Compliance Update with Amy K

​Moratorium on Employee Retention Credit; FinCEN Alert on “pig butchering” scam; NCUA offering FREE consumer compliance webinar; and more. 

by Amy Kleinschmit, Chief Compliance Officer
 
Employee Retention Credit – Moratorium on new claims.
Last week, the IRS announced that with regard to Employee Retention Credit claims there would be “an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program to protect honest small business owners from scams.”

The IRS renewed its warnings in making improper claims for the Employee Retention Credit and also provided additional warnings on aggressive marketing. The IRS notes that it is seeing “wildly aggressive suggestions from marketers urging businesses to submit the claim because there is nothing to lose. In reality, those improperly receiving the credit could have to repay the credit – along with substantial interest and penalties.”

Businesses can protect themselves by working with a trusted tax professional. Eligible employers who need help claiming the credit should work with a trusted tax professional; the IRS urges people not to rely on the advice of those soliciting these credits. Promoters who are marketing this ultimately have a vested interest in making money; in many cases they are not looking out for the best interests of those applying. Businesses should also request a detailed worksheet explaining ERC eligibility and the computations used to determine the ERC amount. Finally - don't apply unless you believe you are legitimately qualified for this credit. Details about the credit are available on IRS.gov, and again a trusted tax professional – not someone promoting the credit – can provide critical professional advice on the ERC.

The IRS has provided a number of resources to determine eligibility for the credit, including this checklist.
 
FinCEN Alert – “Pig Butchering”
The Financial Crimes Enforcement Network (FinCEN) recently issued this Alert on a prominent virtual currency investment scam call – “pig butchering.”  The Alert includes specific instructions to financial institutions should a SAR be required – namely, reference this alert in SAR field 2 (Filing Institution Note to FinCEN) and the narrative by including the key term “FIN-2023- PIGBUTCHERING” and selecting “Fraud-Other” under SAR field 34(z) with the description “Pig Butchering.

The Alert discusses the methodology of the scam which typically starts with the scammer making initial contact with a potential victim through text messages, direct messages on social media, or other communication tools and platforms, usually under the guise of accidentally reaching a wrong number or trying to re-establish a connection with an old friend. Once trust or a relationship has been established, the scammer will introduce the victim to a supposedly lucrative investment opportunity in virtual currency and direct them to use virtual currency investment websites or applications designed to appear legitimate, but which are fraudulent and ultimately controlled or manipulated by the scammer. Once the victim invests with the scammer, the scammer will show the victim extraordinary returns on the investment that have been fabricated. Once the victim is unable or unwilling to pay more into the scam, the scammer will abruptly cease communication with the victim, taking the victim’s entire investment with them.

Red Flags – the Alert discusses several red flag indicators of this scam, a few are highlighted below. Be sure to review the entire Alert and its guidance with staff.

• A customer mentions or expresses interest in an investment opportunity leveraging virtual currency with significant returns that they were told about from a new contact who reached out to them unsolicited online or through text message.
• A customer appears distressed or anxious to access funds to meet demands or the timeline of a virtual currency investment opportunity.
• A customer uncharacteristically liquidates savings accounts prior to maturation, such as a certificate of deposit, and then subsequently attempts to wire the liquidated fiat currency to a VASP or to exchange them for virtual currency.
• A customer takes out a HELOC, home equity loan, or second mortgage and uses the proceeds to purchase virtual currency or wires the proceeds to a VASP for the purchase of virtual currency.
• A customer mentions visiting a website or application that is purported to be associated with a legitimate VASP or business involved in investing in virtual currency. The website or application shows warning signs such as a web address or domain name that is misspelled in such a manner as to resemble that of another business, a recently registered web address or domain name, no physical street address, international contact information, or contact methods that include only chat or email.

The Alert encourages financial institutions to refer their customers who may be victims of pig butchering to the FBI’s IC3 and may also refer their customers to the Securities and Exchange Commission’s tips, complaints, and referrals (TCR) system to report investment fraud. This is in addition to filing a suspicious activity report.
 
NCUA - Consumer Compliance Webinar
The National Credit Union Administration (NCUA) will be hosting a free webinar on September 27 on consumer compliance topics. Staff from the NCUA’s Office of Consumer Financial Protection will cover several subjects, including: Exam observations; Fair lending updates; Complaint trends; and Hot topics and regulatory developments. Register for this webinar HERE. This webinar will be closed captioned and archived online approximately three weeks following the live event.
 
FinCEN – Compliance Guide for Small Businesses
FinCEN also issued a compliance guide aimed at helping the small businesses understand their obligations to report beneficial ownership information (BOI). Starting on January 1, 2024, BOI reports must be filed electronically using FinCEN’s secure filing system. Reporting companies created or registered to do business before January 1, 2024, will have until January 1, 2025 to file their initial BOI reports. Companies subject to the rule created or registered on or after January 1, 2024, will have 30 days after receiving notice of their company’s creation or registration to file their initial BOI reports.

The guide discusses what a “reporting company” is so a business will know whether or not they are subject to this reporting requirement. The Reporting Rule exempts twenty-three specific types of entities from the reporting requirements listed on page 4. An entity that qualifies for any of these exemptions is not required to submit BOI reports to FinCEN.

As always, DakCU members may contact Amy Kleinschmit with any compliance related questions.