The U.S. Treasury agency tasked with tackling the country’s most complex domestic and international money laundering investigations is losing its longtime leader next month in the face of falling budgets and staff, and rising political pressure and congressional scrutiny.
The head of the Internal Revenue Service’s Criminal Investigation Division (IRS-CI), Richard Weber, is stepping down after five years to take a new position as head of financial crimes compliance for an international bank. The transition comes amid increasingly severe budget cuts for the agency that have brought the number of special agents down to levels not seen since the 1950s.
The move will be another difficult blow to IRS-CI on many levels, as Weber brought in a new energy and urgency to investigations after getting his “dream job,” according to a colleague. He added that under his leadership the division expanded its cases more forcefully into the cyber realm, finalized cases of grand corruption with the soccer body FIFA, and kept the pressure on tax evasion by shepherding a Swiss bank settlement program.
Though Weber has seen successes in pushing into new focus areas for IRS-CI, such as cybercrime, virtual currencies and using current money laundering laws more effectively, that has not stopped IRS-CI – and IRS main – from being savaged by budget cuts and raising the ire of Congress through what has been called the tax-exempt charities scandal for the treatment of conservative groups in 2015.
Though less publicly recognized than counterparts in agencies like the FBI, IRS-CI agents are among the most formidable financial crime investigators in US law enforcement. Their work has underpinned any number of major enforcement actions, from cases against virtual currency exchanges to kleptocrats, and agents have a long history of getting investigative results in complex cases.
From the outset of his time with CI, Weber sought to inject his investigators with a greater sense of purpose, have even more passion for their cases and grow pride for their accomplishments. It was work he validated in ways large and small through various awards initiatives and one-on-one chats at all levels, discussions which restored his spirit, say former colleagues.
But Weber took that same passion to those disagreeing with his ideas and initiatives, with some noting he could chafe when challenged.
Getting into bank anti-money laundering (AML) compliance would be Weber’s first foray into the private sector after more than 20 years of serving at the state and federal levels in investigations and prosecutions of illicit acts across the spectrum of financial crime.
Even before he officially took the helm, Weber brought with him a deep respect for IRS-CI investigators, after having worked with them first as a federal prosecutor in New York and later more closely as head of the U.S. Department of Justice’s (DOJ) Asset Forfeiture and Money Laundering Section (AFMLS).
He also worked for two years at the Manhattan District Attorney’s Office.
Great potential, but challenges ahead
When Weber came in, he considered the agency to be the best in the government at complex financial crime investigations, but had to solve several challenges. The agency was dealing with a lack of resources, a dearth in congressional understanding about IRS-CI’s work in so many investigations and with other agencies, and a morale problem, said an individual familiar with the matter.
Some people in Congress “didn’t even know IRS-CI agents carried guns,” said the person, who asked not to be named. “Weber knew that if people don’t know what you do, then how can you blame them for not giving you the support and resources you need. If they don’t know what you do, why should they care about your work?”
Weber also realized he needed to bolster morale, because it can be challenging when the mothership is “an agency that everyone likes to hate,” said the person. “It’s not fun to pay taxes and it’s not fun having an audit. You don’t see people saying as a little kid, ‘I want to be an IRS special agent when I grow up.’ They say that about the FBI or CIA.”
So when Weber talked to agents, he was supremely positive about the future, in part, by harkening back to the agency’s past taking out legendary organized crime figures like Al Capone through the leadership of “incorruptible” figures like Elmer Irey.
“When he came in, he was not critical of people,” said the person. “Weber has always been this ball of energy. He wanted people to feel pride. That’s why it was so important to tell our story, what we have done and what we are doing. That builds a sense of belonging, pride and purpose. That’s how to go from ‘good to great.’”
In his time at the IRS, the story of Irey and his “T-men” became a reoccurring theme, so much so that under Weber the agency created an award with his namesake for exemplary agents.
Tying current tactics to “follow the money” and linking them back to lessons from the past came full circle with the Liberty Reserve case, which was the first major enforcement action involving a virtual currency and a serious blow to cybercriminals worldwide at the time. In May 2013, Weber got the New York Times quote of the day and earned a public relations coup for IRS-CI for stating that, “If Al Capone were alive today, this is how he would be hiding his money.”
