IRS Criminal Investigation Division Releases “Top Ten” Cases of 2024, Signs Point to Focus on Employment Tax Fraud and Bank Secrecy Act Violations
Earlier this year, the Internal Revenue Service’s Criminal Investigation division (IRS-CI) released its “top ten” cases of 2024. The cases involved a myriad of issues, such as fraudulent use of tax shelters, money laundering, and embezzlement charges.
“The defendants in these cases committed millions of dollars in fraudulent activity, duped investors into believing they were going to strike it rich and tried to funnel money to terrorist organizations,” the IRS press release said. “They represent the most high-profile and impactful cases of the previous year.”
The list includes a case against two tax shelter promoters who were each sentenced to over 20 years in prison for a billion-dollar syndicated conservation easement (“SCE”) scheme.
“Using inflated appraisals, backdated documents and other sham actions, these conspirators generated more than $1.3 billion in fraudulent syndicated conservation easement tax deductions, causing hundreds of millions of dollars in losses to the U.S. Treasury,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.
Also included on the list was the case against Changpeng Zhao, the founder and former CEO of Binance, who was sentenced to four months in prison for failing to maintain an effective money laundering program. Binance Holdings Limited agreed to pay a $4.3 billion financial penalty to resolve a criminal investigation related to violations of the Bank Secrecy Act and the International Emergency Economic Powers Act, as well as its failure to register as a money transmitting business.
Other highlighted matters include:
– A former Army civilian employee sentenced to 15 years in prison for involvement in a $100 million fraud scheme;
– A former Jacksonville Jaguars employee sentenced to more than six years in prison for embezzling over $22 million;
– A former law firm partner sentenced to 10 years in prison for fraud stemming from the laundering of $400 million in OneCoin proceeds; and
– A former attorney charged with embezzlement and fraud for their connection to the collapse of Washington Federal Bank.
The top ten cases showcased by IRS-CI came alongside the division’s annual report, which highlighted the accomplishments of the agency.
According to the report, IRS-CI identified more than $2.2 billion in tax fraud and more than 7 billion in other financial crimes during the year. The division also reported a 90 percent conviction rate.
While the IRS is currently reassessing its strategic priorities under the new administration’s guidance, the impact on IRS-CI’s priorities should be minimal. The division will continue to focus on traditional tax evasion cases, international tax evasion, employment taxes, digital assets, COVID-related fraud, and Bank Secrecy Act violations.
Furthermore, with the newly signed Memorandum of Understanding between the IRS and U.S. Immigration and Customs Enforcement (ICE) to share taxpayer information to pursue immigration enforcement actions, it is also anticipated that there will be more investigations into payroll taxes related to hiring undocumented workers.
Historically, the IRS has conducted joint investigations with ICE to address non-compliance with employment taxes. In a recent case, a Honduran national illegally present in the United States was sentenced to 27 months for conspiracy to commit tax and wire fraud.[1] According to court documents, the defendant established a shell company to funnel approximately $1.2 million in unpaid payroll taxes.
To support these employment tax cases, as well as other tax and financial fraud investigations, IRS-CI launched a new initiative last month called CI-FIRST (Feedback in Response to Strategic Threats), an enhanced public-private partnership with financial institutions to tackle Bank Secrecy Act (BSA) violations. IRS-CI plans to leverage the relationship to streamline subpoena requests and provide insight into how to maximize the impact of information shared on suspicious activity reports filed by financial institutions.
According to the IRS, during FY 2022 – 2024, adjudicated cases resulted in a 97.3% conviction rate with defendants receiving average prison sentences of 37 months. IRS-CI also used BSA data to identify $21.1 billion in fraud tied to tax and financial crimes, seize $8.2 billion in assets tied to criminal activity, and obtain $1.4 billion in restitution for crime victims.[2]
With each of these priorities, the use of whistleblowers will be extremely beneficial and an enforcement tool that IRS-CI plans to use extensively.
Eric Hylton is the Director of Investigations at Zerbe, Miller, Fingeret, Frank & Jadav. He previously served in many roles at the Internal Revenue Service, including as the Deputy Chief of Criminal Investigations. This piece was edited by Janis Gorton of Schneider Wallace Cottrell Konecky.
[1] https://www.irs.gov/compliance/criminal-investigation/illegal-alien-sentenced-in-multimillion-dollar-wire-and-tax-fraud-scheme
[2] https://www.irs.gov/compliance/criminal-investigation/irs-ci-releases-fy24-bsa-metrics-announces-ci-first-initiative
