Prepaid Cards are the 'Currency of Criminals', IRS Chief Tells 60 Minutes

60 Minutes correspondent Steve Kroft reports on “The Tax Refund Scam”

The widespread and growing use of prepaid cards, especially by Americans who can’t or won’t use bank accounts, is well established.
Unfortunately, prepaid cards are also the “currency of criminals” engaging in tax refund scams, a huge problem for the Internal Revenue Service, IRS Commissioner John Koskinen told 60 Minutes correspondent Steve Kroft in last night’s installment of the CBS news magazine.
The IRS estimates that it sent out nearly three million fraudulent refunds to scam artists last year. A new report from the Government Accountability Office says fraudulent tax refunds cost tax payers $5.2 billion.
The 60 Minutes segment, “The Tax Refund Scam“, reported on how easy it is for criminals to purchase stolen financial data, especially social security numbers, and fill out federal income tax return forms online, claiming bogus refunds for thousands of dollars each time. One person familiar with the strategy told correspondent Kroft that con artists typically have a 40 percent success rate in getting the IRS to send them the money, most often by filling up prepaid cards.
Americans can easily get prepaid debit cards at major stores, usually without providing identification. You then deposit and withdraw money from it as needed. Many people use it like a bank account.
Prepaid cards are now used legitimately by millions of Americans to collect $142 billion in government entitlements, such Social Security and Medicare payments.

IRS Commissioner Koskinen told Kroft that these prepaid cards amount to an invitation to commit fraud. Here’s the exchange as seen on 60 Minutes:
Commissioner Koskinen: “The prepaid cards are the currency of criminals. Our problem is you can’t distinguish the number of a prepaid card from a legitimate bank account.”
Steve Kroft: “Almost impossible to trace, right?”

Commissioner Koskinen
: It is almost impossible to trace.
Steve Kroft: “Why doesn’t somebody put an end to that?”
Commissioner Koskinen: “There are significant percent of the population that were ‘unbanked’ as it were called. If you don’t allow them to use a prepaid card, they are going to have to get a check and they’ll have to pay someone a lot of money to cash that check. So you are disadvantaging a significant amount of the population.”

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