. Are they going to shoot me for money on the side of the road?

You may get shot; most likely not. But you will be arrested for interfering in an investigation, or something to that effect.

krapp• 9 years ago

Same with those videos of police officers trying to cease cash from people after pulling them over. I would just refuse to give it to them. Are they going to shoot me for money on the side of the road?

That depends. How dark is your skin? How nice is your car? How well do you speak?

One of the mitigating factors for police criminality seems to be the apparent race and class of the victim. Most police may not shoot you on the side of the road for your money, but it's a matter of privilege to be able to refuse their demands and not be met with immediate violence.

sigstoat• 9 years ago

Are they going to shoot me for money on the side of the road?

you're simply not given an opportunity to "refuse". it's usually going to go something like:

1) "mr doe, step out of the car." refuse? you're getting tased and definitely going to jail for refusing a lawful order.

2) "mr doe, i'm going to search your car now." well you're out of your car. you can (and should) say "no", but your car is getting searched regardless. maybe you jump the cop? or shoot at them? now you're definitely going to jail for assaulting the cop, if you even survive the night.

3) they find cash. they bundle it up, pull it out and probably just go stuff it in their car. if they're smart they're not even going to tell you what they're moving until it's locked up in their trunk. if you figure it out and say "hey you can't take that blah blah", they're going to ignore you. so you're back to assaulting them somehow. you're definitely going to jail.

phkahler• 9 years ago

The problem isn't their policy, the problem is the law that allows this. These asset grabs are clearly unconstitutional violations of the 4th amendment - that doesn't change just because of a law. They're taking assets without a warrant or even probably cause. If you want to take the drug money after you've proven and convicted someone of a drug offense then maybe (that's a different debate). But this is simply authorized theft. The justification really isn't there (excuses are there).

Isamu• 9 years ago

91% of 278 randomly-sampled cases were wrongfully seized. Jesus.

More troubling, the report found that the pattern of seizures — targeting businesses that had obtained their money legally — was deliberate.

That part is not surprising to me, given how many cases were wrongful, that it was deliberate. There is no oversight, except for occasional investigations like this one.

This will not result in rolling back this power, though. They'll just put "stronger oversight" in place, to make sure the wolves guarding the hen house are on their best behavior.

addled• 9 years ago

I work on software banks use to look for fraud or money laundering. Fraud always made sense, since there was a feedback loop with the end customer to confirm transactions were legit or not. We could adjust our algorithms from there.

I don't think the same exists for BSA. The main incentive for banks is to avoid fines for not reporting suspicious activity and the Fed doesn't let the bank (or us) know whether the suspicious activity submitted turned out to be legal or not. I would love to reduce the number of false positives from our system, but have no way to build a proper training set. Sounds like the IRS doesn't know what it should really be targeting either.

arafa• 9 years ago

There is sort of a feedback loop based on the reports you do file, whether the Fed ends up accepting or complaining about them, and also (sadly) news reports. It works OK.

Monitoring structuring mostly works fine at larger banks. The problem here is that the IRS doesn't have the same network of analysts and other quality control measures. At a bank, someone can take their money elsewhere and be held liable. The IRS has a smaller budget and much less incentives (very hard to switch governments) and so there's a failure.

CommieBobDole• 9 years ago

What gets me is the audacity of making a suspicious activity that may be an indication of a crime, the crime itself. It's as if they outlawed having a suspiciously high power bill, or looking over your shoulder a lot while you browse items in a store.

maxxxxx• 9 years ago

I can see how these transactions can trigger an alert but why don't they give people a chance to clarify the situation first before taking action? This seems extremely unproductive and a big burden for someone who can't afford a lawyer easily.

pascalxus• 9 years ago

I think we're all guilty of this one - that is anyone with a job that pays less than 10K per pay-check.

Inspector General criticizes the IRS for seizing money from innocent people

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