Federal, state and local authorities have indicted dozens of people and businesses in the U.S. and India accused of impersonating Internal Revenue Service employees demanding money from innocent taxpayers in the U.S.
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The Justice Department unsealed an indictment Thursday charging 61 individuals and entities with being involved in an international criminal organization victimizing tens of thousands of people in U.S., resulting in hundreds of millions of dollars in losses. In connection with the scheme, the Justice Department said 20 individuals were arrested Thursday in the U.S. and 32 individuals and five call centers in India were charged with their alleged involvement. Another U.S.-based defendant is currently in the custody of immigration authorities. 
Earlier this month, police in India raided nine call centers and arrested 70 people who were involved with the IRS impersonation scam (see India Busts IRS Scammers).
“This indictment will serve to not only seek the conviction of those involved, but will send a message around the world that no one is safe from prosecution for participating in such pervasive transnational fraud schemes,” said Kenneth Magidson, U.S. Attorney for the Southern District of Texas, in a statement. “We are extremely vigilant when the names of U.S. government agencies are used to perpetuate fraud for the purpose of victimizing so many innocent American citizens.”
The scheme was allegedly organized in India, with a network of call centers in Ahmedabad using information obtained from data brokers and other sources. The call center operators would call their victims while impersonating officials from the IRS and the U.S. Citizenship and Immigration Services. The call center operators would then threaten victims with arrest, imprisonment, fines or deportation if they didn’t pay taxes or penalties to the government.
If the victims agreed to pay, the call centers would then use a network of U.S.-based co-conspirators to liquidate and launder the extorted funds as soon as possible by buying prepaid debit cards or through wire transfers. The prepaid debit cards had typically been registered using information stolen from thousands of identity theft victims. Wire transfers were steered by criminals using fake names and fraudulent identifications.
The scammers allegedly also relied on “hawalas,” in which money is transferred internationally outside the formal banking system, to direct the extorted funds to accounts belonging to associates in the U.S. A hawala is an underground banking system based on trust in which money can be made available internationally without actually moving it or leaving a record of a transaction. The associates were expecting the hawala transfers but were unaware of the illicit nature of the funds. However, the co-conspirators allegedly kept a portion of the proceeds for themselves.
According to the indictment, one call center extorted $12,300 from an 85-year-old victim from San Diego, California, after threatening her with arrest if she didn’t pay the fictitious tax violations. On the same day she was extorted, one of the U.S.-based scammers allegedly used a reloadable debit card funded with the victim’s money to purchase money orders in San Francisco.
In the largest single case, another scammer extorted $136,000 from a victim in Hayward, California. The scammers called the victim multiple times over a period of 20 days, pretending to be IRS agents demanding payment for tax violations. The victim was asked to purchase 276 stored value cards whose value was then transferred to reloadable debit cards. Some of the victim’s money ended up on cards activated using stolen ID information from victims in the U.S.
The scammers would sometimes use other fraudulent schemes in which the call center operators would offer the victims small short-term loans or tell them they were eligible for grants. The criminals would request a good-faith deposit to show the victims’ ability to pay back the loan or ask victims to pay a fee to process the grant. Victims never received any money after making the payment.
The Treasury Inspector General for Tax Administration has been tracking and investigating the scam since the fall of 2013. To date, more than 1.8 million people have told TIGTA they have received calls from the scammers. More than 9,600 victims reported paying the scammers a total of over $50 million.
“Today’s indictment is the result of countless hours of solid investigative work and excellent cross-governmental collaboration concerning the massive amounts of fraud that individuals have allegedly perpetrated on the American people,” said TIGTA Inspector General J. Russell George in a statement. “I am extremely proud of my investigative team and of the many efforts of hundreds of TIGTA employees who have played a role in this investigation. We will continue to pursue investigations into this type of criminal activity until we bring those involved to justice.”
Timothy Camus, Deputy Inspector General for Investigations at TIGTA, told reporters during a conference call Thursday that the scammers were impersonating not only IRS employees, but also employees of the Department of Homeland Security. He emphasized that TIGTA has multiple other investigations of the scam that are still ongoing.
“Today’s action is the single most significant action taken to date domestically concerning this impersonation scam, a scam that we have been tracking at TIGTA since the fall of 2013,” he said.
The indictment describes hundreds of millions of dollars of fraud impacting as many as 15,000 victims, where 50,000 people’s identities have been stolen, Camus noted.
If you have any questions about the IRS, tax return fraud, scams, or cybersecurity, contact me at info@zinnercocom or any of the professionals at 216.831.0733. We are ready to start the conversation.
This article was written by Michael Cohn and appeared on Oct. 27, 2016 in Accounting Today.
