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Part 9. Criminal Investigation

Chapter 8. Criminal Investigation Fraud Detection Center

Section 1. Fraud Detection Center

9.8.1  Fraud Detection Center

9.8.1.1  (10-14-2004)
Overview

  1. This section discusses the mission, structure, duties, and responsibilities of the Fraud Detection Center (FDC). Topics include:

    • Fraud Detection Center's Function and Organizational Structure

    • Role of the Resident Agent in Charge

    • Fraud Detection Center Training

    • Security

    • Informant Information

    • Court Witness and Certified Transcript Program

    • Field Office Undercover Operations Support

    • Support Of Wagering Investigations

9.8.1.2  (10-14-2004)
The Fraud Detection Center Functional and Organizational Structure

  1. The following subsections provide a broad spectrum concerning the structure of the FDC. Each FDC reports to the Director, Refund Crimes (CI:RC). The FDCs are physically located within, or in close proximity to, each IRS Campus.

9.8.1.2.1  (01-29-2002)
Mission Statement

  1. In support of the overall IRS Mission, Refund Crimes detects fraudulent returns and prevents issuance of related false refunds. It supports the mission of Criminal Investigation (CI) field operations relative to tax administration and related financial crimes, in order to achieve, directly or indirectly, voluntary compliance with the Internal Revenue laws.

9.8.1.2.2  (10-14-2004)
Functional Responsibilities

  1. The primary function of the FDC is to identify and detect refund fraud, prevent the issuance of false refunds, and provide support for the field offices.

  2. The FDC assists IRS Campus Directors and field offices in identifying and assembling information on individuals and entities involved in civil and criminal non-compliance with the Internal Revenue Code (IRC) and other related statutes.

  3. The FDC is also the focal point at the IRS Campus for reporting suspicious criminal activity identified by other operating divisions.

  4. Specific FDC responsibilities include:

    1. maintaining controls on all taxpayer accounts under criminal investigation

    2. forwarding allegations of fraud (other than QRP/RPP items) received to the Denver Lead Development Center (LDC)

    3. coordinating the Questionable Refund Program (QRP) and Return Preparer Program (RPP)

    4. developing questionable refund and return preparer fraud referrals and submitting them to field offices

    5. providing court witnesses for criminal tax trials

    6. providing fraud awareness training to IRS Campus employees

    7. training field office QRP and RPP coordinators in the FDC QRP and RPP processes

  5. The Law Enforcement Manual (LEM) provisions of the Refund Fraud program are found in LEM 9.14, Criminal Investigation Official Use Only Procedures, Law Enforcement Manual.

9.8.1.2.3  (10-14-2004)
Organizational Structure

  1. There are 10 FDCs servicing 35 CI field offices.

  2. Each FDC is staffed by CI employees managed by a Resident Agent in Charge (RAC).

  3. A FDC is located at the following IRS Campuses:

    1. Andover Campus

    2. Atlanta Campus

    3. Austin Campus

    4. Brookhaven Campus

    5. Cincinnati Campus

    6. Fresno Campus

    7. Kansas City Campus

    8. Memphis Campus

    9. Ogden Campus

    10. Philadelphia Campus

  4. Each IRS Campus is structured with at least the following functions:

    1. Submission Processing Center (These will eventually be phased out at the Brookhaven, Memphis, Philadelphia and Andover Campuses.)

    2. Customer Account Services

    3. Compliance Services

  5. Each FDC works closely with the IRS Campus functions.

9.8.1.2.4  (01-29-2002)
Managerial Oversight

  1. The Director, Refund Crimes, has line authority over the FDC.

9.8.1.3  (10-14-2004)
Role of the Resident Agent in Charge

  1. The RAC is responsible for accomplishing the FDC's broad program objectives and procedural guidelines established by the Chief, CI.

9.8.1.3.1  (10-14-2004)
Program Responsibilities

  1. The RAC will participate in the IRS Campus Councils to ensure successful FDC program operation.

  2. The RAC's responsibilities include:

    1. managing FDC employees and programs

    2. field office QRP referrals

    3. field office RPP referrals

    4. controlling taxpayer accounts under criminal investigation

    5. quality reviews

    6. restitution program

    7. work planning and control tracking system

    8. fraud awareness education

    9. referrals from IRS Campus employees

    10. refund inquiries

    11. participating in Headquarters (HQ) office task forces

9.8.1.3.1.1  (01-29-2002)
Managing Fraud Detection Center Employees and Programs

  1. The RAC's span of control includes the FDC technical and clerical employees. These responsibilities include:

    1. assigning and distributing work to subordinates

    2. providing criminal fraud expertise for field office QRP/RPP referrals

    3. managing the FDC budget

    4. posting vacancies and selecting employees

    5. recommending personnel actions

    6. approving leave

    7. counseling employees

    8. providing necessary training

    9. practicing sound position management policies

    10. taking positive steps in support of affirmative action programs

    11. evaluating completed work and employee performance

9.8.1.3.1.2  (10-14-2004)
Field Office Questionable Refund Program Referrals

  1. The RAC is responsible for the following, relative to QRP referrals:

    1. determining criminal potential on QRP fraud referrals developed by FDC employees

