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Tax Refund Fraud: Detection and Deterrence

Recorded on February 27, 2012

Start with identity theft. Add in circumvention of a financial institution's Customer Identification Program, a little creative writing, a bit of bogus math, some type of tax prep software and you have all the ingredients for one of the variations of tax refund fraud. In other cases, the taxpayer is legit and it's the tax preparer doing the stealing. In any event, the crime is lucrative and enormously appealing to today's criminal element. Factor in a lack of monitoring on the part of the financial institution into which the tax refunds are received and you have a recipe for huge paydays for the perpetrators of this time of scam.

A cynical employee may be tempted to say that tax return fraud is the federal government's problem. However, ultimately this type of crime affects us all, and FinCen has gone on record in recent guidance stating that any kind of financial fraud, including tax refund fraud, is the financial institution's problem, and that it has a responsibility to monitor for illegal activity and file Suspicious Activity Reports where warranted.

It is important for all associates charged with safeguarding their institution from fraud to know the anatomy of tax refund fraud schemes and how to identify their signature transactions. Failure to do so could result in an increase in compliance risk in the form of examiner criticism, financial risks from fraudulent accounts, and reputation risks as your institution's name is associated with the fraud scheme in the headlines of the local newspaper.

In this session, Mary Beth and Brian will help you mitigate these risks with the following topics:

  • Descriptions of common tax refund scams
  • How identity theft contributes to tax refund fraud
  • Red Flags indicating the potential for tax refund fraud
  • Regulatory guidance outlining expectations for detection and reporting
  • What to monitor - and how
  • Higher risk business lines
  • Customer Due Diligence strategies
  • NACHA rules governing ACH payments
  • E-filing and refund rules
  • Endorsement rules for tax refund checks
  • Refunds deposited to prepaid access cards

Who Should Attend:
Anyone in your institution who may come into contact with tax refunds including ACH Processors, Bookkeepers, BSA Officers, BSA Analysts, Tellers, Personal Bankers

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