Markets In Action

With tax season approaching, be on lookout for financial scams

Imagine this scenario: You answer your phone and the caller tells you he’s from the Internal Revenue Service (IRS). The agency’s records reveal you owe back taxes, he tells you, and he demands immediate payment or there will be serious consequences.

Or maybe he says you’re owed a refund, and he just needs your bank account information to deposit the funds.

If you get a call like this, you’re almost certainly being scammed. Don’t give out any personal information and hang up the phone.

Not only is that caller not with the U.S. government—there’s a good chance he’s not even in the United States. A January 3 New York Times report sheds light on how a call center based in a suburb of Mumbai, India, conducted a transnational phone fraud scheme of exactly this kind, before being shut down by law enforcement last fall.

That call center was at the center of a scam targeting seniors and immigrants in the United States that bilked Americans out of some $100 million. A teenaged whistleblower working at the call center, concerned by what he saw as an exploitative fraud against vulnerable individuals, contacted an official with the Federal Trade Commission last year.

This was no small-scale operation: when law enforcement authorities in India raided the call center facility last September, they took 700 people working onsite into custody. The Times story makes it clear that this was not the only such call center operating in India, where a large population of young, fluent English speakers makes it easy to find recruits willing to make “sales” calls to the United States for wages higher than the local averages.

By way of illustration, the Times report profiles one victim of a similar scam, a 56-year-old Indian woman living in Texas. She received a call in 2014 and was told she had failed to pay required government fees when she was granted U.S. citizenship in 1995. Threatened with deportation, she handed over nearly $18,000, her life savings.

A key factor in this fraud, and many others, is that the scammers prey upon the weak and vulnerable. Like the recent immigrants noted in the Times story, seniors are another ripe target for financial fraud. Many may be isolated or contending with cognitive decline, leaving them more likely to fall prey to scams. Indeed, more than 1,000 Times readers responded with comments to the original report, many sharing their own stories of both attempted and successful frauds they or their relations had suffered.

Authorities are working to shut down these scams, but the challenge is great. Building awareness of how these scams work is essential, and the financial industry is working closely with both customers and policymakers to shine a light on these scams and put in place mechanisms to protect potential victims before they can be defrauded.

In a 2016 news release on tax season scams, the IRS emphasizes the facts, noting that the agency does not call taxpayers on the telephone without having made an initial contact by mail: 

The IRS will never: 

  • Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you have a loved one, friend or neighbor who may be vulnerable to such scams, you can help them out by sharing this information. Protecting seniors and other vulnerable populations against fraud is a top priority for SIFMA members, and widely distributing articles like these will go a long way toward reducing the number of victims.

Further reading: 

Watch out for these 5 tax season scams 

Financial scammers target vulnerable seniors: Here’s what to look for