ACH Tax Refund Fraud Scam Posted by AVCU on 4:26 PM

Earlier this week, CUNA Mutual Group alerted credit unions of an ACH Tax Refund fraud scam. Please pass this information on to all appropriate employees. If your credit union has experienced a loss and are a CUNA Mutual Group member, you can contact their Credit Union Protection Response Center at 800.637.2676.

Details: Consumers are being drawn in by individuals claiming to be tax preparers. They provide their personal information (i.e., name, social security number, etc.) to have tax refund completed and the phony tax preparer inflates the information as much as possible with fraudulent information. (i.e., claiming children they don’t have day care expenses, etc.) to obtain a larger refund. The tax refunds are transmitted as a direct deposit (ACH credit) to either a newly created account or an existing account with an impersonator added as a joint owner. These accounts are established by either the impersonator or their recruiters. Once the tax refund has been deposited into this account, the impersonator or recruiter withdraws their fee and the remainder of the ACH credit goes to the tax recipient.

It is CUNA Mutual’s understanding that the IRS will attempt to reclaim the ACH credits involving fraudulent tax returns. Per CUNA Mutual, “As the Receiving Depository Financial Institutions (RDFI), if the funds have already been removed from the member’s account and no funds are available to return, you are not liable and should not honor the return request from the IRS. IRS warrants the liability.”

Risk Mitigation Recommendations:

• Watch for the adding of new joint owners on your member’s account and consider freezing the account if you suspect this situation involves fraud.
• Watch for new account openings receiving an ACH credit into the account from the IRS.
• If the funds have already been removed by the scammer, you are not required to return the ACH credit to the IRS if you were unaware of the misdirected payment.
• Contact your association you work with for ACH questions.
• If you have encountered this situation, even if you have not taken a loss, contact your local IRS office.
• File a Suspicious Activity Report (SAR)