WASHINGTON—Today, the Financial Crimes Enforcement Network (FinCEN), in close coordination with the Internal Revenue Service Criminal Investigation (CI), issued an alert to financial institutions on fraud schemes related to the COVID-19 Employee Retention Credit (ERC). The alert provides an overview of typologies associated with ERC fraud and scams, highlights select red flags to assist financial institutions in identifying and reporting suspicious activity and reminds financial institutions of their reporting requirements under the Bank Secrecy Act (BSA).
“It is unfortunate that while the COVID-19 pandemic is behind us, fraud related to COVID-19 relief programs, like the ERC, continues to occur at a concerning scale,” said FinCEN Director Andrea Gacki. “We are issuing this alert in partnership with CI to remind financial institutions that it is critical that they remain vigilant in identifying and reporting related suspicious activity and to protect businesses from being taken advantage of by fraudsters.”
“Tax credits like employee retention credits were meant to provide assistance to struggling business owners during the COVID-19 pandemic, but fraudsters, unfortunately, used the credits to line their own pockets,” said CI Chief Jim Lee. “We hope this alert will help financial institutions recognize financial patterns that indicate fraud and help us recover funds stolen from U.S. taxpayers.”
The ERC was authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act as a tax credit to encourage businesses to keep employees on payroll during the COVID-19 pandemic. CI has identified ongoing fraud and scams related to the ERC that, to date, have resulted in 323 investigations involving more than $2.8 billion of potentially fraudulent ERC claims throughout tax years 2020, 2021, 2022, and 2023. In response to the scope of the ERC fraud, in September 2023, the IRS announced an immediate moratorium through at least December 31, 2023, on processing new ERC claims in an effort to protect honest small business owners from scams.
The full notice is available online at FIN-2023-Alert007
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