White Collar Crime: An IRS-CI Perspective. Focused on ID Theft

Transcription

1 White Collar Crime: An IRS-CI Perspective Focused on ID Theft

2 Special Agents Bill Beckham Brooke Tetzlaff

3 What is IRS-CI? OBJECTIVES Divisions, Mission, Workforce Types of Investigations Tax Evasion, Money Laundering, Refund Fraud Title 26, Title 18, Title 31 (BSA) What is Refund Fraud? QRP/RPP, ID theft How does IRS investigate ID Theft?

4 OBJECTIVES Con t Who do we partner with? What makes an ID theft case different? What to do if you are a victim Disclosure waiver program Form 8821A

5 What is IRS-CI? Commissioner Taxpayer Service Examination Division Collection Division Criminal Investigation Division Assists Taxpayers Determine Tax Due and Owing Collect the Debt Investigate Violations of Internal Revenue Code and other related Offenses

6 IRS-CI s Mission Statement Criminal Investigation serves the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.

7 Workforce There are approximately 3,700 employees in IRS-Criminal Investigation Of this, approximately 2600 are Special Agents CI has 26 Field Offices, which encompass all 50 states and several international cities

8 FY 2013 Areas of Focus REFUND FRAUD International Tax Fraud Voluntary Disclosure Organized Crime Drug Enforcement TF Asset Forfeiture Abusive Tax Schemes Non-Filers Money Laundering/BSA Counterterrorism

9 What is Refund Fraud? Refund fraud results from the filing of federal income tax return(s) that are supported by false information/statements with the intent to defraud the government.

10 Refund Fraud Programs Return Preparer Program (RPP) schemes consist of Abusive Return Preparers that prepare false income tax returns frequently for large numbers of taxpayers. Questionable Refund Program (QRP) Schemes consist of individuals filing tax returns claiming false income tax refunds that are generally based on false Federal income tax withholdings or false refundable credits, for example First Time Homebuyer Credit. These are generally not legitimate taxpayers and returns are filed for the sole purpose of defrauding the government. ID theft is a subset of the QRP program.

11 Identity Theft The FTC estimates that as many as 9 million Americans have their identities stolen each year. Stolen Identities are obtained through various methods: - Dumpster Diving - Skimming - Phishing/Pre-texting - Theft - Hacking

12 Tax Refund Identity Theft Occurs when someone uses your personal information without your permission to file a tax return. Identity Theft can affect taxpayers in two ways: Refund-related Employment-related/Income-related

13 How does IRS-CI Investigate ID Theft? CI has 4 Scheme Development Centers (SDCs) whose primary mission is detecting refund fraud. SDCs have uncovered numerous QRP/RPP and Identity Theft refund fraud schemes. CI has dedicated one SDC to Identity Theft. This location processes and researches ID Theft leads received from the field.

14 Outreach Investigating ID theft Local LEO s, Banks, CPA s Jump Teams Special Investigative Techniques Undercover Operations Informants Surveillance

15 What makes an ID theft case Electronic Filing Different? IP address, Internet Service Provider Jammers/Anonymizers, Hotspot Mobile Devices Follow the money Direct Deposit of Refund to B.A., D.C. Treasury Check, Third Party Check ATM withdrawals, surveillance footage

16 Prepaid Cards The use of prepaid cards in ID theft schemes has increased significantly. Hundreds of billions of dollars are loaded to Open- Loop prepaid cards each year. Numerous government programs utilize prepaid cards to distribute benefits. Past estimates indicate such activity is in the billions each year. The prepaid cards add a level anonymity.

17 Coordination Amongst IRS Functions Treasury Checks Prepaid Cards ID Theft Lists Filter Updates

18 Trends in Identity Theft Refund Schemes perpetrated by prisoners Stolen dependants for additional credits (EITC) Use of identity by prior year tax return preparer Use of identities of those not likely required to file a Federal tax return Use of non-wage and withholding tax returns (i.e. Interest Income, Schedule D, Schedule C)

19 Refund Crimes Identity Theft Statistics *FY 2013 (10/1/12-1/31/13) FY 2012 FY 2011 FY2010 Investigations Initiated Prosecution Recommended Indictments/Informations Percent to Prison 87.3% 89.2% 100.0% 88.9% Avg. Months to Serve

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21 I m a Victim What Now?! Print your return, mail it to the appropriate service center and include an ID theft affidavit, F14039; mail or fax F14039 to IRS separately to ensure proper processing Call IRS, Identity Protection Specialized Unit: to check on your status Check your credit; place fraud indicators on accounts if necessary

22 What Now con t File a police report (optional) Contact taxpayer advocate service Write your congressman

23 Disclosure Waiver Program Historic measure allowing IRS to share tax return and return information with local law enforcement agencies who wish to pursue an ID Theft investigation. Previously a pilot program open to FL and 8 other states (including TX) only. Recently fully adopted to include all 50 states.

