The IRS initiated 1,714 investigations into individuals and groups who knowingly participated in illegal domestic and offshore tax schemes in fiscal year 2018, recommending prosecutions in a vast majority of tax crime cases, according to the agency’s criminal investigation report for fiscal year 2018.
However, the agency is facing a shortage of agents, according to the report, all while financial crime has proliferated over the past few years and cybercrime looms large.
The fiscal year saw 1,050 prosecutions with 1,052 individuals sentenced, reflecting the agency’s overall high conviction rate.
These schemes include the creation of partnerships, trusts or foreign companies to falsely make it appear a foreign entity owns the assets, according to the IRS.
Overall, IRS’ Criminal Investigation Unit (CI) had a conviction rate of 91.7% and identified almost $9.7 billion in tax fraud, according to the report published this week.
(Related: Top 10 Least Tax-Friendly States in US: 2018)
CI leadership said it was spending more investigative time in the area of international tax compliance and enforcement.
“Most of our cases ultimately end in convictions and jail time,” IRS CI Chief Don Fort stated in the report.
CI is also beginning to use data analytics, as well, to fight tax crime and has launched its Nationally Coordinated Investigations Unit (NCIU), which will become an official CI section in the new year.
So far, the nascent unit, which employs data analytics, has referred more than 50 leads to CI field offices, a number that is expected to balloon in the current 2019 fiscal year.
However, there are major challenges, according to CI.
Fort noted in what he called a troubling statistic, that the U.S. “is on pace to record the fewest number of white-collar crime prosecutions on record,” based on outside studies.
However, he noted financial crime has proliferated over the past few years and cybercrime looms large. All CI employees now undergo cyber training, and CI is combating cybercrime with its expertise, according to Fort.
Another issue is staffing, according to a report statement from CI Deputy Chief Eric Hylton pointed to the outsized work done by CI despite fewer staff. He raised the issue twice, in the context of international cases and in the area of identity theft.
Hylton said that CI, which is entering its 100th year as a law enforcement agency in 2019 has been doing “amazing” work despite fewer agents and resources. The CI workforce is about 3,000, fewer than 2,100 of which are special agents, Hylton stated.
He referred to a “perfect storm” of agents lost due to retirement, lack of hiring over the past five years and proliferation of identity theft cases.
Despite the recent rapid emergence of identity theft as a sophisticated global organized crime operation, CI made a “conscious effort to reduce our investigative time on identity theft,” Hylton stated.
“We ended the year spending about 10% of our investigative time in this area compared to 18% at our high-water mark,” he said. The unit instead put more if its time and resources into traditional tax work, bringing high-level cases to the Department of Justice for prosecution, he noted.
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