New Verafin analytic helps detect tax refund fraud

April 8, 2016

ST. JOHNS, Newfoundland and Labrador (4/8/16)--Verafin, a provider of fraud detection and anti-money laundering software, has added a new analytic to help credit unions and other financial institutions detect suspicious tax refunds.

Verafin worked closely with financial institutions nationwide to develop and enhance an alert that warns the institutions when suspicious federal and state tax refunds are deposited into a individual’s account. The alert helps credit unions and banks successfully uncover potentially suspicious tax refund activity.

“Tax fraudsters are usually waiting for those suspicious refunds to be available--then they withdraw as much as they can,” said Mauriceo Castanheiro, Verafin director of analytics. “Our analytic runs daily--early detection is critical to be able to return those refunds to the IRS right away before more illicit funds end up in the hands of criminals.”

The Internal Revenue Service (IRS) earlier this year warned consumers of a 400% increase in phishing and malware scams targeting taxpayer information. It also reported that more than 724,000 taxpayers had personal information compromised through the agency’s “Get Transcript” program. The IRS also suspended its “Get IP PIN” online service as part of an ongoing security review.

Verafin, which is a CUNA Strategic Services strategic alliance provider, identified tax refund fraud as a priority in early 2016.

“Though institutions do not incur any direct losses from tax refund fraud, we know that there is often a long list of criminal activities connected to this type of fraud,” said Brendan Brothers, Verafin co-founder.

“Related identity theft cases are increasing year over year. As a result, criminals will attempt to launder millions of dollars in illicit funds through the financial system, often through the use of mule accounts,” he added. “Ultimately, those funds could be used for more nefarious purposes, such as terrorist financing. And that is why we made it a priority.”