financial fraud

IRS Cutbacks Led to Fewer Investigations, Prosecutions in 2017

Jan 12th 2018
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The effect of IRS staffing cutbacks is evident in the agency’s 2017 annual report of criminal investigations, with fewer investigations, recommended prosecutions, filings of information and indictments, and prison sentences than in 2015 and 2016.

“Resource issues make it impossible to be involved in every investigation in which we are asked to participate,” said Don Fort, chief of the IRS Criminal Investigation Division, in the report’s prelude. “We have the same number of special agents — around 2,200 — as we did 50 years ago.”

For example, the number of investigations initiated on fraud by financial institutions dropped to 46 last year from 66 in 2016 and 84 in 2015. Cases on money laundering dropped to 1,096 from 1,201 and 1,436 in the respective years. At the same time, investigations on non-filers steadied at 206 in 2016 and 2017 but were down from 223 in 2015.

While the number of financial crimes has grown, criminals shouldn’t be misguided by the agency’s role in thwarting illegal activity, he said.

“Criminals would be foolish to mistake declining resources for a lack of commitment in this area,” Fort said. “While the size of our organization directly affects the number of cases we open each year, the quality and the complexity of those cases continues to remain at a high level.”

Overall, the agency’s 2,159 special agents and 835 support staffers handled 3,019 investigations, 2,294 indictments, 2,251 prosecution recommends, and 2,549 sentencings in fiscal year 2017 — all of which were lower than in 2015 and 2016. Covered cases included abusive tax preparers and schemes, financial institution fraud, employment tax, refund fraud, international tax enforcement, tax-related identity theft, public corruption, cybercrime, terrorist financing and money laundering.

Its conviction rate was 91.5 percent, and its cases led to the identification of $2.5 billion in tax fraud and $1.1 billion in proceeds from other financial crimes.

IRS 2017 report
Image via IRS

The Criminal Investigations unit is the only federal law enforcement agency with jurisdiction over federal tax crimes, according to the IRS. The majority of the work (72.5 percent) was tax-related, while 14.7 percent was non-tax related and 11.6 percent pertained to drugs.

Even so, in crime categories that target abusive return preparers, abusive tax schemes and employment tax, the number of initiated investigations was higher than in 2015 and 2016 but indictments and sentencings were lower.

Cases targeting nonfilers and questionable refunds, on the other hand, had fewer successes in all categories. High-profile crime cases involving identity theft were significantly lower in 2017.

Meanwhile, cybersecurity breaches have become far more troublesome and the Criminal Investigations unit in 2016 created an office of Cyber Crimes. Investigators primarily focus on theft and fraud that grow in scale by the use of computers, networks and other technology.

The IRS in its report highlighted a few successful cases in 2017:

  • A shakedown of commercial fisherman in Massachusetts that involved complex financial investigation, in a case it called the “Codfather”.
  • Its role in taking down several large Dark web marketplaces, which led to the arrest of the sites’ owners
  • Its participation with the FBI, DEA and ATF in taking down a national health care fraud scheme that  resulted in charges for 412 individuals and accounted for more than $1.3 billion in fraud losses.

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By Seth Fineberg
Jan 12th 2018 12:40 EST

From an Anonymous reader:
I just read Ms. Sheridan’s article on the woes of IRS CI being down on resources – it was sent to all IRS CI employees as part of our daily briefings. Another article bemoaning how IRS CI is understaffed.
Mr. Fort seems to do this frequently. Yet his decision making skills should be questioned as he is forcing out agents to quit and leave IRS CI.
Mr. Fort does not think hearing aids can be worn by agents, even if it is only on one ear.
Yes resources have been limited at IRS CI, but if I was in Congress I would also question some of the reasons why IRS CI agents are being forced out and are leaving for other agencies.
There have been about 25 of more agents that have been forced of IRS CI because of the strict hearing ability requirements. What is even more alarming, is that younger agents are leaving to other federal agencies because they feel that they may not meet the hearing requirements in the future. In the Oakland Field Office almost 10% of the field agents left last year for other agencies.
Maybe next time Ms. Sheridan can ask Don Fort about why IRS CI has such strict hearing requirements compared to HSI, FBI, or other Treasury agencies (SIGTARP or TIGTA). IRS CI is known as accountants with badges that doesn’t have a SWAT or elite enforcement teams.
There currently isn’t even a physical fitness requirement. However, you better have good hearing without a hearing aid – because hearing aids are forbidden. Meanwhile corrective lenses are allowed and vision is not questioned.

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