How the IRS Is Using AI to Fight Back Against High-Tech Fraud Schemes

How the IRS Is Using AI to Fight Back Against High-Tech Fraud Schemes

Criminals are getting smarter with artificial intelligence, but so is the IRS. The agency's criminal investigation division is deploying advanced AI tools to combat a surge in sophisticated fraud schemes that now cost Americans more than $360 billion annually in online payment fraud alone.

The Growing Threat

Jarod Koopman, IRS Criminal Investigations' executive director of cyber and forensics, explains that fraudsters are using AI to create deepfakes and disinformation campaigns at unprecedented speed and scale. What once required significant technical expertise can now be accomplished quickly through AI automation.

Key fraud trends include:

• Check fraud is "skyrocketing" according to IRS officials
• Cryptocurrency markets create new opportunities for money laundering
• AI-powered schemes are more sophisticated and deployed at higher volumes

How the IRS Is Fighting Back

The agency is using AI primarily for pattern recognition and data analysis rather than direct decision-making. The technology helps investigators sift through vast amounts of data from casework, financial institutions, and open-source intelligence to identify fraud patterns and red flags.

Recent successes include recovering more than $1.3 billion from about 1,600 millionaires with unpaid tax debts and a major international investigation that led to 300 arrests worldwide for cryptocurrency-funded criminal activity.

Staffing Up for the Challenge

IRS-CI has grown from 2,700 to 3,500 employees in recent years, returning to staffing levels not seen since the 1990s. The agency is actively hiring specialists in international banking, anti-money laundering, cybercrime, and cryptocurrency - though accounting backgrounds remain a requirement for most positions.

Despite being the sixth-largest federal law enforcement agency, IRS-CI remains relatively small compared to the FBI's 30,000-40,000 employees, but Koopman says this allows them to be "flexible and nimble" in driving innovation.

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