WASHINGTON–Credit unions and other organizations are being cautioned about rising fraud related to the COVID-19 Employee Retention Credit (ERC).
FinCEN issued an alert that federal law enforcement agencies that include the Internal Revenue Service’s (IRS) Criminal Investigation (CI) division have identified fraud and scams related to the ERC that have resulted in 323 investigations involving more than $2.8 billion of potentially fraudulent ERC claims since 2020.
Immediate Moratorium
In response to the scope of the ERC fraud, the IRS had announced in September an immediate moratorium through at least Dec. 31 on processing new ERC claims as part of what FinCEN said was an “effort to protect honest small business owners from scams.”
“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.
About the Act
ERC, which 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, has been the subject of a number of organizations that have been pushing companies to file claims.