a. It is not the place of the Feds to ask the church to return these funds.
b. Now that the church knows this is dirty money I think it is right and good to return it, if the money is returned to those bilked out of their savings in the first place.
I think that the church can and must be forced by legal action to pay back that money. It was constructive fraud and they are not entitled to the sums involved. There are many legal precedents for such cases, and just because they didn’t know it was stolen money when they received the money does not mean they are entitled to keep it.
On b. If it is proven dirty money, I’d sure as heck not leave it up to this government to return anything to the rightful owners. We all know what happened to the premium bond investors on GM, don’t we? I wouldn’t return ANYTHING to this government.
Clearly the church accepted the donations in good faith. That said, it was stolen property. Generally stolen property is subject to legal clawback as long as the crime is not outside the applicable statute of limitations. (In those cases the law gets murky and there is some variation between jurisdictions.) Unfortunately the law does not offer much relief for whoever has the misfortune of holding the hot goods at the time it is discovered that they belong to someone else. The only exception would be if they church actually did not have the money or it would be bankrupted by its return. In such a case they might be able to argue in court that it was simply not in their power to return it. However, I don’t think that this is the case.
In any event, and legal questions aside, morally the church has no claim to the money and it must be returned. A victim of theft does not lose claim to their property because it has been fenced or passed on by the thief.
However, that being said, I agree with “b”. It would certainly be a great testimony from the church to help those who lost their savings and now are in desperate straits. After all, isn't church giving meant to relieve suffering?