August 2019 JD Supra
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IRS using Data Analytics to Uncover Criminal Arrangements article appeared on JD Supra on 8/20/19.

IRS-Criminal Investigation (IRS-CI) is a federal agency department specifically authorized to investigate and 

prosecute federal income tax crimes. IRS-CI uses data analytics such as models, algorithms, and the millions of records and evidence that IRS-CI has at hand to help identify areas of tax noncompliance. It plans to focus on:

  • International tax compliance and enforcement. This entails identifying, investigating, and recommending prosecution of international offshore tax evasion schemes that involve US citizens who move their money offshore to avoid detection, and foreign banks, financial institutions, their employees, and facilitators who help US. citizens hide their funds offshore.
  • The J5: The Joint Chiefs of Global Tax Enforcement. The group includes the heads of tax enforcement from the United States, the United Kingdom, Canada, Australia, and the Netherlands. The J5 addresses sophisticated tax evasion and other financial crimes that cross international borders. The Group shares information and collaborates on tax investigations.
  • Expanding its presence into the Cyber Environment and tackling cybercrime. IRS-CI defines a cybercrime as a criminal investigation in which IRS-CI has investigative authority and believes the subject of an investigation is using the internet as an essential means to commit the crime, remain anonymous, elude law enforcement, and conceal financial transactions, ownership of assets, or other evidence.
  • Abusive Tax Schemes that involve domestic and offshore tax scheme promoters and clients who willfully participate and create structures such as trusts, foreign corporations, and partnerships to make it appear a trustee, nominee, non-resident alien, or other foreign entity is the owner of the assets and income; when in fact a US Taxpayer is actual owner and controlling person.
  • Questionable refunds, abusive return preparers and stolen identity refund fraud. There are tax preparers that file false returns without the knowledge of the preparer’s clients.
  • Employment Tax Fraud which includes filing false payroll tax returns and failing to file payroll tax returns.
  • Identity Theft Refund Fraud.
  • Internet and internet-based technologies that enable criminals to engage in illegal activity with anonymity and without a defined physical presence.
  • Data loss incidents include data intrusions, business email compromise, phishing schemes, and bank account takeovers.

IRS is working with “data scientists” to analyze Data sourced from:

  • Investigations performed in the past
  • The Swiss Bank program and the twenty financial institutions (UBS, Credit Suisse, Wegelin & Co., Lloyds Bank, and Leumi amongst others) with more than thirty Bank Advisors that IRS has been pursuing over the last 10 years
  • Panama Papers
  • FATCA: US Taxpayers reporting that they have accounts at a Foreign Financial Institution (FFI) and the FFI not reporting the US Taxpayer. Conversely, an FFI reporting a US Taxpayer and the US Taxpayer not reporting accounts held at the FFI.
  • Financial Crimes Enforcement Network (FinCEN) and anti-money laundering (AML) filings in FinCEN’s database
  • IRS John Doe summonses
  • Whistleblowers
  • Behavioral Science Lessons for Taxpayer Compliance via alternative treatments

Don’t be a Victim of your Own Making

IRS-CI special agents are trained to uncover tax non-compliance and bring a Taxpayer to the US Department of Justice for prosecution. The agents are experts in tracing flows and analyzing data analytics. Consult a specialized Tax Representative.