Government ScamsGovernment Scams

Ross McDonaldRoss McDonaldAGA/ACFE Fraud and Technology AGA/ACFE Fraud and Technology

ConferenceConferenceOctober 11, 2006October 11, 2006

Types of Government ScamsTypes of Government Scams

• MONEY, Money, money…

• Benefits/Services

• Reduce or Eliminate Tax Liabilities

• Hide Assets

• Many, many others…

What’s Not CoveredWhat’s Not Covered

• Government Conspiracies– Yes, we did walk on the moon…

• Government Coverups– Nothing strange happened in Area 51

What We Will Talk AboutWhat We Will Talk About

• Fraudulent Transactions Using Government Banking Information

• Falsifying Information to obtain Benefits and/or Services

• IRS’s “Dirty Dozen” for 2006

• Overpayment and Excess Funds Scams

Fraudulent Banking TransactionsFraudulent Banking Transactions

• Using Bank Routing and Account Numbers from issued checks

• Check-by-Phone

• Electronic Funds Transfers

Bank Routing and Account Bank Routing and Account NumbersNumbers

• Checks Written & Sent

• Some are Intercepted/Stolen

• Most are Cashed/Deposited

• MICR information contained on checks

• Cheap Software and Print Stock

• Info is sometimes available on the ‘Net

Check with Changed AmountCheck with Changed Amount

Fraudulent Checks with CoV Fraudulent Checks with CoV Routing and Account NumbersRouting and Account Numbers

More ChecksMore Checks

Check by PhoneCheck by Phone

EFTs – the New FrontierEFTs – the New Frontier

Account – to – Account Transfers

Quick Transfers of Funds

3rd Party Groups – Paypal, Bidpay, Billpay, etc.

Benefits and ServicesBenefits and Services

• Usually Need-Based

• Determinants can be manipulated– Household Income– Household Size

• They’re getting some, I want some!

IRS’s 2006 Dirty DozenIRS’s 2006 Dirty Dozen

Zero Wages

- Substitute W-2 or Corrected 1099

Form 843 Tax Abatement

- To cover previously unfiled returns

Phishing

Dirty Dozen, con’t.Dirty Dozen, con’t.

Trust Misuse

Frivolous Arguments- the Sixteenth Amendment concerning congressional

power to lay and collect income taxes was never ratified; - wages are not income; - filing a return and paying taxes are merely voluntary; and- being required to file Form 1040 violates the Fifth

Amendment right against self-incrimination or the Fourth Amendment right to privacy

Dirty Dozen, con’t.Dirty Dozen, con’t.

Return Preparer Fraud

Abuse of Charitable Organizations and Deductions

Offshore Transactions

Dirty Dozen, con’t.Dirty Dozen, con’t.

Employment Tax Evasion

“No Gain” Deduction - Filers attempt to eliminate their entire adjusted

gross income (AGI) by deducting it on Schedule A. The filer lists his or her AGI under the Schedule A section labeled “Other Miscellaneous Deductions” and attaches a statement to the return that refers to court documents and includes the words “No Gain Realized.”

Overpayment/Excess Funds Overpayment/Excess Funds ScamsScams

Individual sends payment over what is due

- Could be that entire account is fraudulent

Requests refund

Fake/False Instrument Used in 1st Transaction

Other ScamsOther Scams

• Excess Inventory– Send more than what’s ordered

• Phishing– Usually email-related, but could use snail-mail

• Vishing– Voicemail or phone-related Phishing

Resources Available In Resources Available In InvestigationsInvestigations

• People/Address Look-ups– Free and Fee-based Services

• Social Security Death Index

• US Attorney’s Criminal Resource Manual– Fraud Against the Government– http://www.usdoj.gov/usao/eousa/foia_reading

_room/usam/title9/42mcrm.htm

Questions?Questions?

• How do I do it?

• How can I get some of that money?

• Can I get caught?