IRS Title 31 Examinations: What MSBs Need to Know Before It’s Too Late

When most Money Services Business (MSB) owners hear the term “IRS audit,” their minds jump straight to tax returns. But in reality, the IRS also plays a critical role in enforcing Title 31 of the U.S. Code, which governs the Bank Secrecy Act (BSA). For MSBs, this means that an IRS examiner walking into your check cashing location or money transmitter’s office isn’t just looking for bookkeeping errors; they’re also evaluating whether you’ve followed federal anti-money laundering (AML) rules.

And if you haven’t, the consequences can be steep.

The IRS is the delegated examiner for most non-bank financial institutions under Title 31. That includes check cashers, money transmitters, and other MSBs. Their examiners are trained to look for weaknesses in your compliance program, failures in your Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs), and even patterns of structuring.

The official IRS Internal Revenue Manual (IRM) lays it out clearly:

“The purpose of Title 31 examinations is to promote compliance with the requirements of the Bank Secrecy Act. Examiners are responsible for determining whether the business has implemented an effective compliance program and for identifying violations of recordkeeping and reporting requirements.” Source: IRS IRM 4.26.7

In plain English: Title 31 exams are not a box-checking exercise. They are designed to see if your MSB has policies, procedures, and daily practices in place to actually detect and report suspicious activity. If you fall short, penalties are not only possible…they’re expected.

What Title 31 Really Means for MSBs

At its core, Title 31 compliance requires MSBs to:

• File CTRs for cash transactions over $10,000.

• File SARs when suspicious or unusual activity is detected.

• Keep accurate, retrievable records of transactions.

• Maintain an AML program that meets the “five pillars” (policies/procedures, internal controls, training, independent review, and a designated compliance officer).

The IRS exam manual stresses that failures in any of these areas are subject to penalties. And importantly, penalties aren’t one-size-fits-all—they’re calculated based on the nature of the violation, whether it was willful or negligent, and whether mitigating factors exist.

The IRS IRM notes:

“Civil penalties under the Bank Secrecy Act may be assessed for violations of reporting, recordkeeping, registration, and other requirements. Examiners must document all violations and recommend appropriate penalties.”

Translated: if your check cashing business failed to file a CTR because you thought it wasn’t a big deal, or if your money transmitter kept sloppy records, the examiner has the authority to propose a fine, and those fines can add up quickly.

The Types of Violations IRS Examiners Look For

During a Title 31 examination, IRS agents focus on three major areas:

1. Reporting Violations – Failure to file required CTRs or SARs or filing them inaccurately or late.

2. Recordkeeping Violations – Not maintaining copies of required forms, transaction logs, or identification documents.

3. Structuring – Allowing or failing to detect patterns of transactions that are deliberately kept under the $10,000 CTR threshold.

The manual points out that even “defensive filing” can be a red flag; filing too many unnecessary SARs or CTRs can suggest you don’t understand the law, which can also draw examiner scrutiny.

For MSBs, this is a tightrope: file too few reports, and you risk underreporting. File too many, and you risk showing incompetence. That’s where having an experienced compliance partner makes the difference.

The Real-World Cost of Non-Compliance

The penalties under Title 31 aren’t just symbolic. They can devastate a small or mid-sized MSB. Civil fines can reach tens of thousands of dollars per violation, and in willful cases, criminal penalties, including prison, are possible.

Consider this example: if your business fails to file a required CTR, you may face a civil penalty of up to $500 for a negligent violation. But if the IRS determines the violation was willful, the penalty can climb to the greater of $25,000 or the transaction amount (up to $100,000). For SAR failures, the fines can be even higher.

Now imagine the IRS finds a pattern of missed filings during an exam—suddenly, what seemed like a paperwork oversight becomes a six-figure liability.

Why Examiners Care So Much

The IRS isn’t simply nitpicking forms for fun. Their examiners see MSBs as a frontline defense against money laundering, tax evasion, fraud, and even terrorism financing. When a check casher fails to report properly, or when a money transmitter ignores red flags, it undermines the entire regulatory system.

The IRM underscores this priority:

“The Bank Secrecy Act is intended to provide a paper trail for large currency transactions and to identify suspicious financial transactions that may involve criminal activity. Failure to comply with these requirements undermines the ability of law enforcement to investigate and prosecute financial crimes.”

That means every missing or late CTR isn’t just an administrative slip, it’s seen as obstructing law enforcement. That’s why examiners are aggressive in pursuing penalties.

How MSBs Can Prepare for a Title 31 Examination

The key takeaway from the IRS manual is simple: if you wait until the examiner shows up to get your compliance program in order, you’re already too late.

Here’s what every MSB should be doing today:

• Conduct Independent Reviews: Annual reviews by an outside compliance consultant are not just required; they’re your best chance to catch weaknesses before an examiner does.

• Test Your Reporting Accuracy: Make sure CTRs and SARs are filed correctly, timely, and backed by documentation.

• Maintain Corporate Files: Examiners will look for complete, updated files on your business customers, including incorporation documents, licenses, and worker’s comp where applicable.

• Train Your Staff: Every teller, cashier, and manager should understand how to identify suspicious transactions.

• Stay Current: Title 31 isn’t static; new rules, Geographic Targeting Orders (GTOs), and enforcement priorities can shift quickly.

Where ComplyCheck Comes In

This is where ComplyCheck proves invaluable. We’ve supported over 100 MSBs through compliance challenges, and we know how IRS examiners think. We bring an extra set of eyes to your program, informed by experience across hundreds of businesses and thousands of transactions.

When you work with ComplyCheck, you get:

• Independent reviews that mirror examiner expectations.

• Transaction monitoring and CTR/SAR filing support.

• Corporate file management to ensure every document is ready when asked for.

• Training that helps your team spot and document suspicious activity.

• Ongoing guidance so your program doesn’t drift out of compliance between exams.

For MSB owners, this is about more than avoiding fines. It’s about protecting your license, your livelihood, and your reputation.

Final Word

IRS Title 31 examinations are not slowing down, in fact, they’re increasing in both frequency and intensity. The penalties outlined in the IRS Internal Revenue Manual make it clear: if you fail to comply, the financial and reputational damage can be catastrophic.

But you don’t have to face it alone. At ComplyCheck, we specialize in helping check cashers, money transmitters, and other MSBs stay ahead of examiner expectations.

Before the IRS knocks on your door, make sure your compliance program is in order. Contact us today to discuss how we can help you prepare for your next Title 31 exam.

Reference: IRS IRM 4.26.7 – Title 31 Penalties