How to report scammers to the Internal Revenue Service

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Rat River Trapper

How to report scammers to the Internal Revenue Service

Post by Rat River Trapper »

The IRS, or "Eternal Revenue Service" as it's referred to by some wags, can actually be of some help to victims of financial fraud schemes. This post is intended as an overview.

The IRS has two divisions, the Civil Division, and the Criminal Investigations Division, or CID. Generally, the Civil Division handles review of tax returns, tax collections, and civil tax enforcement. In the case of financial fraud schemes, the CID people are the ones with the most clout, as they are sworn federal law enforcement personnel, with powers of arrest, subpoena authority, and the ability to obtain federal grand jury subpoenas and apply for and execute search warrants.

There's a whole body of criminal statutes relating to tax fraud, but the IRS-CID agents most often investigate financial crimes with a goal to charge under the federal wire fraud, mail fraud, bank fraud, money laundering, and RICO statutes. They can cross state lines, and work closely with other federal and state law enforcement and regulatory agencies, including the U.S. Securities and Exchange Commission.

Where international fraud schemes are involved, the IRS-CID agents, acting through the U.S. Attorney's Office and the IRS and DOJ Offices of International Affairs, can obtain bank records and other information via MLATS, or mutual law enforcement assistance treaties, that the U.S. State Department has entered into with many countries. MLAT's were originally designed for use in drug and money laundering cases, but they've proven to be a effective, albeit slow, means of obtaining information from another country that is admissible in the courts.

While the IRS-CID agents have some leeway to open investigations, agency policies and those of the respective U.S. Attorney's Office in the geographical area where the agents work, usually require that cases meet a certain threshold, usually based on the number of victims, amount involved, and the likelihood of a successful prosecution.

When contacting the IRS, be sure to have copies of your documents, including offering materials, prospectuses, records of money transfers, and correspondence, including e-mails, by or between you and the alleged scammer. This is going to save time and will increase the likelihood of the agent agreeing to followup on your complaint. It's important not to withhold information from the agent, as this may cast doubt upon your credibility. That being said, remember that it's not a crime to be a victim. You might feel embarrassed or chagrined at having been scammed, but many of the scammers count on that to keep scams going and/or unreported.

And one last item. Think about completing an IRS 211 form and take it with you. This actually winds up going over to the Civil Division, but if the IRS determines that a scammer has tax liability and manages to collect funds, you're eligible for a reward. The program has certain restrictions. More about that here: http://www.irs.gov/newsroom/article/0,, ... 32,00.html