24 F8821A Form 8821A is filled out by the ID theft victim/taxpayer. Allows the LEO to obtain a copy of the fraudulent return in order to conduct an investigation. Does not allow for the disclosure of the fraud return to the victim. Does not allow for the disclosure of the fraud return to other Federal agencies.

25 QUESTIONS? Recent Scheme Sentencing's

26 ID Theft Schemes On May 8, 2012, in Montgomery, AL, Veronica Dale and Alchico Grant were sentenced to 27 years and 25 years, in prison, respectively for a role in a large ID Theft scheme. They were also each ordered to pay over $2.8 million in restitution to the IRS. In 2009 and 2010, the defendants were part of a scheme that involved over 500 fraudulently claimed tax refunds of $3.7 millions using stolen identities of Medicaid beneficiaries.

27 ID Theft Schemes On January 13, 2012, in East St. Louis, Ill., Jessica Childers was sentenced to 108 months in prison, three years of supervised release and ordered to pay $860,801 in restitution to the IRS for submitting false federal tax returns. Used deceased individuals identities between 2008 and 2010, Childers submitted 572 such false returns claiming over $1.5 million in fraudulent refunds. After discovering the scam, federal authorities were able to seize $192,512 from her bank accounts.

28 ID Theft Schemes On July 29, 2011, in Chicago, Ill., Marvin Berkowitz, was sentenced to 220 months in prison, ordered to pay $10,232,800 in restitution to the IRS and various states and to forfeit $5 million. Berkowitz pleaded guilty in January 2011 to orchestrating a tax fraud conspiracy that tried to obtain at least $65.8 million in fraudulent federal and state income tax refunds using the identities of at least 2,900 prisoners and deceased persons.

29 ID Theft Schemes On October 1, 2012, two North Carolina men were sentenced to a total of 155 months in prison and ordered to pay a total of $466,153 in restitution for their involvement in an identity theft scheme. The individuals broke into a tax preparation office, stealing over 300 files containing personal information of tax clients. After the tax files were stolen, the individuals filed returns in the names of the clients and directed the tax refunds to either debit cards, which were mailed to addresses they controlled or to bank accounts that were opened, using fraudulent and unauthorized information.

30 ID Theft Schemes Barbados National Sentenced for Using Stolen Identities to File False Claims for Tax Refund On November 7, 2012, Chicago, Ill., Andrew J. Watts, a Barbados national, was sentenced to 114 months in prison and ordered to pay $1.7 million in restitution. Watts pleaded guilty on July 10, 2012, to one count of mail fraud and one count of aggravated identity theft. According to court documents, between 2007 and 2011, Watts filed false federal income tax returns in the names of deceased taxpayers seeking fraudulent refunds. Watts either signed the name of the deceased taxpayer to the tax return or would falsely list himself as the deceased taxpayer s representative. As part of the scheme, Watts filed over 470 false federal income tax returns, claiming fraudulent refunds in excess of $120 million. Watts directed the IRS to either mail the refund checks to an address he controlled or to electronically deposit the refund into a bank account under his control.

31 ID Theft Schemes Memphis Woman Sentenced On Tax Fraud Charges On December 21, 2012, in Memphis, Tenn., Aundria Bryant-Branch was sentenced to 262 months in prison, three years supervised release, and ordered to pay $690,399 in restitution to the Internal Revenue Service (IRS). According to the indictment, Bryant-Branch orchestrated a tax refund scheme beginning in or about 2006 and continuing until approximately June 10, Bryant-Branch obtained stolen identification information and a stolen Warrant Book from the Memphis Police Department. This book listed individuals with outstanding arrest warrants. Bryant-Branch would give the stolen identification information to others, who then used it to prepare and electronically file false tax returns with the Internal Revenue Service (IRS) claiming refunds without the taxpayer s knowledge. These fraudulent returns generated either refund checks from the IRS or Refund Anticipation Loan (RAL) checks from the Bank and Trust of Santa Barbara.