    2. ensuring that an evaluation by the field office conforms with existing timeframes and guidelines

    3. ensuring the proper resolution of returns in schemes referred to field offices regardless of investigative status

9.8.1.3.1.3  (10-14-2004)
Field Office Return Preparer Program Referrals

  1. The RAC is responsible for the following, relative to RPP referrals:

    1. determining criminal potential on RPP fraud referrals developed by FDC employees

    2. ensuring that an evaluation by the field office conforms with existing timeframes and guidelines

9.8.1.3.1.4  (10-14-2004)
Controlling Taxpayer Accounts under Criminal Investigation

  1. The RAC is responsible for the quality and timely input of CI transaction freeze codes per existing guidelines.

  2. The CI freeze codes are input by the FDC control function. The freeze codes are discussed individually in LEM 9.14.

9.8.1.3.1.5  (01-29-2002)
Quality Reviews

  1. The RAC is responsible for establishing and maintaining a structured internal quality review process for the following FDC programs:

    1. Questionable Refund Program (QRP)

    2. Return Preparer Program (RPP)

    3. Court Witness Program

    4. Control Function

  2. A review of each program will be conducted by the RAC or his/her designee on an annual basis each fiscal year ending September 30.

  3. A report detailing the findings will be prepared for the Director, Refund Crimes, within 45 days following the end of each fiscal year. A copy of the report will be maintained in the FDC administrative files.

9.8.1.3.1.6  (10-14-2004)
Questionable Refund Program Restitution Program

  1. See LEM 9.14 for information concerning the court ordered restitution program.

9.8.1.3.1.7  (01-29-2002)
Work Planning and Control Tracking System

  1. The RAC is responsible for tracking the time of FDC personnel.

  2. Time worked on FDC programs is tracked on the Campus Work Planning and Control (WP&C) reporting system.

9.8.1.3.1.8  (01-29-2002)
Fraud Awareness

  1. The RAC is responsible for the training of IRS Campus functional personnel in the recognition and referral of potentially fraudulent returns or other documents in connection with the Questionable Refund and Return Preparer Programs.

  2. The volume of in-house referrals varies between IRS Campuses. Some of the principal reasons for this variance are the quality of the fraud awareness training, timeliness, encouragement, and interest by management. It is the RAC's responsibility to secure a commitment from the IRS Campus management to allow fraud awareness presentations during training sessions or as often as is deemed appropriate.

9.8.1.3.1.9  (10-14-2004)
Referrals from IRS Campus Employees

  1. The FDC will receive referrals from various functions within the IRS Campus to evaluate for criminal potential. The referrals will primarily be from Document Perfection, Remote Exam, Adjustments, Automated Underreporter, and Customer Service.

  2. Information may be referred via Form 2797, Referral Report of Potential Criminal Fraud Cases, or per the referring function's IRM instructions; however, some information may also be referred based on fraud awareness training given to IRS Campus tax examiners.

  3. The referral evaluation should include:

    1. determining criminal potential of fraud referrals from IRS Campus functions

    2. notifying referring functions whether the referral was accepted or declined within time frames specified in existing guidelines

    3. where possible, personally meeting with referring office to explain declinations

9.8.1.3.1.9.1  (10-14-2004)
Information Report Referrals from IRS W&I Fraud Hotline Call Sites

  1. The FDC will receive information report referrals for QRP and RPP from Wage and Investment (W&I) Fraud Referral Hotline call sites to evaluate for criminal potential and/or scheme development. These call sites are not located at all IRS Campuses.

  2. Information may be referred via Form 3949, Information Report Referral, or per the call sites' IRM instructions.

  3. Referral evaluations should include:

    1. Determine criminal potential.

    2. The RAC, who is co-located within the W&I Fraud Referral Hotline call site, should notify the call site manager when the referrals do not meet existing guidelines.

  4. The RAC, who is co-located within the W&I Fraud Referral Hotline call site, will prepare a briefing on a periodic basis for the call site manager and Refund Crimes. This briefing will comment on the adequacy of the preparation, handling, and processing of Forms 3949 involving QRP and RPP matters forwarded to CI. The RAC will need to secure feedback from the other FDC's that have received referrals to assist in the preparation of this briefing.

