Feds crack down on check-cashing stores in South Florida

South Florida check-cashing business are under new scrutiny from federal regulators because tax fraud scamsters have often used their services.
South Florida check-cashing business are under new scrutiny from federal regulators because tax fraud scamsters have often used their services. Miami Herald file

For a very fat fee, South Florida check-cashing businesses have routinely turned a blind eye to criminals who use fake IDs to cash millions of dollars in fraudulently obtained tax-refund checks from the U.S. Treasury Department, authorities say.

Case in point: A Homestead-area man convicted of cashing thousands of fraudulent tax-refund checks totaling $12 million.

Now, the government hopes to put an end to the racket by requiring 760 check cashers in Miami-Dade and Broward counties to obtain additional personal information from all customers if they want to cash a refund check in excess of $1,000.

The check-cashing crackdown — which takes effect Monday and is the first in the nation — aims to help the Internal Revenue Service punish bad businesses and save taxpayers millions. It’s being imposed during the off-tax season because that is when criminals often try to cash ill-gotten refund checks issued in other people’s stolen names.

“We are putting the check cashers on notice that if they continue to do this, they will be prosecuted,” said Kelly Jackson, special agent in charge of IRS criminal investigations in South Florida. “We hope to stop the bad people and put them in jail and protect tax revenue.”

Among the new requirements: a copy of the customer’s identification, such as a driver’s license or passport, matching the name on the refund check. Also required: a digital photo taken of the customer at the time of the transaction that matches the one on the ID and the customer’s phone number.

Already required under state law: the customer’s thumbprint recorded on the check.

Previously, federal law only required check cashers to report all transactions in excess of $10,000 — like all financial institutions in the United States under the Bank Secrecy Act.

Check cashers who get caught breaking the Treasury Department’s “geographic target order” could face up to five years in prison and a $250,000 fine if convicted.

A national check cashers trade association said that it represents 5,000 licensed members who already comply with federal and state laws regulating financial transactions — and that it doesn’t view the new policy in South Florida as an imposition. The association’s leader said that as a practical matter, the only additional requirement would be installing new digital-camera equipment.

“It’s a burden we will comply with,” said Edward D’Alessio, executive director of the Financial Service Centers of America, based in Washington, D.C. “If it helps keep the bad guys out of our [business], it helps our industry.”

But D’Alessio took umbrage with the IRS for singling out the check-cashing industry when the agency itself regularly issues fraudulent refund checks without verifying claims — and then takes so long to pursue offenders.

“It’s not an excuse for the actions of our industry, but the IRS needs to look inward, too,” he said.

South Florida, already boasting the nation’s highest rate of identity theft of Social Security numbers and other personal data, has secured the dubious distinction of being the country’s capital of tax-refund fraud, which costs the IRS more than $5 billion a year in losses nationwide.

To gain the Treasury Department's approval for this unprecedented policy change, IRS criminal investigators and federal prosecutors had to prove there was a need.

In the fraud capital of America, the U.S. attorney’s office has made hundreds of cases in recent years, many involving crooked check cashers and brokers.

Among the most-mind-boggling refund rip-offs: In 2013, Jesus Calvo, formerly of Cutler Bay, was sentenced to nearly five years in prison after receiving 30 percent of the take as his fee on $12 million worth of fraudulent tax-refund checks. He invested the stolen millions in two houses, luxury cars, a retirement account and other business activities.

The checks were brought to his business, J&S Taxes, by Frankie Jermaine Anderson, a convicted drug trafficker who skimmed 20 percent of the take for himself and delivered the other half of the proceeds to suppliers of the refund checks, according to prosecutor Michael Berger. Anderson also pleaded guilty and was sentenced to 10 years.

Another staggering refund scam: For similar high fees, Wilson Lau and Kate Yuee Lau, who operated American Quick Cash Depot in Oakland Park, processed more than $5 million in fraudulently obtained tax-refund checks, according to court records. The Coral Springs couple pleaded guilty to bilking the U.S. government, with the husband sentenced to seven years and the wife to two years.

Even a former NFL lineman, William Joseph, who starred at the University of Miami, was caught cashing dozens of fraudulently obtained tax-refund checks in other people’s names during a sting operation set up at a North Miami business. Joseph and others used forged signatures and phony IDs to cash more than $500,000 in refund checks. He was sentenced to two years in prison.

The new check-cashing requirements — imposed by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) — remains in effect for 180 days, until Jan. 30. It’s being imposed during the off-tax season by design.

“Most people who have a legitimate tax-refund check cash it right away during the tax season” in the first half of the year, the IRS’ Jackson said. “Fraudsters, on the other hand, are part of organized criminal activity and operate in the off-season to stay under the radar.

“Fraudsters file tax returns in the off-season in the names of dead people, elderly people and children, who don’t file returns,” she said.

It is possible that the department will extend the “geographic target order” for another 180 days and extend the territory to Palm Beach and Monroe counties. “We would like to cover our entire region,” Jackson said.