Stolen Identity Refund Fraud (SIRF) is a relatively new phenomenon in Indiana and across the US — an unfortunate fallout from the intended convenience of electronic tax filing with quick electronic refunds. As Forensic Accountants and Data Mining Specialist headquartered in Indianapolis, Indiana, we are considered experts in this niche field. We also fully understand the difficulty of investigating these matters and identifying those who are committing the crime. In this article, we will explain what SIRF is and a new ingenious tool states are using to combat this financial crime.
SIRF, in a nutshell, is when the “bad guy” or “bad gal” steals an identity from an unknowing American citizen and uses the information to submit a fraudulent tax return to State and/or Federal Government tax authorities. This fraud most likely exploded about 10 years ago, mainly due to the proliferation of online data communications, lack of computer safeguards, and the ever-increasing capabilities of hackers located both in America and in foreign countries. No longer does the bad guy physically need to break into the Human Resource department and steal the content of the file cabinet containing Personally Identifiable Information (PII). All the bad guy needs is a laptop, a credit card, and the will to break the law. There are several ways to do this, which we won’t describe in detail (we don’t want to do the bad guys’ homework), but suffice it to say your PII is a click away. For those of you who are new to this term – PII, it basically refers to your Name, Social Security Number, Date of Birth, and Address. Most of this information is readily available, but the Holy Grail is the social security number. You should never be sharing any of this information with anyone without good cause.
Once the bad guy gets this information, it’s basically a race between them and you on who will file your taxes first. You could also become a victim without ever even noticing it, when your identity is used to file returns in states where you don’t reside or work, and would never normally file. These greedy bad guys also steal and use any of several hundred thousand identities of the deceased, unemployed, elderly, young, or otherwise non-filing individuals. There are virtually hundreds of methods to conduct this illegal financial crime and unfortunately the “good guys” aka the investigators or forensic accountants are few and far between. But fortunately there is major player in this market coming to the aid of all tax payers and government agencies that saves tax dollars and helps prevent your identity from becoming a victim. This SIRF Super Hero goes by the name of LexisNexis, and you’re only a Google search away from determining whether your state has found the wisdom to do business with them. LexisNexis developed an intuitive software solution called TRIS (Tax Refund Investigative Solution). Basically, their solution weeds out the fraudsters by comparing the data submitted to governmental agencies on the tax refunds to the millions of data points of information on every person “on the grid” in their secured data warehouse. It’s a brilliant solution that has already spared hundreds of millions of tax dollars from being released to the bad guys all the while protecting your identity from becoming a victim entangled in the mess! This is a game changer that all governmental agencies should consider if they truly want to take seriously their fiduciary duty to the American taxpayers.
Michael R. Hathaway, CFE, CAMS
Certified Fraud & Forensic Investigations
Owner and Director of Investigations