9.8.1.3.1.10  (10-14-2004)
Refund Inquiries

  1. Refund Inquiries are received from Customer Service representatives (CSR) or Taxpayer Advocate offices. The FDC personnel are responsible for coordinating the resolution of each refund inquiry.

9.8.1.3.1.11  (01-29-2002)
Task Force Participation

  1. At various times throughout the year, issues may arise that require a team approach to resolve. A RAC may be asked to lead or participate in such a task force.

9.8.1.4  (01-29-2002)
Training

  1. The following sections provide information concerning the training of FDC employees.

9.8.1.4.1  (01-29-2002)
Training Requirements For The Resident Agent in Charge

  1. Reserved

9.8.1.4.2  (01-29-2002)
Training Requirements

  1. Reserved

9.8.1.4.3  (01-29-2002)
Questionable Refund and Return Preparer Program Fraud Awareness Training At IRS Campus

  1. The RAC is responsible for the training and orientation of IRS Campus functional personnel in the recognition and referral of potentially fraudulent returns.

  2. The RAC will secure a commitment from IRS Campus management to allow fraud awareness presentations during functional training sessions or other group meetings conducive to fraud awareness training.

  3. Whenever possible, the RAC should be personally involved in the training to ensure timeliness, quality, and a high level of management interest in the fraud referral program.

  4. The RAC will maintain documentation on all fraud awareness training.

9.8.1.4.3.1  (10-14-2004)
Questionable Refund and Return Preparer Program Fraud Awareness Training at W&I Fraud Referral Hotline Call Sites

  1. The RAC, who is co-located with the W&I Fraud Referral Hotline call site, is responsible for the training and orientation of W&I Fraud Referral Hotline call sites personnel in the recognition and referral of questionable refund return filing allegations and abusive return preparer activities. The RAC will also provide information regarding other CI referrals as necessary. This training will need to remain dynamic and responsive to evolving fraud trends.

  2. The RAC, who is co-located with the W&I Fraud Referral Hotline call site, will secure a commitment from W&I Fraud Referral Hotline call site management to allow fraud awareness presentations during functional training sessions or other group meetings conducive to fraud awareness training.

9.8.1.4.4  (01-29-2002)
Field Office Visitations

  1. On an annual basis, the RAC should coordinate with the Special Agents in Charge (SAC) to attend an all-managers meeting and/or field office group meeting to discuss the following:

    1. FDC services to field offices

    2. CI Controls maintenance

    3. Questionable Refund Program

    4. Return Preparer Program

    5. FDC fraud referrals to the field office

  2. Travel expenses related to these meetings will be paid from FDC travel allocations.

9.8.1.5  (10-14-2004)
Security

  1. This subsection provides an overview of security requirements within the FDC.

9.8.1.5.1  (04-14-1998)
Automation

  1. All systems are required to be accredited and certified per IRM 2.1.10, Information Systems Security, and the Computer Security Act of 1987.

  2. The Internal Revenue Security Certification program is the technical evaluation of computer security, requirements, regulations, and standards used to assist in the accrediting system.

9.8.1.5.2  (10-14-2004)
Firearms

  1. Firearms for RACs are to be secured per IRM 9.10.1, Investigative Equipment.

9.8.1.5.3  (10-14-2004)
Informants

  1. Protection of informant information and identity is required. This protection includes:

    1. disclosing to only those employees having a need to know

    2. transmitting in double-sealed envelopes bearing instructions To Be Opened by Addressee Only

    3. protecting per IRM 1.16.8, Emergency Planning and Incident Reporting

9.8.1.5.4  (10-14-2004)
Physical Security

  1. Physical security in the IRS Campus must conform to Protection Point Values (PPV) of IRM 1.16.8.

  2. CI personnel are authorized to control all keys and combinations within their office per IRM 1.16.8.

9.8.1.5.5  (10-14-2004)
Records And Property

  1. Records and property are to be secured per IRM 1.16.8.

9.8.1.6  (04-14-1998)
Informant Information

  1. The following procedures will be followed when dealing with informants.

9.8.1.6.1  (10-14-2004)
Processing Informant Information

  1. Customer Service is responsible for receiving, screening, and processing all telephonic informant communications.

  2. Any telephonic informant communications received in the FDC will be redirected to Customer Service at 1–800–829–0433. However, if the informant is unwilling to call the 1–800 number or be transferred, the employee must document all of the information provided by the informant on Form 3949, Information Report Referral. The RAC will forward Forms 3949 to the Denver LDC. The call sites will forward information items (Form 3949 and attachments) to the Denver LDC.

