Rising fraud related to coronavirus crisis employee retention credit trips alert to banks

Rising fraud associated with the COVID-19 Employee Retention Credit (ERC) is the subject of an alert to financial institutions by the Treasury’s financial crimes investigation unit, the agency said Wednesday in a release.

The alert issued by Treasury’ Financial Crimes Enforcement Network (FinCEN) asserts that federal law enforcement agencies – including the Internal Revenue Service’s (IRS) Criminal Investigation (CI) division – has identified fraud and scams related to the ERC that, since 2020, have resulted in 323 investigations involving more than $2.8 billion of potentially fraudulent ERC claims.

In response to the scope of the ERC fraud, the IRS in September announced an immediate moratorium through at least Dec. 31 on processing new ERC claims “in an effort to protect honest small business owners from scams,” FinCEN said.

“The alert provides an overview of typologies associated with ERC fraud and scams, highlights select red flags to assist financial institutions in identifying and reporting suspicious activity, and reminds financial institutions of their reporting requirements under the Bank Secrecy Act (BSA),” FinCEN said in a release.

ERC was authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 as a tax credit to encourage businesses to keep employees on payroll during the COVID-19 pandemic., the agency noted.

FinCEN Alerts Financial Institutions to COVID-19 Employee Retention Credit Fraud