Sí, Soy de Puerto Rico…


What do you call it when three people commit two unrelated acts of fraud using nearly identical scams? I call it a pattern. At a minimum, it is a problem.

Today’s ”Fraud of the Day” from AccountingToday.com reports that three former employees of a large New York bank pleaded guilty to using the identities of Puerto Rican residents to obtain $2 million in fraudulent tax refunds. Though the schemes operated separately, they were run in about the same way: they simply took names, dates of birth, and Social Security numbers (SSN) of Puerto Rican residents and filed tax returns with them claiming refunds. (Sounds familiar) They even bribed U.S. Postal workers to pull the checks from the mail. (Whatever happened to: ”Through rain, sleet, snow and ice…”).

The U.S. Attorney’s Office offered some pretty good insight into the cases and the overall problem: ”As bank employees on the take, these three defendants facilitated fraudulent tax schemes using the stolen identities of Puerto Rican citizens. Their conduct contributed to a national crime wave that is costing the IRS billions of dollars in lost revenue. Today’s guilty pleas should serve as warnings to others who might contemplate aiding tax cheats that we will prosecute you to the full extent of the law.”

So, we have a problem: tax refund fraudsters are using stolen Puerto Rican identities to file bogus tax refund claims. Here’s the good news. We know what the problem is, so we can stop it.

These fraudsters have found a loophole: Puerto Rican residents don’t pay federal income tax. As you’ve seen me write before, this is an identity problem requiring an identity solution. Here, it was the federal tax system. In reality, a fraudster could use the identity of a Puerto Rican resident in any state and for a host of public assistance benefits. But identity management solutions can quash public assistance fraud schemes that begin with identity fraud. They are designed to check batches of data against public records databases to search for anomalies in the data. These solutions are created to discover that phony IDs.

So, here’s the question for the day: is your agency using an identity management solution to catch fraudsters? Why or why not?

Source: Today’s ”Fraud of the Day” is based on the article titled ”Chase Employees Plead Guilty to Tax Refund Fraud,” written by Roger Russell and published by AccountingToday.com on August 14, 2012.

Three former employees of J.P Morgan Chase Bank pled guilty in Manhattan federal court to participating in two separate tax refund schemes that used the identities of Puerto Rican citizens to obtain fraudulent tax returns.

In the first scheme, Katherine Torres, a former Chase branch manager, and Rosalind Smith, a former employee at the same branch, pled guilty to participating in a scheme that defrauded the Internal Revenue Service and New York State out of over $1 million. In the second scheme, Judith Fulgencio, a former personal banker at another Chase bank branch, pled guilty to participating in a scheme that also defrauded the IRS and New York State out of more than $1 million.


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Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.