Declining manpower continues to sap the Internal Revenue Service’s ability to pursue criminal cases, as the number of new investigations dropped by 11 percent over the past year and recommendations for prosecution fell by 18 percent.
The IRS Criminal Investigation Division, which helps send people to prison for crimes such as tax evasion, money laundering and identity theft, opened 3,019 cases in fiscal 2017, compared with 3,395 in 2016. It recommended 2,251 prosecutions, a decrease from the 2,761 it sought in the previous year, the division said Thursday in its annual report.
But the division managed to slow the exodus of agents, who have a reputation as top financial investigators. Buoyed by a group of hires, the loss this year was only 2.6 percent, to 2,159 agents. Since 2011, the division has lost 21 percent of agents – a trend in line with IRS as a whole.
Fewer agents mean fewer cases, so the division is trying to select investigations more carefully, said investigations chief Don Fort. Agents rely more on data analysis and an understanding of crimes that occur on the internet and dark web, he said, referring to portions of the web that are hard to find.
“We want to select the best possible cases in every program area in as wide a geographic area as possible,” Fort told reporters on Thursday. “Financial crime is definitely proliferating with the internet and the dark web.”
New investigations of various kinds declined. The division’s focus on identity theft, which many former agents say should be handled by other agencies, continues to wane. Fort’s division opened 374 such cases in 2017, down from a high of 1,492 in 2013.
“We’re not de-emphasizing identity theft, it just has dropped significantly,” said Fort, who took over the division in June. “My goal is that the time that was spent on identity theft is now being devoted to traditional tax crimes.”
The division has created a “nationally coordinated investigations unit” that will use data analysis to refer cases to field offices in such areas as micro-cap stocks, employment tax schemes and bio-fuel tax credit schemes. A Washington-based unit will also focus on international crimes, Fort said.
In its annual report, the division cited several successes, such as an undercover operation that led to the imprisonment of Carlos Rafael, known as the “Codfather,” a Massachusetts fishing magnate who mislabeled tons of fish and smuggled bulk cash.
The number of new investigations has dropped for several years in money laundering, questionable tax refunds, financial institution fraud and Bank Secrecy Act cases.
Agents saw an uptick in cases involving abusive tax preparers, employment tax and international operations.