In the action, authorities dismantled an alleged $6 billion money laundering scheme, stating they had crushed the “financial hub of the cybercrime world” by indicting digital currency provider Liberty Reserve and arresting five of its top executives.
The Liberty Reserve indictment characterized the online currency exchanger as the money transfer system of choice for hackers, drug traffickers, credit card fraudsters and identity thieves worldwide.
Liberty Reserve was “intentionally created, structured and operated… as a criminal business venture, one designed to help criminals conduct illegal transactions and launder the proceeds of their crimes,” the indictment stated.
Leaning on innovation, leading with integrity
The Liberty Reserve case was a testament to Weber’s innovation, a quality he has made use of from his early days as a prosecutor and will be an asset in the AML space.
IRS-CI will be losing a “great guy,” said a second former colleague. “He’s very innovative, always thinking ahead and coming up with new ideas,” like in developing cases in cyber areas and building investigative resources to better find financial threads in the real world that lead to virtual world attackers.
But with the politics and scandals at IRS main - that had little to do with Weber or IRS-CI - he was “caught in the middle of the crossfire,” said the person. “He really loves the IRS, but got caught in such a tough political time,” with a Republican-controlled Congress continually cutting the budget.
A government watchdog group also recently criticized IRS-CI for how it used its civil asset forfeiture powers in certain cases, noting that they too often went after cases, in many instances where the assets were legally obtained, because the assets could be quickly and easily obtained, violating citizens' rights.
The report was rare chiding for IRS-CI, a division held in high regard across the various law enforcement and investigative agencies, groups that, at times, have been accused of "turf wars" in cases, battling to see who can take the most glory to ensure future funding in a time of government belt-tightening.
Weber had always been excited by the prospect of working at IRS-CI because he “realized the implications of financial investigations and that IRS folks are the best,” said the person. “Following the money was the key to dealing with different kinds of drugs, corruption and fraud. He always loved IRS and it was his dream to become IRS-CI.”
He will be remembered for his government service as “being a good leader with great integrity,” said the person. “He has known so many people in the field of financial crime for years in one capacity or another and they are very loyal to him.”
Great powers muted by budget cuts
But even with loyal, passionate and driven agents, a division simply can’t handle as many cases without resources. Weber noted how the staffing challenges were hurting IRS-CI in a call with reporters last month tied to the release of the agency's latest annual report, according to media reports.
IRS-CI was “at the same staffing level as 1956, which is just unbelievable when you think about it. There’s still no realistic expectation of increasing that number anytime soon. It’s very difficult to be able to do everything we are mandated to do.”
Many senior IRS-CI agents have retired in recent years – a group typically feted by law firms and compliance consultancies due to their extensive experience – with the number falling more than 4 percent to just above 2,200 in fiscal year 2016.
Over the past five years, agent staffing levels have tumbled 19 percent, according to the annual report.
Various reports have the Trump administration requesting more than $12 billion for IRS – with some stating he actually wanted a 14 percent cut – for fiscal year 2017, a 7 percent increase when adjusted for inflation, though it would reportedly still leave the IRS 12 percent below 2010 funding levels.
Overall, IRS CI investigations initiated have dropped precipitously, from 5314 in 2013 to 3395 in 2016, according to the annual report. BSA/AML investigations have plummeted even more sharply in that same time frame, from 922 in 2013 to 504 last year.
Some in Congress have even called for IRS to have the IRS-CI abolished, to have their “guns and badges” taken away, while others have stated CI should be taken from under IRS and made into its own distinct investigative agency under the Treasury, on par with IRS main, not a sub agency.
But a key reason Weber carried on the fight is his agents, where he would meet individually in field offices, not for criticism, but conversation about cases, chats that restored Weber’s emotional reserve.
“Whenever he would go into a field office, he would always want to meet individually with agents to hear about their cases,” said the first former colleague. “What keeps him going when he hits these challenges is when agents tell him about their current investigations.”
In those discussions, “everything, all the negativity and worries would be wiped away,” said the person. “He would get into this zen zone and afterward would say ‘that was great’ and brag to others about the cool things the agent was doing and what the office was working on. That is where he got his energy. He would say after those talks, ‘that is why I fight for this agency.’”