The Financial Crimes Enforcement Network on Tuesday issued a notice to financial institutions to help federal law enforcement identify construction firms engaged in payroll tax evasion and workers compensation insurance fraud, crimes the U.S. Department of Treasury says are on the rise in residential and commercial real estate construction industries.
Federal law enforcement said in its notice that in addition to paying workers without issuing tax documents construction, companies are increasingly using “shell” companies to buy small workers compensation policies and then “renting” such policy documentation to companies with a much larger workforce than the shell company was insured for.
The notice says banks can help report such fraud by looking at the “company’s recently acquired workers compensation insurance policy, which may be verifiable through an official state website” to see whether it was issued within the last year and covers only a small number of employees. From there, banks can see whether a “high volume of transactions is observed in the company’s bank accounts” that does “not commensurate with a construction company of that size.”