MOUNTAIN WEST CREDIT UNION ASSOCIATION June 9, 2020 Special Agent Lisa Palmer, IRS-CI
Objectives • Overview of Role of CI Special Agents • Components & Importance of SARs • Discuss Traditional Case Studies • Emerging Cryptocurrency Trends • Discuss Cryptocurrency Cases • Discuss Role SARs Play in Investigations
Who i o is s IRS-CI a and W nd Wha hat Do Do The hey Do Do? • Approx. 2,200 Special Agents Fraud Detection Centers Forensic Laboratory Computer Investigative Specialists Undercover Program Tech. Program Asset Forfeiture Coordinator
Wha hat Do Do S Speci pecial Ag Agents Do Do? • Interview witnesses and subjects • Serve search, seizure and arrest warrants • Perform undercover operations • Armed Escorts/Building Security • Evaluate Information • Testifying - Grand Jury & Trial • Recommend Prosecution
SAR AR Revie view T Tea eams • Includes FBI, IRS, USAO, ICE/HSI, DEA, ATF, USSS, USPS, CO Dept of Rev., and SEC etc. • Meet once a quarter • Discuss SARs, cases, and trends
So o Many SARs - How t to o Chose ose • Different agencies have different priorities
Who i o is s IRS-CI a and W nd Wha hat Do Do The hey Do Do? • Investigative Authority: • Legal Source Income • Title 26 – Internal Revenue Code • Illegal Source Income • Return Preparer Schemes • ID Theft
Who i o is s IRS-CI a and W nd Wha hat Do Do The hey Do Do? • Money Laundering (Video Break!)
SA SAR Analysi sis s Tool
Data Analytics Da Data Ana Analytics ics • Are there individuals with multiple SARs this months? • Previous months? Outside this area? • Are there individuals with SARs who also have other BSA Documents • What specialized filers have filed in my area? • Are there new documents for existing cases?
Preparing SAR Narratives Prepp epping g SAR AR N Narr rratives • This is your chance to tell me, in plain English, what you THINK is suspicious. • Give me a summary in the first 1-2 sentences. • Provide a detailed description of the known or suspected criminal violation or suspicious activity. • Add any information you have about the knowledge, mindset, or intent of the subject. • Conversations, or statements from the subject are especially useful
How We S e See S ee SAR AR Narr rratives es TELLER 08 AT 12:29 10/12/2010 TUESDAY CASH DEPOSIT $9,500.00 TELLER 08 AT 16:23 10/13/2010 WEDNESDAY CASH DEPOSIT $9,500.00 TELLER 10 AT 10:30 10/19/2010 TUESDAY CASH DEPOSIT $9,500.00 TELLER 08 AT 16:40 10/20/2010 WEDNESDAY CASH DEPOSIT $9,500.00 TELLER 11 AT 14:44 10/21/2010 THURSDAY CASH DEPOSIT $9,500.00 TELLER 08 AT 14:46 10/26/2010 TUESDAY CASH DEPOSIT $9,500.00 TELLER 04 AT 15:02 10/27/2010 WEDNESDAY CASH DEPOSIT $9,500.00 TELLER 04 AT 11:34 11/02/2010 TUESDAY CASH DEPOSIT $9,500.00 TELLER 11 AT 16:35
Attach Transaction Charts to SAR DEPOSIT Teller Time Day of Week Date $9,500.00 08 16:23 WEDNESDAY 10/13/2010 $9,500.00 10 10:30 TUESDAY 10/19/2010 $9,500.00 08 16:40 WEDNESDAY 10/20/2010 $9,500.00 11 14:44 THURSDAY 10/21/2010 $9,500.00 08 14:46 TUESDAY 10/26/2010 $9,500.00 04 15:02 WEDNESDAY 10/27/2010 $9,500.00 04 11:34 TUESDAY 11/02/2010 $9,500.00 11 16:35 THURSDAY 11/04/2010
Example 1 Example e 1 Excerpt from a SAR This SAR is being filed for suspicious incoming funds, a suspicious use of funds and a suspicious movement of funds conducted in personal checking account… …[the bank] considers this activity suspicious because the true source of the electronic credits and incoming wires is undetermined. Also, the inability to determine the true use of the visa debit card purchases and electronic debits is suspicious. Additionally, the inability to determine the source and use of funds indicates a suspicious movement of activity. Online research supporting this customer is buying and selling bitcoins adds to this suspicious nature.
