IRS Issues FATCA Fraud Alert

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As part of its continuing efforts to combat the serious problem of identity theft, the Internal Revenue Service warned today that fraudsters have expanded their widening schemes to obtain identity information to foreign financial institutions (FFIs) that are complying with the Foreign Account Tax Compliance Act (FATCA). FATCA, which became effective on July 1, 2014, is a new law that is designed to provide the U.S. with information about offshore bank accounts held by U.S. taxpayers.  FATCA generally requires FFIs to annually report to the IRS information about their U.S. accountholders, or face a 30 percent withholding tax on U.S.-source payments.  To date, nearly 100,000 FFIs have indicated their willingness to comply with FATCA by registering as compliant institutions with the IRS. Separately, over 100 foreign jurisdictions have agreed to implement FATCA by entering into bilateral Intergovernmental Agreements (IGAs) with the United States.

As FFIs around the world are scrambling to ensure their procedures and systems are FATCA-compliant, it appears that scam artists posing as the IRS have fraudulently solicited financial institutions seeking account holder identity and financial account information.  The IRS has received multiple reports that FFIs registered with the IRS and in jurisdictions with IGAs in effect have been approached by individuals representing themselves as IRS agents.  These reports come from multiple countries around the world.

In its fraud alert, the IRS reminds FFIs that it does not require financial institutions to provide specific account holder identity information or financial account information over the phone or by fax or email.  Further, the IRS does not solicit FATCA registration passwords or similar confidential account access information.  “Tax scams using the IRS name can take many forms and they are not limited by national borders,” said IRS Commissioner John Koskinen.  “People should always be cautious before sending sensitive information to anyone.”

The FATCA alert further provides:

These fraudulent solicitations are known as “phishing” scams.  These types of scams are typically carried out through the use of unsolicited emails and/or websites that pose as legitimate contacts in order to deceptively obtain personal or financial information.

Financial institutions or their representatives that suspect they are the subject of a “phishing” scam should report the matter to the Treasury Inspector General for Tax Administration (TIGTA) at 800-366-4484, or through TIGTA’s secure website.  Any suspicious emails that contain attachments or links in the message should not be opened, and the email should be forwarded to phishing@irs.gov.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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