Reports: IRS and DEA Misused Asset Forfeiture

Is Civil Asset Forfeiture really a useful tool in fighting crime?  Two new Inspector General reports on the DEA and the IRS challenge that assumption.

If someone decided they wanted your property and showed up with guns to take it, you’d call that a crime.  But if that someone happened to be the federal government, and they took your stuff without charging you with a crime, they’d call it ‘civil asset forfeiture’, and you would have a difficult time ever getting your stuff back.  Supporters of civil asset forfeiture champion the practice as a tool that law enforcement can use to thwart criminal enterprises.  But frequently there is never a criminal case made in relation to asset seizures, putting the lie to the claim that seizures are indispensable in fighting criminals. Much of the time, these agencies aren’t even charging or prosecuting their targets.  They assume guilt, confiscate assets, and leave it up to the person whose assets they’ve seized to try to get it back.

Inspector General reports scrutinizing the activities of the Drug Enforcement Agency and the Internal Revenue Service were recently released, each pointing to serious problems with the way these federal agencies confiscate assets from citizens without charging them with any crimes.

The DEA report reached some incredible findings, among them:

  • The DEA seized over $4 billion in cash alone since 2007.
  • Only 4% of the amount the DEA seized in the reporting period was returned to the owner.
  • Of 100 cases reviewed in which there were no narcotics seized or warrants served, the IG found that only 44 of them were tied to or furthered a criminal investigation.
  • Cases in which the DEA seized over $100k account for 70% of cash seized, but the agency handled 9 times more cases where the value of the assets seized was under $100k.
Turning to the Treasury’s IG report, the audit that was conducted of the IRS centered around asset forfeiture for ‘structuring deposits’.  Since 1970, the government has required banks and financial institutions to file reports on deposits that total more than $10k in an attempt to detect and prevent money laundering and tax evasion for criminal activities.  In order to get around the reporting requirements, some depositors illegally ‘structure’ their deposits by breaking them up into amounts just shy of the $10k threshold.  There are several problems with prosecuting violations of this law.  Many times bank insurance policies will only insure the first $10k of a deposit, so they counsel their customers to make deposits in smaller amounts.  Additionally, many small retailers try not to keep significant amounts of cash on hand, so they deposit small amounts frequently.  These innocent depositors have been caught up in IRS seizure cases, sometimes having their entire bank accounts cleaned out.

The IRS report was equally shocking, including these findings:

  • In 91% of cases examined for ‘structuring deposits’, no evidence was found that the funds came from illegal sources or involved criminal activity.
  • Only 21 of the 252 cases of legal-source cash established a case for tax violations.
  • Only 3% of documents regarding forfeiture that were reviewed showed evidence of an interview with the subject BEFORE the seizure took place.
Both of these reports by the Inspectors General of the Treasury and the Justice departments are intended to provide guidelines for the agencies, and address concerns about civil liberties violations.  The IRS underwent a policy change in late 2014, stating that the agency’s criminal investigations division would no longer pursue seizure of funds for cases with legal sources unless exceptional circumstances warranted it.  In the year after the policy change, the agency saw an 80% reduction in seized and forfeited funds.  At the Justice Department, an order was issued by Attorney General Eric Holder in early 2015 that made it more difficult for state and local law enforcement to share in federal asset forfeiture proceeds.  That order helped cut the number of DEA cash seizures in half.

While these changes point to positive improvements, both reports contain further recommendations addressing consistency, oversight, and civil liberties. If the suggestions are taken seriously and implemented by the new administration, it might be the beginning of serious reform in civil asset forfeiture.  And it will be a long overdue and highly welcome change.


Find out more about civil asset forfeiture, and check whether reform legislation is being filed in your state.