IRS Alert: Fraudulent Tax Refund Checks


Justice Dept Page on Stolen Identity Refund Fraud (SIRF)

Illinois Business Owner Sentenced to Prison for Stealing Identities to File False Tax Returns
January 18, 2017

August 5, 2015 NMTA Webinar With Leo Rovensky of the IRS CID
Mr. Leo Rovensky is the identity theft coordinator for the State of New Jersey and is part of a multi-agency Task Force in Newark, NJ, that investigates criminals involved in stolen identity refund fraud. Mr. Rovensky also serves as a point of contact for financial institutions looking to report suspicious activity.

--------------------

The material below was posted February 10, 2015:

IRS Fraudulent Tax Refund Check Flyer (English) (Feb 3, 2015)

The Following is as Per Information Received From the IRS. -Ed.
The IRS developed these flyers to use in their examinations of check cashers (or money transmitter agents who may be accepting these checks) to raise their awareness of the red flags for ID theft and tax refund fraud.  A substantial number of fraudulent refund checks are being cashed at check cashers in order to avoid the scrutiny of a bank.  A check casher should implement policies, procedures, and internal controls as part of their AML program to reduce their risk of being used to facilitate money laundering and other financial crimes.  Financial crimes include fraudulent income tax refund schemes. Management should provide training to employees about how to identify potential fraudulent federal income return checks and how to notify management when identified.  
 
On a related note, according to information received from the IRS, a bank compliance officer reported that the bank will no longer accept US Treasury tax refund checks from their check casher customers because of the losses the bank has incurred from the checks being reclaimed. 
 
Check reclamation is a recovery procedure used by the US Treasury Bureau of the Fiscal Service to obtain refunds (reclamations) from a presenting financial institution for paid U.S. Treasury checks.  The presenting financial institution is the bank/credit union where the Treasury check is ultimately deposited.  All U.S. Treasury checks, regardless of the payment type, are subject to check reclamation procedures. 
 
Reclamation actions may be initiated against the presenting financial institution when:
  • The check was presented for payment over a forged or unauthorized endorsement;
  • A benefit check was negotiated after the payee’s death; or
  • The check was materially altered.
The presenting financial institution is liable for the principal amount of the check and if applicable the accrued interest, penalties, and administrative fees.  The financial institution may protest their liability for a reclamation if they raise a valid legal or factual question and include a written statement and provide supporting documentation which proves they are not liable for the reclamation.  However, in most instances in order to reduce their liability, banks are withdrawing the funds from the check casher’s account and remitting the funds without determining whether the check casher has the supporting documentation to prove the customer cashed the refund check belonging to that customer.  In one instance, the check casher had a copy of the check and the customer’s foreign passport yet the bank paid the reclamation and closed their account prior to contacting the check casher.