Intersections’ Consume Security Adviser Neal O’Farrell reports on an inventive identity theft scam that was recently uncovered in Florida.
It was addictive. Just like the dope they once sold on the streets, if not more, according to the story in the Seminole Heights newspaper. "The scheme is extremely simple but extremely lucrative," said the U.S. Secret Service Special Agent in Charge.
They were talking about Operation Rainmaker, an identity theft scheme that was so easy and so lucrative it persuaded drug dealers to abandon their age-old trade and turn instead to identity theft . The operation got its name from law enforcement simply because of the vast amounts of money thieves were able to rain down on themselves — about $130 million in fact.
Authorities were only tipped off to the scheme when tax payers began to file complaints that when they went to file their own taxes, they found someone else had filed using their name. And that was the core of the scam.
Here's what they discovered. The thieves were using public sites like Ancestry.com to assemble the identities of the living and the dead, and were also buying complete identities on the black market — something that's surprisingly easy for anyone to do.
Once the thieves had assembled enough information about an individual, they used off-the-shelf tax return software like Turbo Tax to file fraudulent tax returns. And that was probably the easiest part of the entire scam. The IRS is unable to thoroughly review or cross-reference every single tax return they receive, or spot any red flags like a sudden change of a taxpayer's address. And if the amount of the return is under $10,000, it rarely gets scrutinized.
So naturally the thieves kept their returns under the $10,000 threshold and then sat back and watched the IRS rain money down on them. That money came in credit cards or checks issued by the Treasury and sent to a variety of homes, some of them vacant, or deposited electronically into bogus accounts.
Once they had their hands on the funds, the thieves would go on spending sprees. The scheme was so lucrative and widespread, authorities in the area said they noticed a significant reduction in street-level drug dealing. According to the story, informants told police that local drug dealers quickly realized that identity theft was a much more lucrative and safe line of business.
As soon as authorities got wind of the scheme, they assembled a task force that included police and Sheriff's departments, the United States Secret Service, the United States Postal Inspection Service, State Attorney's Office, and the United States Attorney's Office.
But in spite of all the evidence they had gathered, authorities had trouble in filing charges of tax fraud because the IRS refused to share the records they had — apparently the IRS protects the personal information of thieves who are caught committing tax fraud.
Nearly fifty people have been arrested so far, and here's exactly how law enforcement laid out the multiple steps in this bizarre criminal enterprise:
- Create Fake Identity
- Suspects search the web to find identities of deceased or living victims.
- Defendants buy large volume of identities from suspects who are stealing names and social security numbers from businesses, medical facilities or prisons.
- File Fraudulent Tax Return Online
- Suspects use multiple electronic filing programs including, Turbo Tax, Tax Hawk and Tax Slayer. Turbo Tax is the most commonly used.
- Suspects refer to this tax scam as "doing drops."
- Request Refund on Green Dot Card, Treasury Check or Direct Deposit
- Suspects have refunds sent to vacant homes, another suspect's home or an innocent bystander's home and then intercept the mail.
- Defendants open fraudulent bank accounts to receive direct deposits.
- Cashing in the Refund
- Suspects withdraw money from ATM's.
- Buy large ticket items or money orders at legitimate businesses.
- Suspects launder the money through illegal businesses.
And apart from how easy it was to pull of the scam — if they'd stuck to victimizing dead people they might never have been caught — the most worrying part of the story is how drug dealers and other criminals are turning away from traditional crimes and to identity theft. And with so few investigations, arrests and prosecutions for identity theft, what have these crooks to worry about?
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