Pub. 5 2016 Issue 7

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 30 OPEN SEASON ON (TAX) FRAUD By Chris Hoff, CISA, CISM – Director of Audit and Consulting – Secure Banking Solutions, LLC What is Tax Fraud? During situations or events of significance, there is one constant - someone who will try to take advantage of that situation to make a profit for themselves. One of the most common ways that criminals are trying to take advantage of these situations is through fraud or identity theft, many times through the method of social engineering; more specifically phishing and pre-text phone calls. Whether it is the death of a celebrity, holiday seasons, or – most recently – tax season, people are inventing new scenarios and ways to collect information or install malicious software onto users’ devices. Tax season makes everyone in the nation a prime target to receive phishing emails. According to the IRS, they reportedly saw a nearly 400% increase in phishing and malware incidents during tax season over previous years. Submitting your taxes requires all the sensitive information, as well as financial information, needed to steal your identity and perform financially fraudulent transactions. Additionally, most people in the US are required to submit tax returns, but few really understand the details of the process. Using taxes as the subject of a phishing email makes the majority of the nation vulnerable to these types of attacks. Some examples of these types of targeted attacks include emails designed to scare an individual into downloading an attachment because their tax return had inaccuracies and “must” be corrected, requesting that you fill out forms to expedite their tax return process or to get a larger return, or calling financial institutions and organizations claiming to be preparing taxes for individuals and needing to gather sensitive information. Brian Krebs, a popular investigative journalist specializing in information security, reported the U.S. Federal Trade Commission (FTC) tracked a nearly 50% increase in identity theft complaints in 2015, and by far the biggest contributor to that spike being tax return fraud. How does Tax Fraud affect Financial Institutions? Tax Return Fraud can negatively impact financial institutions as a whole, including both customers and employees. Recent tax-fraud schemes include perpetrators