Even when weather conditions look perfect, surfing can be dangerous. A gentle breeze may be blowing and the sun shining, but underneath the ocean, rip tides and strong undertows can be life threatening. Just as die-hard surfers sometimes ignore the dangers of the ocean for the thrill of one perfect ride, fraudsters will risk a life in prison just for the opportunity to steal and spend money that doesn’t belong to them. A recent article in The Economist profiles a story about the proliferation of Stolen Identify Refund Fraud (SIRF) and how this type of fraud impacts the government and American taxpayers. (Full disclosure? this is the part where I brag about the great work my company, LexisNexis®, is doing in this space.)

The article reports that Uncle Sam is losing between $70 billion and $240 billion a year to health care scams alone, not to mention false claims for welfare payments and tax refunds. Most of this fraud is perpetuated through the use of stolen identification information that can be obtained from a multitude of places including, doctor offices, nursing homes, hospitals and even online genealogical sites. The article states that nearly 12.6 million people were victims of identity theft in 2012. (That’s about one person every three seconds.) Unfortunately, SIRF conditions are perfect for fraudsters these days – especially in the area of tax refund fraud.

With 145 million individual tax returns being filed each year and three-quarters entitled to a rebate, there is ample opportunity for tax refund fraud. (If I had a favorite, this would be it.) Stolen personal identification information enables fraudsters to apply online for multiple refunds per day and make off with a lot of money before the authorities can track down the perpetrators. This type of fraud is popular because of how easy it is to do. Even street gangs are turning from peddling drugs to filing bogus returns online because it is less dangerous and more lucrative. (Less prison time if you get caught and the fraudster is probably less likely to get shot than a drug dealer.)

Approximately 30 state and federal agencies are fighting back at tax refund fraud by using ”filters,” designed by LexisNexis, that cross reference millions of names, addresses and personal data. This system helps to identify patterns of fraud that would take months of manual labor to detect. Suspicious requests are identified then posed multiple-choice questions about past addresses, previously owned vehicles or other personal information. (Like the middle name of distant cousin, Herb.) Those who answer the questions correctly are issued a tax refund. By using the filters in just the State of Georgia last year, $110 million in fraudulent refunds were prevented. Approximately $23 million of that was attributed directly to the fraud filters.

The Internal Revenue Service is combating the problem of fraud by doubling the number of staff working on ID theft. This effort has helped decrease the amount of time required to resolve fraud cases by an average of six months, while increasing the amount of blocked fake refunds to $20 billion in 2012 – up from $14 billion the previous year. (The IRS could further cut their losses if they could cross-check the returns against employer data income, which is received after the refund checks have been sent. Unfortunately, that would require an act of Congress.)

There’s no doubt that the increased efforts to fight fraud are paying off, but fraudsters have a way of implementing new techniques, while moving their operations to other locations to prevent being caught. You never know where fraudsters might be lurking, but with the use of filters and data cross-referencing, authorities don’t have to cast such a large net to catch ID predators. Federal agencies and states can realize immediate return on investment; criminal acts can be prevented; and, American taxpayers can have less fear about having their credit history wrecked by SIRFing.

Source: Today’s ”Fraud of the Day” is based on the article titled, ”Stealing from the Government,” written by Matthew Valencia and published in The Economist on November 30, 2013.

ATLANTA AND TAMPA – Uncle Sam being bilked, big-time. Losses from health-care scams alone are between $70 billion and $240 billion a year, reckons the FBI. An ever higher percentage of frauds (false claims for welfare payments, tax refunds and so on) are being perpetrated with stolen identities. Some 12.6m people—one every three seconds—fell victim to identity theft in the United States in 2012, according to Javelin Strategy and Research. The problem only grows as benefit programmes strive for efficiency and convenience, shifting applications online and making payments to prepaid debit cards, which can be bought in shops, require no bank account and allow money to be laundered quickly and easily. The self-proclaimed first lady of tax-refund fraud is Rashia Wilson (posing with the loot on her Facebook page, above) who, along with her eager associates, claimed bogus rebates of more than $11m.

A degree in computer science is not needed to steal personal data. Names, addresses and Social Security numbers can be nicked from doctor’s surgeries, nursing homes and hospitals, either by insiders (a medical assistant was indicted in June for allegedly selling hundreds of names to feed his crack habit) or outsiders (who may distract secretaries and grab patient logs). Swindlers commonly prise information from the unsuspecting over the phone by posing as, say, Medicare reps. Some use the identities of dead people after trawling genealogical or family-support websites. The Affordable Care Act is a gift: complaints about phone calls and visits from bogus Obamacare ”navigators” are on the rise.

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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.