New FinCEN GTO puts more pressure on South Florida check cashers to sniff out fraudulent tax refunds

The US Treasury agency responsible for orchestrating the country’s anti-money laundering framework has issued a regional order requiring check cashers in two South Florida counties to get more information at lower thresholds from anyone cashing in tax refund checks.

The Financial Crimes Enforcement Network (FinCEN) engaged in the latest initiative, called a geographic targeting order or GTO, in a bid to cut down on criminal identity thieves stealing account information or personal details from individuals and filing false tax returns, later gaining a check from the Internal Revenue Service under fictitious pretenses and cashing the check using fake identification documents.

The latest FinCEN GTO released Monday is the second one in South Florida in three months – the first was tied to trade and also follows orders linked to Los Angeles’ fashion district and armored car companies – and is further evidence the agency is trying to make a statement against multi-dimensional crimes in critical financial hubs.

South Florida is known as a magnet for a wide array of criminals, from human traffickers, to car and medical insurance fraudsters and increasingly, identity thieves, said Elaine Carey, managing director in the global risk and investigations practice in the Los Angeles office of FTI Consulting.

“That FinCEN would want to focus on this area is no surprise because there are so many types of crimes that all come together,” in South Florida, she said, adding that the requirements of the GTO and lower identity thresholds would make it harder for criminals to cash checks anonymously and, if they did, investigators can more quickly identity lower tier mules and smurfs.

The action is also a fusillade against the hacking groups who stole the information, making it more challenging for these entities – in most cases linked with larger criminal organizations – to monetize the data they stole, she said.

South Florida has “become a hotbed for stolen identity tax refund fraud,” according to FinCEN.

In a typical scheme, the criminal files a fraudulent tax return after stealing a victim’s identity and then cashes the refund check at a local check casher. The criminal typically cashes the check using fake identification in an attempt to evade law enforcement.

The GTO will require check cashers in Miami-Dade and Broward counties to obtain and record additional identifying information about customers cashing tax refund checks over $1,000.

This includes a copy of the customer’s identification, a digital photograph of the customer taken at the time of the transaction, the customer’s phone number, and in accordance with Florida law, the customer’s thumbprint.

Such information will “significantly assist law enforcement’s ability to identify and prosecute the individuals behind stolen identity tax refund fraud schemes,” according to the agency. The GTO “will make it much more difficult for these criminals to remain anonymous,” FinCEN said in a statement.

Check cashers subject to the GTO must comply with its requirements from August 3, 2015 through January 30, 2016.

The move is also a stopgap measure to aid the IRS, which is dealing with budget and staffing shortages of its own and can’t investigate every instance of potentially false returns, especially during the deluge of returns coming in at tax time, Carey said.

Cybercriminals have been more aggressive in attempting to get, and getting, fraudulent tax returns from the IRS and they are more apt to not choose a bank wire, but a check, so they can go to a small check casher and anonymously get the funds, she said. “These cybercriminals must go somewhere to cash these checks, and will choose the entity that gives them as little scrutiny as possible.”

FinCEN, the IRS, and other state and local authorities are “particularly concerned that identity thieves are attempting to perpetrate their schemes outside of tax filing season in hopes that their illegal activity will catch financial institutions off guard and be more likely to slip through their anti-money laundering controls, which are aimed at preventing criminal funds from entering and moving through the financial system.”

The GTO will, therefore, “cover a time period in which the proportion of fraudulent tax refund transactions is high, but the total volume of transactions is relatively low,” a move meant to minimize the operational burden on affected check cashing operations, which may be small mom-and-pop operations with limited financial crime bandwidth or controls.

“Our unique authorities, such as the ability to issue GTOs, enable us to partner with law enforcement in attacking stolen identity tax refund fraud from every angle,” FinCEN Director Jennifer Shasky Calvery said in a statement.

“This GTO will help ensure that the perpetrators of these schemes can no longer hide their face while our national treasury is looted and innocent victims spend countless hours and personal expense working with government to reclaim their true identities.”