IRS CSI – As Tax Fraud Related To Identity Theft Skyrockets, Ultra-Wealthy Families Are Frequently Targets.
Cybersecurity is just the latest hot-button issue that advisors to ultra-wealthy communities are being asked to address. Like most buzzwords, however, the concept is often vaguely defined. In this case, the intensity of the conversation within the wealth management sector may have masked complacency regarding the need for real solutions. Recently, the IRS announced that help is on the way, in the form of a newly created cybercrime unit within its “Criminal Investigation Division.” The group is specifically tasked with investigating evidence of tax fraud arising from identity theft. The move follows a 2014 tax season that featured a record number of fraudulent filings.
“IRS CID – Cybercrime would be a terrible idea for a TV show, but it’s a perfect concept for an IRS task force. Anyone who was truly surprised by the number of fraudulent returns this year probably wasn’t paying much attention. The number and scope of breaches reported in 2014 was unprecedented, as criminal networks and hackers became more brazen and sophisticated in their attacks. The amount of personal information that has been compromised is astounding,” said Anthony Davenport, CEO of Regal Financial, a credit management and protection company.
Instead, billionaires and other ultra-wealthy families are preferred targets for malfeasance. Without adequate controls, these clients may be blind-sided when they discover that tax returns have been issued to fraudulent preparers. By that point, nefarious individuals may have effective control over family finances.
“Through personal and professional networks, ultra-wealthy families have access to the top professionals across all disciplines. Given the quality of these relationships, clients might feel inoculated against the threat of cybercrime or identity theft. Without adequate checks and balances to ensure all parties are working diligently in coordination, each point of contact is a possible crack in the foundation. Creating a unified wealth strategy keeps the team focused on potential dangers while also ensuring proper segmentation of duties,” said Evan Jehle, a partner at FFO Advisors.
Despite growing awareness and enhanced solutions, cybercrime promises to be a persistent concern among the ultra-wealthy and the public at large. There have been hundreds of known security breaches in the first few months of this year, involving over 100 million victims – more than enough to keep the new IRS task force busy for the foreseeable future.
“Cyber-security is not only a matter of avoiding the icebergs in view. The real solution is to build a sturdier ship that can navigate through murkiness that lies ahead,” added Davenport.