Fraudsters are Trading Guns for Laptops


Unfortunately, we live in a world with crime – and fraud is increasingly becoming a bigger part of that crime calculus. In fact, in today’s Fraud of the Day from The New York Times, the article notes that tax refund fraud perpetrated through information gleaned from identity theft is so ”simple and lucrative that some violent criminals have traded their guns for laptops.”

We know the basic approach: all someone needs to perpetrate tax refund fraud is a handful of stolen identity information (e.g., Social Security numbers, names and dates of birth) and a computer. Unless they’re the old fashioned kind of identity thief, then they just need some stamps. By filing a tax return before the legitimate taxpayer has the opportunity to do so, the fraudster receives the refund. Sometimes the revenue agency sends a check, but more often than not, a prepaid debit card is sent. These cards are widely available, often located at tax preparation companies.

Unfortunately for Florida, its population of elderly residents and health care facilities makes identity theft almost too easy. The article reports that South Florida has the single highest rate of identity theft in the nation.

As for the ones that come through the mail, fraudsters often provide addresses for empty houses and collect their bonuses there. Think the streets are safer with identity thieves perpetrating the crime? Think again. Postal workers are now being harassed and robbed by those looking for the debit cards. One postal worker was even murdered.

The article notes that in 2010 alone the Internal Revenue Service (IRS) detected 940,000 fake returns for which the estimated total of fraudulent refunds is almost 11.7 billion dollars. That is plain stupid money. But luckily, not all hope is lost. The IRS is working hard to stop what the United States Attorney for the Southern District of Florida has called ”a tsunami of fraud.” The number of investigators has been significantly increased, implemented technology that better flags fraudulent returns, and hired more workers to help taxpayers get their refunds. The federal agency is working with local law enforcement in Florida to help stop the fraud.

But as much as everyone is doing to stop the fraud, it’s still widely abundant. With only 30 percent of filings reviewed so far this year, 2.6 million already has been identified as fraudulent. It’s clear that Florida’s taxpayers are up against a tough enemy. It’s equally clear that the government needs to start beating the fraudsters at their own game by stopping the tax refund fraudsters at the first sign of identity fraud.

Source: Today’s ”Fraud of the Day” is based on the article ”With Personal Data in Hand, Thieves File Early and Often,” written by Lizette Alvarez and published by The New York Times on May 26, 2012.

MIAMI — Besieged by identity theft, Florida now faces a fast-spreading form of fraud so simple and lucrative that some violent criminals have traded their guns for laptops. And the target is the United States Treasury.

With nothing more than ledgers of stolen identity information — Social Security numbers and their corresponding names and birth dates — criminals have electronically filed thousands of false tax returns with made-up incomes and withholding information and have received hundreds of millions of dollars in wrongful refunds, law enforcement officials say.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.