The Financial Crimes Enforcement Network (“FinCEN”) issued an advisory (FIN-2012-A005, the “Advisory”) to assist financial institutions (“FIs”) with identifying tax refund fraud and reporting the activity through the filing of Suspicious Activity Reports (“SARs”). FinCEN stated that since individual income tax returns are tracked and processed by an individual’s name and Taxpayer Identification Number (“TIN”), fraudulent actors use phishing schemes, the establishment of fraudulent tax preparation businesses and other criminal schemes to obtain TINs and defraud taxpayers. The Advisory notes that FIs are critical to identifying tax refund fraud because the proceeds of tax refunds are generally distributed through transactions at FIs.
To assist FIs with identifying potential tax refund fraud, the Advisory provides a number of examples of “red flags” of tax refund fraud. FinCEN then reminds FIs that, generally, they are required to file SARs if they know, suspect, or have reason to suspect that tax refund fraud has been conducted or attempted by, at or through the FI.