Feds target tax-refund ripoff with new order

Jul 13, 2015   

By Nicholas Nehamas
July 13, 2015

Identity Theft Fraud

U.S. Attorney for the Southern District of Florida, Wifredo Ferrer, foreground, gestures as he speaks during a news conference announcing the results of an operation by the South Florida Identity Theft Tax Fraud Strike Force, against identity theft refund schemes, Thursday, April 9, 2015, in Miami. Federal investigators say 42 people in South Florida have been charged with identity theft and fraud that involved intended losses of $21 million. Wilfredo Lee AP

 

Federal officials are cracking down on a form of tax fraud that is hugely popular in South Florida.

Crooks can use stolen identities to claim bogus tax refunds thanks to a lack of oversight by the Internal Revenue Service.

But the Financial Crimes Enforcement Network on Monday announced a new temporary measure to combat the fraud. The order applies specifically to Miami-Dade and Broward counties, which have the highest rates of identity theft and tax-refund fraud in the country.

Under the new rules, check cashing stores in Miami-Dade and Broward will have to record more information about customers cashing a tax refund over $1,000, including a copy of their ID, a digital photograph, a phone number and a thumbprint. The order goes into effect on August 30 and will remain in force until January 30, 2016.

“This [order] will help ensure that the perpetrators of these schemes can no longer hide their face while our national treasury is looted and innocent victims spend countless hours and personal expense working with government to reclaim their true identities,” Jennifer Shasky Calvery, director of FinCEN, said in a statement.

The new measures will likely make it too risky for criminals to cash ill-begotten refund checks, said Andrew Ittleman, a Miami-based attorney whose practice focuses on white collar criminal defense and anti-money laundering compliance.

But the fraud is often accomplished with pre-paid debit cards from financial services companies that the criminals load with tax refunds, making checks unnecessary.

“There are lots of different ways of getting criminal proceeds into legitimate forms of commerce,” Ittleman said.

“Ultimately, FinCEN might be playing a game of whack-a-mole, just moving the racket from paper checks to the pre-paid cards,” he continued. “So is it going to completely eliminate the tax refund fraud? No. But they may well eliminate this variety of it.”

The regulation is known as a “geographic targeting order” because it singles out a specific region of the country for heightened enforcement. It is the second such order issued against South Florida in recent months.

In April, FinCEN cracked down on 700 electronic export businesses in Miami-Dade that may have been used to launder proceeds from the drug trade and other criminal enterprises.

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