Did you know that the Internal Revenue Service (IRS) has a criminal investigation division (IRS-CI)? What started out as the IRS Intelligence Unit more than 100 years ago—out of the need to combat widespread tax evasion and bribery among bureau employees—is now the sixth largest federal law enforcement (LE) agency, touting a century of high-profile cases, many you may or may not have heard about. Among the most notable are as follows:
- IRS-CI agents traced money that Saddam Hussein hid throughout his country while fleeing from military conflict.
- IRS-CI agents helped trace Osama bin Laden’s financial network as he plotted terrorist activities.
- IRS-CI investigated the big banks and is responsible for record-setting settlements from UBS, Credit Suisse and BNP Paribas.
- The largest corruption case in the world involving FIFA began as a tax case with IRS-CI.
It is important to note that IRS-CI is not made up of auditors but rather criminal investigators. Where there is crime connected to money, IRS-CI will “follow the money.” IRS-CI special agents investigate a wide spectrum of financial crimes related to tax fraud and money laundering, including cyber/cryptocurrency fraud, the Bank Secrecy Act (BSA), narcotics-related investigations, public corruption and other financial fraud schemes. They are the only federal agency allowed to investigate federal tax crimes.
IRS-CI often partners with the U.S. Attorney’s Office and other federal LE agencies that rely on IRS-CI’s unique ability to follow the money and locate assets worldwide. IRS-CI also participates in a number of task forces and partners with LE agencies both domestically and internationally, including:
- Organized Crime Drug Enforcement Task Force (OCDETF)
- Drug Enforcement Administration Special Operations Division
- OCDETF Fusion Center
- International Organized Crime Intelligence and Operations Center
- Joint Criminal Opioid Darknet Enforcement
- National Joint Counterterrorism Task Force
- National Counterintelligence Task Force
- High Intensity Drug Trafficking Areas program
Public-private partnerships (PPP) have never been more vital than they are today. IRS-CI Chief Jim Lee stressed the importance of these relationships at events in recent weeks, specifically in the enforcement areas of anti-money laundering (AML) and the BSA.
BSA data, in general, is not a “nice to have,” but rather a “must have” in an effort to help identify those individuals who attempt to launder money from illegal activities. AML specialists, commonly, are really the first line of defense to detect illegal and suspicious activities. Further, PPPs are critically important to fostering compliance and assisting investigations. We need to embrace the idea, conduct training with one another—in both directions, create red flag indicators around priorities, develop typologies illustrating risk, engage in speaking opportunities, etc.
The Joint Chiefs of Global Tax Enforcement (J5): Leaders were established as a joint operational alliance of tax enforcement authorities from Australia, Canada, the Netherlands, the U.K. and the U.S. to increase collaboration in the fight against international and transnational tax crime and money laundering.
IRS-CI has 11 attaché offices strategically positioned abroad to tackle financial and tax-related crimes and train foreign government partners on investigative techniques.
Case Initiation and Overview
In December 2020, IRS-CI was invited to an investigation by the Southern District of New York in which IRS-CI special agents partnered with U.S. Homeland Security Investigations, the U.S. Postal Inspection Service and the U.S. Department of Justice. The task force was tasked with investigating a transnational criminal organization (TCO) suspected of engaging in cyber-enabled investment fraud schemes utilizing “boiler rooms” to generate fraud proceeds and launder the proceeds through accounts in the U.S. Boiler rooms are fraudulent call centers that pose as legitimate investment brokerages and sell nonexistent investments over the phone and internet. The investigation identified more than 500 victims located throughout the world, with losses of more than $50 million.
The TCO was comprised of multiple overseas boiler rooms, cyber-enabled marketing teams and U.S.-based professional money laundering organizations. It controlled a complex international network of businesses, websites, financial accounts, escrow agents and nominees to make the boiler rooms appear legitimate and to launder the fraudulent proceeds generated by the boiler rooms. The boiler rooms would often “spoof” legitimate investment brokerages from the U.S. while hiding and operating from the Philippines, Cyprus, Thailand and elsewhere.
IRS-CI named this investigation Operation Furnace. IRS-CI’s main role in this investigation was to analyze the movement of illicit funds through financial institutions. They also assisted with gathering evidence for the specified unlawful activity by reviewing email and text communications between the third-party money launderers, domestic brokers, boiler room operators and victims. Furthermore, IRS-CI traced the communications to specific financial transactions and participated in enforcement actions such as search warrants and arrests of the targets in Operation Furnace.
This case was worked under the umbrella of the J5. The IRS-CI case agent who worked this case, Special Agent Benedict Castro, is part of a J5 unit in the New York Field Office. Through the J5 partnership, the criminal investigation case agent was able to talk to victims of the boiler room scheme with the help of criminal investigation attachés.
Target Example—Robert Lenard Booth
Robert Lenard Booth was a boiler room operator identified in this investigation who relocated overseas and spent years operating his scheme from Thailand and Panama. Booth defrauded victims of nearly $2 million.1
The investigation of Booth started after the arrest of a third-party money launderer in early 2021. The third-party money launderer moved the illicit funds for Booth through brokers located in New York. (The brokers in New York were later arrested in early 2022.) The task force discovered communications between Booth and the third-party money launderer relating to the boiler room activity. The task force was also able to trace the illicit funds that went through the U.S. broker accounts that were associated with the boiler room controlled by Booth.
In August 2021, Booth was arrested when he flew from Thailand to the John F. Kennedy International Airport. Booth was indicted for conspiracy to commit securities fraud, conspiracy to commit wire fraud and conspiracy to commit money laundering. In April 2022, a jury trial found Booth guilty on all counts. In September 2022, Booth was sentenced to 10 years in prison, three years of supervised probation, more than $2 million in restitution, and $780,982 in forfeiture.2
During the trial, Jerome Austin, one of Booth’s co-conspirators, was indicted for conspiracy to commit securities fraud, conspiracy to commit wire fraud and providing false statements to federal agents. Austin pleaded guilty on all counts. Austin also violated bail and was later arrested on a provision arrest and extradited back to the U.S. In September 2022, Austin was sentenced to five years in prison and three years of supervised probation.
Boiler Room Red Flags
Below are some red flags for boiler room activity:
- Finding out information included in the list below during the know your customer processes
— Newly established companies with minimal business history
— Physical location is a residence or post office box
— Minimal internet presence
— Business described in vague terms (e.g., real estate, consulting, payroll, construction, etc.)
— Signatory is the sole owner/employee of the company
- Incoming wire transfers from multiple overseas individuals (victims)
- Incoming funds are quickly transferred to overseas accounts or other domestic shell company accounts
- Wire notes: Incoming notes describe investments or share purchases; outgoing wire notes describe consulting fees
- Customers attempting to recall wire transfers
- Banking transactions are not consistent with the financial and business profile of the account signatory
IRS-CI serves the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law. Moving toward the future, as stated by Chief Lee, it is the extent to which LE adapts, embraces technology and trains its personnel to investigate financial crimes involving digital currency and illicit marketplaces that will truly determine their effectiveness. IRS-CI has been and continues to be up for the task, and we look forward to continued partnerships in this mission.
Thomas M. Fattorusso, special agent in charge, IRS-CI, New York Field Office, NewYorkFieldOffice@ci.irs.gov, @IRS_CI and @IRSCI_NY,
- “Robert Lenard Booth Sentenced To Ten Years For Defrauding Investors Of Over $2 Million In International Boiler Room Scheme,” U.S. Department of Justice, August 11, 2022, https://www.justice.gov/usao-sdny/pr/robert-lenard-booth-sentenced-ten-years-defrauding-investors-over-2-million