What is IRS-Criminal Investigation?
The IRS-Criminal Investigation (IRS-CI) is a specialized unit of the Internal Revenue Service that investigates a variety of financial crimes such as tax fraud, money laundering, healthcare fraud, identity theft, public corruption, and narcotics trafficking. IRS-CI agents are the only federal law enforcement officers with the power to investigate criminal violations of the Internal Revenue Code. Their successful conviction rate is over 90%.
The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) was signed into law on March 27, 2020, in response to the difficulties the US economy was having as a result of the Covid pandemic. IRS Criminal Investigation (IRS-CI) says that in the nearly three years since Covid fraud was first reported, they have investigated 975 tax and money laundering cases, with a total alleged fraud amount of $3.2 billion.
There have been 458 people indicted for alleged crimes related to Covid fraud as a result of IRS-CI investigations, and 236 people have been sentenced to an average of 37 months in federal prison. Over the same period, nearly all cases brought to trial resulted in a conviction for CI.
“IRS-CI is pleased to be at the forefront of efforts to combat fraud related to COVID. The effects of the disease and the fraud perpetrated on the various COVID-related relief programs may have faded from the evening news, but they are not forgotten. Any crook thinking of taking advantage of the CARES Act should know that stealing from law-abiding citizens will lead to swift and severe retribution “stated Jim Lee, head of the IRS-CI.
While there has been a wide range of fraud types, the following are the most common types:
The misuse of the Payroll Protection Plan (PPP). While PPP funding was available, nearly 12 million loans were approved for a total of $800 billion, with the average loan size being $42,000. The loans were made available to help small businesses keep their doors open during the pandemic. However, dishonest people saw this as a chance to profit; some inflated their payroll costs to qualify for larger loans than they needed, while others resurrected dormant corporations or bought shell companies with no actual operations to apply for multiple loans.
Beware of Economic Damage after a Disaster (EIDL) Scams Targeting Businesses.
Loans for Economic Damage after a Disaster (EIDL) Scams. EIDL loans weren’t quite as popular as PPP loans—just under four million loans totaling more than $378 billion were doled out during the pandemic. More than $5 billion in prepayments came from another 601,058 loans. Businesses are expected to pay back Covid EIDL loan funds, which were designed for things like working capital and regular expenses. Existing COVID-19 EIDL applicants who meet certain criteria were granted interest-free EIDL Advances. Scammers have targeted the EIDL program in a similar way to PPP loans, applying for advances and loans on behalf of ineligible, newly-created shell businesses and then using the money for illicit activities, according to research conducted by the IRS-CI.
Unemployment Insurance (UI) fraud. More than $653 billion had been dispersed by October 2021 through programs meant to aid those who had been unable to work due to shutdowns and related activities during the pandemic. The Department of Labor estimates the total amount of improper UI payments, including fraud, to be at least $39.2 billion, which was taken advantage of by scammers who submitted false information to government agencies, collected benefits while ineligible, and used stolen identities to file for UI benefits during the pandemic.
Criminals have also created fake unemployment benefit websites to steal taxpayer data. Individuals were lured with text messages and emails purporting to be from a legitimate state agency and tricked into thinking they are applying for benefits, but fraudsters were stealing their information to commit identity theft.
Not only did the increase in false claims cause delays in the delivery of much-needed benefits (hundreds of thousands of claimants waited more than 21 days to receive their benefits), but it also resulted in the issuance of many incorrect Forms 1099-G in the names of honest taxpayers whose identities had been stolen. The IRS eventually made a section of its website dedicated to helping those who had been victimized in this way.
The IRS-CI has been conducting fruitful investigations into these cases.
In February 2023, Mustafa Qadiri from Irvine, California was handed a 54-month federal prison sentence for his role in fraudulently obtaining $5 million in Covid-relief loans. The funds were used to purchase luxury vehicles, including Ferraris, Bentleys, and Lamborghinis. He was also fined $20,000 and ordered to pay $2.86 million in restitution.
Qadiri claimed to have operated four Newport Beach-based companies, none of which were in operation and submitted false and fraudulent PPP loan applications to three banks on behalf of those companies. Qadiri used a fictitious name, Social Security number, and signature to apply for a loan, inflated bank account balances to make it appear as though the companies had more money than they did, and submitted false quarterly federal tax returns.
About IRS.
The criminal investigative unit of the IRS, known as IRS-CI, investigates a wide range of financial crimes such as tax fraud, money laundering, healthcare fraud, public corruption, identity theft, and narcotics trafficking. Only IRS-CI special agents have the authority to investigate violations of the Internal Revenue Code and have a track record of more than a 90% conviction rate.
Resources
If you are contacted by someone claiming to be from the Treasury Department offering Covid-related grants or stimulus payments in exchange for personal financial information, an upfront fee, or any type of charge, such as the purchase of gift cards, do not fall for it. These types of offers are not legitimate. It is important to hang up immediately and not provide any personal or financial information to the caller or sender.
Call the National Center for Disaster Fraud Hotline at (866) 720-5721 or fill out the NCDF Web Complaint Form to report suspected fraud related to the COVID-19 pandemic.
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