The U.S. Department of Justice (DOJ) 39 count indictment
charging Robert T. Brockman, with tax evasion, wire fraud, money laundering, and other offenses, demonstrates that the DOJ is committed to the investigation and prosecution of the costliest and most sophisticated tax crimes in the US. The DOJ stated that “IRS Criminal Investigation aggressively pursues tax cheats domestically and abroad. No scheme is too complex or sophisticated for our investigators. Those hiding income or assets offshore are encouraged to come forward and voluntarily disclose their holdings.”
The Robert T. Brockman $2 billion tax fraud scheme (the Feds largest ever tax case) illustrates that IRS uses Data Analytics to Uncover Criminal Arrangements. IRS-Criminal Investigation (IRS-CI) is a federal agency department specifically authorized to investigate and prosecute federal income tax crimes. IRS-CI uses data analytics such as models, algorithms, and the millions of records and evidence that IRS-CI has at hand for identifying areas of tax noncompliance. IRS-CI special agents are trained to uncover tax non-compliance and bring a Taxpayer to the DOJ for prosecution. They are trained to trace cash flows and use data analytics. Some of the information sources for an IRS-CI are:
- Revenue agent (auditors) within the IRS
- Revenue officers (collection) detecting possible fraud
- Individuals who report possible violations through the whistleblower program
- United States Attorney offices across the country
- Ongoing investigations by other law enforcement agencies
- Reciprocity under FATCA
- Information that is sourced from the FATCA reports submitted by Foreign Financial Institutions (FFI) (on Form 8966 – FATCA Report) and by Individual US Taxpayers that have reporting obligations via Form 8938 (Statement of Specified Foreign Financial Assets). IRS electronically matches (cross-checks) these forms to identify US Taxpayers that are not making required disclosures to IRS through not filing or underreporting as well as FFIs that are not reporting their reportable US account holders through its cross-check process.
- Tips from “regular” people like neighbors and friends
- Something “fishy” in the taxpayer’s previous tax returns
- Tax treaty and information exchange per case investigation requests
IRS-CI focuses on:
- International tax compliance and enforcement. This entails identifying, investigating, and recommending prosecution of international offshore tax evasion schemes involving US taxpayers who move their money offshore to avoid detection, and foreign banks, financial institutions, their employees, and facilitators who help US. taxpayers to conceal their funds offshore.
- The J5: The Joint Chiefs of Global Tax Enforcement. The group includes the heads of tax enforcement from the United States, the United Kingdom, Canada, Australia, and the Netherlands. The J5 addresses sophisticated tax evasion and other financial crimes that cross international borders. The Group shares information and collaborates during tax investigations.
- Expanding its presence into the Cyber Environment and tackling cybercrime. IRS-CI defines a cybercrime as a criminal investigation in which IRS-CI has investigative authority and believes that the subject of an investigation uses the internet as a means to commit crimes, remain anonymous, elude law enforcement, and conceal financial transactions, ownership of assets, or other evidence.
- Abusive Tax Schemes that involving domestic and offshore tax scheme promoters and clients who willfully participate and create structures to create an appearance that a trustee, nominee, non-resident alien, or other foreign entity is the owner of assets and income; when in fact a US Taxpayer is ultimate beneficial owner and controlling person.
- Questionable refunds, abusive return preparers and identity theft refund fraud.
- Employment Tax Fraud which includes filing false payroll tax returns and failing to file payroll tax returns.
- Internet and internet-based technologies that enable criminals to engage in illegal activity with anonymity and without a defined physical presence.
- Data loss incidents include data intrusions, business email compromise, phishing schemes, and bank account takeovers.
Individuals and entities making decisions to not comply with the law could face a civil audit or criminal investigation resulting in tax penalties or prosecution and possible jail time
There are offshore tax crimes committed by individuals, corporations, and promoters of abusive schemes. For making a determination of whether tax code non-compliance is unintended, or Willful, the US turns to IRS-CI. This division, in tandem with the US Department of Justice, investigates crimes related to violations of the Internal Revenue Code and other Money Laundering Statutes such as the Bank Secrecy Act (BSA).
The DOJ Brockman’s news release states that: “IRS Criminal Investigation aggressively pursues tax cheats domestically and abroad. No scheme is too complex or sophisticated for our investigators. Those hiding income or assets offshore are encouraged to come forward and voluntarily disclose their holdings.”
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