Wednesday, February 21, 2024

FinCEN raises alert on COVID-19 tax credit fraud schemes

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network recently issued an alert to financial institutions concerning fraud schemes related to the COVID-19 Employee Retention Credit (ERC) and is urging vigilance in identifying and reporting related suspicious activity.

Ongoing fraud and scams related to the ERC have been identified that, to date, have resulted in 323 investigations involving more than $2.8 billion of potentially fraudulent ERC claims throughout tax years 2020, 2021, 2022, and 2023. Further, these fraudulent claims added to, and disrupted, the IRS’s ERC claim review process, which created a significant backlog and caused delays in the processing of legitimate ERC claims filed by eligible businesses.

The alert provides an overview of typologies associated with ERC fraud and scams, highlights select red flags to assist financial institutions in identifying and reporting suspicious activity, and reminds financial institutions of their reporting requirements under the Bank Secrecy Act.