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HomeMy WebLinkAboutItem 2a: Authorization to Assign Police Officer to Internal Revenue Service Los Angeles SAR & MSB Task Force of A N - 7 0,01'0 Riv • G 114 1:=1“ `4 t STAFF REPORT Police Department DATE: July 5, 2011 TO: Mayor and Members of the City Council FROM: Robert Guthrie, Interim Chief of Police By: Nancy Chik, Senior Management Anal s SUBJECT: Participation in an Internal Revenue Service Task Force Recommendation: Authorize the Police Department to assign a police officer to the Internal Revenue Service Los Angeles SAR & MSB Task Force and the utilization of Asset Forfeiture funds to lease office space for two years for the task force in the City of Arcadia, in an amount not to exceed $350,000. SUMMARY The Police Department recommends assigning a full -time police officer to the Department of the Treasury Internal Revenue Service (IRS) Los Angeles Suspicious Activity Reports (SAR) & Money Services Businesses (MSB) Task Force (also known as LA- SMTF), and the utilization of Asset Forfeiture funds, in an amount not to exceed $350,000, to pay for a two -year lease of office space for the task force in the City. BACKGROUND Suspicious Activity Reports (SARs) are one of the government's main weapons in the battle against money laundering and other financial crimes since these reports generate leads that law enforcement agencies use to initiate money laundering investigations. Many individuals launder money to conceal illegal activity, such as drug trafficking, health insurance fraud, tax evasion, and even terrorism. It fuels criminal conduct, allowing drug dealers, smugglers, terrorists, arms dealers, and tax evaders to maintain control over their proceeds and ultimately to provide a legitimate cover for their sources of income. Law enforcement officials estimate that such individuals yearly launder one to two trillion dollars worldwide through different types of financial institutions and businesses. One of the types of financial institutions money launderers use are the Money Services Businesses (MSBs) that issue, sell, or redeem traveler's checks or money orders, transmit money, or exchange currency. Since they are targets for money launderers, the Bank Secrecy Act requires MSBs to file suspicious activity reports with the U.S. Department of the Treasury's Financial Crimes Enforcement Network. The MSB task force is a sub - program area of the SAR program, and they depend and complement each other. Since Los Angeles receives over 15,000 SARs each month within the Los Angeles Metro area alone, MSB SARs are substantial enough to comprise a necessary task force. The Los Angeles SAR & MSB Task Force (LA -SMTF) is a multi- agency task force and is comprised of agents from the IRS, ICE, US Postal Inspector Service, DOJ Bureau of Narcotics Enforcement, LA District Attorney's Office, LAPD, LASD, and Long Beach PD. The task force focuses on the financial activities of national and international organized crime syndicates, including drug trafficking organizations. The objective of the task force is to identify, disrupt, and dismantle national, transnational, and international organized crime syndicates along with their support system that utilizes MSBs to launder illicit proceeds. The task force conducts SAR seizures while developing criminal cases, and the seized assets are distributed amongst participating task force members. DISCUSSION LA -SMTF has grown and the need for a larger workspace has become a necessity. The task force has considered relocating to several other cities around Los Angeles County, but they have shown an interest in Arcadia because of the community itself, business demographics, overall economic makeup of the City, and its proximity to the U.S. courthouse, U.S. Attorney's office, and the Federal Building. There are many local, state, and federal agencies that would like to participate in the task force and are on a waiting list. However, LA -SMTF is offering a full -time task force officer (TSO) position to an Arcadia police officer. By participating in the task force, each agency will receive a minimum of 5% of all annual seizures. However, the percentage could be much higher. For example, if the TSO is the primary officer who initiates an investigation, then his agency will receive 60% of the seized assets. If he is the second lead officer in an investigation, then his agency's share will be 20 %. The remaining 20% of seized assets will then be divided amongst the other four participating agencies. In addition to receiving a minimum of 5% of all annual seizures as an agency participant, the LA -SMTF will also pay the City an extra 5% of the seizures to substitute as payment for rent. Therefore, the City will receive a minimum of 10% of all seizures by providing a TSO and leasing an office space. Furthermore, the equitable sharing guidelines established by the Treasury Executive Office of Asset Forfeiture indicate there are no restrictions on the use of forfeited funds. In 2009, the task force seized $2.5 million; in 2010, over $5.6 million was seized. Between October 2010 and May 2011, $3.9 million was seized. If $5 million is seized in a year, then the City's share will be at least $500,000. By assigning a TSO, the City may be able to obtain more revenue in addition to paying for the rental of office space. The task force is looking for an 8,000 square foot office space that includes a generous amount of parking. Staff has found a location at the Vons headquarters that meet their requirement and the cost is $1.70 /sq. ft. for the first year, which equates to $13,600 per month; and $1.75/sq. ft. for the second year, which equates to $14,000 per month. The amount for a two -year lease will be $331,200, and staff requests that $18,800 be set aside for contingencies, for an amount not to exceed $350,000. Initially, Asset Forfeiture funds will be used to pay for the two -year lease of the office space, but any funds received from the task force will first go back to reimbursing the Asset Forfeiture account. Any remaining seized assets will then go toward the General Fund. FISCAL IMPACT No impact to the General Fund. Asset Forfeiture funds, in an amount not to exceed $350,000, will be expended for the two -year lease of the office space. Any seizure money received from LA -SMTF will first go to reimburse the Asset Forfeiture account, and any remaining funds will go to the General Fund. RECOMMENDATION Staff recommends that the City Council authorize the Police Department to assign a police officer to the Internal Revenue Service Los Angeles SAR & MSB Task Force and the utilization of Asset Forfeiture funds to lease office space for two years for the task force in the City of Arcadia, in an amount not to exceed $350,000. Approved: Donald Penman, City Man er