Example 1 Example e 1 Excerpt from a SAR This SAR is being filed for suspicious incoming funds, a suspicious use of funds and a suspicious movement of funds conducted in personal checking account… …[the bank] considers this activity suspicious because the true source of the electronic credits and incoming wires is undetermined. Also, the inability to determine the true use of the visa debit card purchases and electronic debits is suspicious. Additionally, the inability to determine the source and use of funds indicates a suspicious movement of activity. Online research supporting this customer is buying and selling bitcoins adds to this suspicious nature.
Limited Use of SAR Information Limited Us d Use e of S SAR AR I Inform rmation • Back-up documentation • Transactions are great but context ALWAYS helps • More is better…additional account activity and history, conversations with subject, video, and pictures • We cannot directly use any of the information in the SAR • Follow-up with subpoena, summons, court order • Interview employees of the financial institution who were involved/witness to the suspicious activity
Red Flags Depository Accounts Red F ed Flags – Depo Depository Ac Accoun unts • Structuring • Large amount of cash deposits • International wires • Activity out of the ordinary for customer • Customer inquiring about BSA laws • Business activity in personal accounts • Multiple U.S. Treasury checks in various names in single account • Recycling of Cashier’s Checks to keep account balance low
Reach Out to Law Enforcement Rea each Out ch Out to Law E Enforcemen ent • Thousands of SARs are filed each month in Colorado - don’t be scared to reach out • Time sensitive • Out of the ordinary • Trust your instincts • You are the boots on the ground, much of our financial intelligence comes from you
Tax Evasion in a nutshell Tax E x Evasion i n in n a Nut utshell This boils down to intent to defraud the United States by concealing income from being taxed or concealing assets so as not to pay an outstanding tax. • Evasion of Assessment vs. Evasion of Payment Applies to all types of federal taxes: income, employment, etc.
What Can Tax Evasion/Fraud Look Like in a Bank Account? • Structured cash deposit/withdrawals • Using nominees (shell corporations, nominee signor, stamped signature) • Business activity in a personal bank account • Comingling business and personal funds/expenses • Sweeping accounts regularly (i.e.: depositing funds, purchasing cashier’s checks, then redepositing cashier’s checks at a later date) • Cash intensive businesses with no cash activity in business bank account (i.e.: retail, bars, dry cleaners, etc.) • Admissions or statements from account holders
Return Preparers Return Preparers • No Licensing Rules for Return Preparers • Make up Information on Returns • Charge a Percentage of the Refund
Tax Fraud ID Theft Fraud – ID Theft • Stolen SSN • Fabricate income – Refundable credits • Use last year’s income numbers • Business Email Compromise • ITIN Fraud • Create an account • Receive Additional Child Tax Credit • The gift that keeps on giving
MONEY: From the IRS to the Criminal • Direct Deposit into Bank Account • Limit of three • Prepaid Debit Card • Also a limit of three • Debit cards have AML programs • Checks • You need an ID to cash the checks
IRS I Impersonation S Schemes IRS Impersonation Schemes • Phone and email (mostly phone) • Threaten arrest • Action required immediately • Send money through MSB, gift cards, or cryptocurrency • Not limited to IRS • Social Security Administration • Utility Companies
Case Studies
• SARs filed by local CU stating two new business accounts just received over $3 Case Study #1 – million from the Treasure Department related to claims with the VA The Home • Businesses registered to same residential addresses Healthcare • Majority of the funds were quickly Providers transferred to personal accounts. • Funds largely used for what appear to be personal expenses
• The businesses’ claims with the VA were analyzed and outliers were identified for patient care Case Study #1 – • Interviews showed business owner had cold called patients with a chronic The Home condition, and helped care takers fraudulently enroll as certified Healthcare healthcare workers. Providers • Subject’s businesses kept 80% of the money • Found guilty – subjects are awaiting sentencing
• Multiple SARs filed on local landlord Case Study #2 • Subject would bring in an empty bag, go to their safe deposit box and then buy a large cashier’s check with cash The Landlord from the bag • Subject would cash checks regularly with memos for “Rent” or an address • Kept low balances in personal accounts
• Follow up documentation requested, and Case Study #2 agents interviewed bank personnel • Subject told tellers she didn’t trust banks, and preferred to use cash The Landlord • Review SAR support and public records showed she was buying inexpensive properties and renting them • Review of tax returns showed income was reported
Cryptocurrency CRYPTOCURRENCY • History of Cryptocurrency • Components of a Cryptocurrency Transaction • Role of Cryptocurrency in Financial Crimes • Emerging Trends
Cryptocurrency S SARs Rs: V Volume Cryptocurrency SARs: Volume
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