  3. All written informant communications received in the FDC will be forwarded to the Denver LDC for evaluation.

  4. All walk-in informants will be encouraged to go to the CI field office. However, if the informant is unwilling to go to the field office, the employee must document all of the information provided by the informant on Form 3949. The RAC will forward Forms 3949, Information Item, to the Denver LDC.

  5. All informant information forms will be forwarded in security envelopes that must be double sealed and labeled confidential.

9.8.1.6.2  (10-14-2004)
Request for Reward for Information Provided

  1. If the informant indicates he/she wants a reward, the following actions should be taken:

    1. Give the informant a Publication 733, Rewards for Information Given to the Internal Revenue Service, and a Form 211, Application for Reward for Original Information.

    2. Instruct the informant to return the completed Form 211 to the IRS Campus that services the area where the alleged tax violator resides (addresses of the IRS Campuses are shown on the reverse side of the Form 211).

    3. Forward a copy of Form 3949 or a copy of the written informant information to the Informant Claims Examiner (ICE) Planning and Special Programs (PSP) at the IRS Campus that services the state/area where the alleged tax violator resides.

  2. If a Form 211 is received in the FDC with the written informant information, the original Form 211 and a copy of the written information should be forwarded to the Informant Claims Examiner.

9.8.1.7  (01-29-2002)
Court Witness and Certified Transcript Program

  1. The FDC Court Witness Program provides court witnesses, certified returns, certified transcripts, and other certified documents for court and other judicial proceedings.

9.8.1.7.1  (10-14-2004)
Court Witness Coordinator

  1. The Court Witness Coordinator coordinates the Court Witness Program for a cross-business unit campus, provides expertise in the area of judicial processes, and is assigned to the staff of a RAC. The Court Witness Coordinator is management's representative for cross-unit coordination among the various Directors at the IRS Campus sites and must make adjustments to meet the needs of several heads of office within a collaborative environment.

  2. The court witness represents the Commissioner, in the Commissioner's role as custodian of returns and documents, in trials, pre-trial proceedings, and other judicial or quasi-judicial proceedings. The court witness testifies and presents evidence as to all matters within the scope of the Commissioner's custodial responsibility.

9.8.1.7.1.1  (04-14-1998)
Testimony of Court Witness

  1. The quality of court witness testimony is crucial to law enforcement and to voluntary compliance. The expertise, competence, and decorum of the witness contributes significantly to the success of the prosecution case.

9.8.1.7.1.2  (10-14-2004)
Responsibilities

  1. Among others, the duties of the court witness include but are not limited to:

    1. securing all available original tax returns and documents, and obtaining certified copies where appropriate

    2. securing other original documents and correspondence filed by the defendant with the IRS

    3. securing current certified transcripts of accounts, certificates of assessments and payments, or certificates of Lack of Record

    4. researching all IRS Campus areas and Federal Records Center for pertinent information to aid in trial, e.g., returns, correspondence, receipts, transcripts, organizational functions, and documentation procedures

    5. meeting with the attorney for the government prior to trial to discuss points of testimony and to review investigative files, exhibits, and any other documents to be presented as evidence during trial

    6. assisting attorneys for the government and special agents as requested

9.8.1.7.1.3  (01-29-2002)
Knowledge Required

  1. The court witness must have extensive knowledge regarding:

    1. all IRS Campus actions with respect to returns and documents under the custody of the Commissioner or his/her designee

    2. complete processing procedures and functional responsibilities (past and present) of the IRS Campus, Field Office, and Federal Records Center

    3. all types of returns, due dates, filing requirements, and document systems (including the Electronic Filing System)

    4. all laws and regulations relating to Disclosure, Freedom of Information Act, Privacy Act, Federal Rules of Criminal Procedure, and the Federal Rules of Evidence

    5. proper introduction of tax returns, certificates of assessments and payments, Information Reporting Program (IRP) Records, Master File Transcript Request (MFTRA), and certificates of Lack of Record

    6. coordinating and conducting periodic court witness training for IRS Campus personnel

    7. responding to interrogatories and providing depositions or affidavits

    8. reviewing all completed Certifications for accuracy and quality control

    9. maintaining a current cadre of court witnesses

9.8.1.7.1.4  (10-14-2004)
Authority

  1. In testifying as a court witness for the IRS, the following procedures must be adhered to:

    1. Delegation Order 156 (Rev.17) and Exhibit 1.2.2-2, Delegation Order 156 (Rev.17) Reference Chart

    2. Title 26 USC §6103(h)(1), (h)(4), and (k)(6)

  2. The quality and credibility of a witness' testimony depends on answering only the questions asked and representing the IRS with the highest degree of integrity, efficiency, and fairness.

