The Internal Revenue Service’s Criminal Investigation unit is readying two new programs focusing on data investigations and international tax enforcement.
The data initiative will tie together the information uncovered by the IRS’s field offices around the country with headquarters in Washington, D.C. “We are standing up a nationally coordinated data investigations unit,” said IRS Criminal Investigation chief Don Fort during a conference call with reporters Wednesday. “This is really cutting edge for CI, and part of the future of IRS Criminal Investigation. Many of the cases that we work on have nationwide impact. The cases exist in every judicial district and probably every zip code, and impact every single field office. It’s a way to better manage and coordinate these investigations. This particular unit is going to report directly to our front-line executives here in Washington, D.C. The goal of the unit is to really use all of the data that we have available to us to help identify and develop areas of noncompliance.”
With the new initiative, the IRS hopes to make better use of the areas of noncompliance identified by its field offices. “One of our primary priorities and obligations that we have is to make sure that we investigate all program areas within our jurisdiction and get as broad a geographic coverage as possible,” said Fort. “We’ve got great case development initiatives in our field offices, but this allows us to see things at a national level and supplement the great case development efforts that are going on in the field, with other very significant projects that have a nationwide impact. This will help us nationally coordinate investigations on data.”
The new data program will also help the IRS deal with the perennial cutbacks in its budget and workforce. “One of the ways we combat the reduction in resources is better use of data to help identify areas of noncompliance and really to help with case selection and future cases that we’re rolling out nationwide,” said Fort. “This unit is going to stand up in several months. It’s already semi-operational now. We’ve been doing some training and putting the manpower in place.”
The first projects that this unit is going to focus on are international tax enforcement, employment tax, and SEC microcap fraud, according to Fort. “These will be must-work referrals that will come out of this group to the field offices,” he said. “We also envision when this group stands up and is operational, it will have a very heavy data analytics component that will allow us not only to support and send great cases out from this unit, but to also look around the corner to see what the next areas of noncompliance are. There will be a lot of interaction with this group with research components of main IRS and other civil components of IRS to help determine future areas of noncompliance and get priority investigations out to the field offices.”
International Tax Enforcement
The new international tax enforcement program will leverage the expertise of IRS Criminal Investigation in previous cases involving UBS and other Swiss banks, as well as other cases involving offshore tax evasion.
“Today, I’m announcing the formation of a dedicated international tax enforcement group,” said Fort. “In a matter of months, if not sooner, we’re going to be standing up a group of elite special agents in our Washington, D.C., field office that are going to be dedicated to working and developing significant international tax cases. What we’re essentially doing is consolidating some of our foremost experts in these international tax cases who are really the nationwide experts in this field and put them under the umbrella of one focused operational group.”
The group will be based in the IRS’s field office in Washington, not at headquarters. “These are agents who, when this group is operational, have actually worked these investigations," said Fort. "These are agents who are subject matter experts in this field. This is something we’ve never done before. We’ve had great international cases in most of our field offices around the country. This focuses and leverages those years of expertise and the knowledge, skills and successes in the international tax arena with those agents who have worked those cases.”
In addition to the Washington, D.C., field office, members of the elite team will also be strategically located in other parts of the country. The IRS will also get support from the Department of Justice’s Tax Division.
“We’ll have a lot of involvement with the Department of Justice, as well as we’ll be leveraging the great relationships we have internationally with our international partners, as well as our constant involvement with our civil counterparts,” said Fort. “By consolidating these efforts in the Washington field office, it’s really going to allow us to better control the cases and work more efficiently as an organization in the international tax area.”
As in the data investigation program, the international enforcement program will also make heavy use of data. “You look at this particular effort with the international tax enforcement group, it’s very heavy on the use of data and data analytics,” said Fort. “You couple the manipulation and use of data, with the experts that have worked these cases before.”
IRS Criminal Investigation plans to leverage not only tax data, but also information gleaned from the Bank Secrecy Act, whistleblowers, the Offshore Voluntary Disclosure Program, Panama Papers, and the Foreign Account Tax Compliance Act, or FATCA.
“You take an elite group of agents with this data, the resources that we have internationally, the relationships we’ve built with the Department of Justice,” said Fort. “I’m excited about this effort. We will be analyzing the data to see where it leads us in terms of other countries, other jurisdictions and other individuals to best focus our efforts from a criminal investigation standpoint.”
There will be between 10 and 12 special agents in the international group, he added. They will be able to leverage data from FATCA as well as other sources. “All available data we have in-house, which includes FATCA, as well as any information that we’ve gleaned and is available from the Swiss bank project and other completed investigations,” said Fort. “We have human sources of intelligence domestically as well as people that provide information internationally, so it’s all sources of information, looking at all of that data to help with case selection and better inform future international cases.”
Meanwhile, IRS Criminal Investigation is continuing to pursue cases involving identity theft, including cybercriminals who are targeting tax professionals with phishing schemes, ransomware and the like. “The account takeovers, data breaches of return preparers, CPAs and payroll providers are kind of the evolution of where we see identity theft, and where we’re spending a lot of our efforts,” said Fort. “Three or four years ago we were seeing basically street-level crime, but it now has morphed into complicated international cybercrime. A lot of our current investigative efforts in identity theft are involved in phishing, account takeovers, business email compromise, things of that nature. We also participate where we can with our civil counterparts in trying to get the message out to tax return preparers and professionals about the importance of protecting their data.”
