Verafin’s new tax fraud analytic helps detect fraudulent refunds

New alert type helps financial institutions combat fraud and uncover potential suspicious tax refunds

ST. JOHN’S, NEWFOUNDLAND (April 22, 2016) — With the tax season in full swing, fraudsters will attempt to exploit the personal information of U.S. taxpayers to pocket millions of dollars in fraudulent tax refunds — illicit funds they will look to move through the financial system. Today, Verafin Inc., a leading provider of fraud detection and anti-money laundering collaboration (FRAMLx) software, announced a new analytic to help U.S. banks and credit unions detect suspicious tax refunds.

Despite the Internal Revenue Service (IRS) implementing numerous safeguards to prevent identity theft and related fraudulent refunds, vulnerabilities still permeate the tax preparation and filing process. Early in the tax season, the IRS warned consumers of a 400% increase in phishing and malware scams targeting taxpayer information. In addition, according to a statement in late February, the number of taxpayers affected by the IRS “Get Transcript” breach has ballooned from 100,000 to over 724,000. Days later, the IRS suspended their “Get IP PIN” online service as part of an ongoing security review. These online vulnerabilities and email fraud scams have the potential to result in millions of dollar’s worth of fraudulent tax refunds.

Verafin worked closely with financial institutions (FIs) across the country to develop and enhance this new tax fraud analytic. The result is a powerful alert type that warns investigators at FIs when suspicious Federal and State tax refunds are deposited into a customer’s account, helping both banks and credit unions 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,” says Mauriceo Castanheiro, Director of Analytics at Verafin. “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.”

Verafin is known for its innovative approach to crime-fighting technology. Having recently introduced FRAMLx, with its focus on helping FIs detect criminal networks and criminal activity across multiple institutions, detecting tax refund fraud was identified 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,” says 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. Ultimately, those funds could be used for more nefarious purposes, such as terrorist financing. And that is why we made it a priority.”

About Verafin

Verafin is a leader in cloud-based, cross-institutional Fraud Detection and Anti-Money Laundering (FRAMLx) collaboration software with a customer base of over 1300 financial institutions across North America, and is the exclusive provider of fraud detection and BSA/AML software for the California Bankers Association, Florida Bankers Association, Illinois Bankers Association, Massachusetts Bankers Association, CUNA Strategic Services, a preferred service provider of the Independent Community Bankers of America, and has industry endorsements in 44 states across the U.S. For more information, visit, email or call 866.781.8433


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