Millions in IRS Refund Checks Stolen and Altered
- Refund checks from the IRS are being targeted by thieves
- Checks range from a few hundred dollars to $500,000
- There are reports of "inside job" postal thefts as well
When you think about different types of checks, which do you believe is the most desirable to fraudsters?
The answer is treasury checks. When a fraudster is able to steal a treasury check, they can simply alter the payee and deposit the check into a drop account -- typically by mRDC of ATM to avoid a bank employee reviewing the physical item. And, since treasury checks are seen as "good items," the funds are available to the account owner faster (depending on your financial institution's funds availability policies).
This is a challenge that banks not utilizing image forensic AI technology struggle to overcome. So, exactly how bad is the problem?
Treasury Check Fraud Challenges
A troubling report by the Wall Street Journal reveals that millions of dollars in IRS refund checks sent through the mail are being stolen as part of a massive fraud scheme. Refund checks, ranging from hundreds to hundreds of thousands of dollars, never arrived and were allegedly stolen.
According to the report, over 200 taxpayers have complained to Rep. Nicole Malliotakis (R-NY) that their refund checks were "intercepted." Malliotakis represents Staten Island, and said the 218 cases fielded by her office include checks totaling $3.8 million.
From the Wall Street Journal:
Bennett Grimm, a spine surgeon based in Atlanta, told the Journal that he was notified by the IRS in February that he should expect to receive a refund check from his 2021 amended tax return in two to three weeks’ time.
Grimm said he was expecting a check for $96,000, which the IRS owed him after he sold his medical practice.
But by May, the check hadn’t arrived.
When his account requested a new check, it was stolen and deposited fraudulently, according to the Journal.
Grimm said he is now awaiting his third refund check.
Unfortunately, sometimes the theft is an "inside job," as seen in recent indictment reports:
Four separate indictments were unsealed today at the federal courthouse in Brooklyn charging five defendants with crimes related to the fraudulent theft and deposit of checks issued by the United States Department of the Treasury. As alleged in the indictments, two of the defendants, both former United States Postal Service (USPS) employees, allegedly sold the checks which were stolen from a USPS mail facility located at John F. Kennedy International Airport (JFK Mail Facility) where one of the defendants worked. The other three defendants fraudulently endorsed and deposited Treasury checks that were not addressed to them.
Effects of Treasury Check Fraud
There are an estimated 10 million tax filers still choosing paper checks, making them vulnerable to theft. Victims face a lengthy process to get their money back, with the Treasury Department taking up to four months, in some cases, to issue new checks.
Additionally, many of the accounts depositing these checks are typically mule accounts or unwitting victims. The bank may try to recoup losses from these accounts, even though those funds would have been withdrawn months ago.
In order for banks to protect themselves, they will need to leverage AI and machine learning technologies to analyze the images of the deposited checks. By analyzing the altered payee field, Writer Verification can analyze to detect the font style and size, along with its position relative to the static template of a treasury check. Even the most skilled fraudster cannot perfectly duplicate these characteristics.
Fraudsters see IRS checks as a "treasure," but technology is the padlock that keeps the fraudster from opening the chest!