Busting International Fraud

48385801 - money in the hands of

Using stolen identities to commit tax refund fraud has become such a fast-growing and common fraud, that it now has its own acronym. Otherwise known as SIRE, Stolen Identity Refund fraud is a sophisticated crime that devastates its victims’ reputations and credit histories, while infuriating taxpayers. U-T San Diego reports on a crackdown of a massive identity theft ring that allegedly netted $7 million by using 2,000 stolen identities to file bogus tax returns. (OK, this is big!)

The story details that 55 people were indicted in tax refund fraud scam. Foreign nationals from former Soviet bloc countries, such as Kazakhstan, Turkmenistan or Russia, who were in the U.S. on student visas, allegedly were used to carry out the scheme. (Ring leaders knew that the students would not be in the country very long.) Authorities say that while in the U.S., many of the students had rented apartments in San Diego and in other cities across the nation and opened post office boxes and bank accounts to deposit refunds from fraudulently filed income tax returns.

The elaborate international scheme mainly involved two types of refunds – winnings and losses from gambling ventures and falsified job earnings. To conceal their identities and make it harder for authorities to track, the authorities say defendants used code names, prepaid cell phones and disguised their computer’s electronic addresses. One defendant is accused of using her job at a bank to open accounts to accept refunds. Three defendants are accused of filing 400 fraudulent tax returns using stolen identification information. Another ruse allegedly included recruiting people to pose as wealthy customers, who would wire large sums of money to a gold dealer, then at a later time would pick up the gold coins. The indictment says this required coaching the co-conspirators to answer potential questions, forge signatures and speak without an accent. Similarly, another indictment notes part of the scam included writing $600,000 worth of bad checks.

So far, 22 suspects have been arrested in San Diego, Los Angeles, Las Vegas and Maryland. The busts have turned up $13,000 in cash and four handguns. The other 33 suspects are at large, many of them out of the country.

If true, this massive operation, which allegedly spans across the globe, is a sophisticated venture. However, it should be noted that the defendants are innocent until proven guilty. Each deserves his or her day in court.

The federal government recognizes that schemes such as the one alleged in this article are going on all across the country. It has responded by setting up a clearinghouse to work with identity theft and tax fraud victims, while continuing to make it a priority to track down and prevent further tax refund fraud.

So, here’s the question for the day? what steps does your revenue agency take to prevent stolen identity refund fraud?

Source: Today’s ”Fraud of the Day” is based on the article titled, ”Feds: Massive Identity Theft Ring Busted,” written by Terri Figueroa, Debbi Baker and Pauline Repard and published in U-T San Diego on September 26, 2013.

SAN DIEGO — Fifty-five people, including dozens operating out of San Diego, were indicted in what federal authorities on Thursday called a massive bogus tax-return scheme that netted $7 million and involved the theft of more than 2,000 identities.

The elaborate operation included using foreign students to carry out the scheme in San Diego and elsewhere. Some defendants used code names, prepaid cellphones and disguised computer addresses. One bank employee is accused of setting up accounts to launder fraudulent refunds.


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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.