9.8.1.7.2  (10-14-2004)
Field Office Procedures to Request Court Witness

  1. Requests for court witnesses by field offices can be made by memorandum from the SAC to the RAC who will be providing the court witness.

  2. The RAC will follow the guidelines established by the IRS Campus Directors relative to requests for court witnesses from IRS Campus functional areas.

  3. The SAC or his/her representative may telephonically request a court witness in exigent situations; however, a follow-up memorandum must be submitted to the RAC within two calendar days.

  4. Field offices will pay for the travel expenses of a court witness that pertain to criminal investigations, e.g., trials, grand juries, etc.

  5. Funding for civil trials are to be paid from the Division Commissioner's Office for the area that originated the matter (SB/SE, W&I, LMSB, or TE/GE). The Planning and Analysis Office (or other office, if appropriate) will provide the travel codes for the voucher by working with their Budget Office for funding codes.

9.8.1.7.3  (10-14-2004)
Seals And Certification

  1. The primary purpose of certification is to satisfy the requirements of the rules of evidence and civil procedure. This is essential in authenticating a document for admission into evidence.

  2. Certification is accomplished by attaching Form 2866, Certificate of Official Record, with a seal affixed. The court witness coordinator is responsible for ensuring that the transcript is accurate.

  3. Transcripts and other documents are prepared for use in court per 28 USC 1733(b), USCS Fed Rules Crim Proc R44 and USCS Fed Rules Crim Proc R27:

    1. 26 USC 7514—authorizes the seals of office

    2. 26 CFR 301.7514—governs the use of seals

    3. 26 CFR 301.7622–1—authorizes the Commissioner to designate persons to issue certifications

    4. Delegation Order 198 (Rev.5) —designates the persons who may issue certification and provide delegation of authority

    5. CI Delegation Order 18, Seal of the Office of the Internal Revenue Service and Certification —designates the persons who may issue certifications as re-delegated from the Chief, CI

9.8.1.7.4  (10-14-2004)
Request For Certification

  1. Forms 4338 and 4338–A, IMF Information or Certified Transcript Request, will be used by CI personnel to request Certified Transcripts of Accounts. Requests will include but are not limited to:

    1. certification of original and copy of returns

    2. certification of MCC and microfilm transcripts

    3. certification of certificates and payments

    4. certification of Lack of Record

  2. All requests for transcripts of ADP accounts will be forwarded to the FDC servicing the field office requesting the transcript.

  3. Each request should cover the specific tax periods. Only information that is responsive to the request will be certified.

  4. A minimum of four weeks is required to secure and certify all requested documents.

  5. The court witness coordinator will establish expedited procedures.

9.8.1.8  (10-14-2004)
Support of Field Operations

  1. Employer Identification Numbers (EINs) issuance will be consolidated in three IRS Campuses. The centers will be Brookhaven, Cincinnati, and Philadelphia. (See Exhibits 9.8.1–1, Map and Corresponding Table.) The FDCs in those campuses will provide support to National Office Operations in obtaining EINs. Employer Identification Numbers are issued by the IRS Campuses, see LEM 9.14.

Exhibit 9.8.1-1  (10-14-2004)
Map and Corresponding Table

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A NEW STATE MAPPING IS REQUIRED FOR 3 SB/SE SITES FOR TELE-TIN, FAXTIN, PCFAX

STATE IRS CAMPUS
Alabama CSC
Alaska PSC
Arizona PSC
Arkansas PSC
California PSC
Colorado PSC
Connecticut BSC
Delaware BSC
Florida BSC
Georgia BSC
Hawaii PSC
Idaho PSC
Illinois CSC
Indiana CSC
Iowa PSC
Kansas PSC
Kentucky CSC
Louisiana PSC
Maine BSC
Maryland BSC
Massachusetts BSC
Michigan CSC
Minnesota PSC
Mississippi CSC
Missouri PSC
Montana PSC
Nebraska PSC
Nevada PSC
New Hampshire BSC
New Jersey BSC
New Mexico PSC
New York-city BSC
New York-state BSC
North Carolina BSC
North Dakota PSC
Ohio BSC
Oklahoma PSC
Oregon PSC
Pennsylvania BSC
Rhode Island BSC
South Carolina BSC
South Dakota PSC
Tennessee CSC
Texas PSC
Utah PSC
Vermont BSC
Virginia BSC
Washington PSC
West Virginia BSC
Wisconsin CSC
Wyoming PSC
International PSC

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