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Territorial Status Makes Fraud Easier

Identity theft has become a familiar concern to many Americans. As consumers become more savvy and businesses tighten up security, thieves have come up with new tactics. In one creative scheme, recently reported by the Dallas News, Luigi Montes stole the identities of Puerto Rican adults and children in a multi-million dollar tax fraud case.

The $3.4 million crime by Montes and his team of up to 18 associates is just the latest incident in a longer history of Puerto Rican identification documents being targeted by thieves and made possible because of Puerto Rico’s unique status as a territory of the United States.

As American citizens, Puerto Ricans have Social Security numbers.  Yet many workers in Puerto Rico are not required to file federal income tax returns.  (Click here to read about the federal taxes that Puerto Ricans pay.)  This has made it easier for thieves to file fraudulent tax returns and successfully receive refund checks using Puerto Rican identities. Puerto Rican residents who do not file federal tax returns would be unlikely have an opportunity to learn that their identities are being improperly used.

Montes’s conviction is not the first involving the black market for this information.  The IRS has been targeting Puerto Rican identify theft’s connection to tax fraud for several years. The problem had become so pervasive that the Puerto Rican government required residents to reapply for birth certificates with enhanced security features, a decision that reportedly had implications on voting access of Puerto Ricans living in the states.

If a criminal sends in a fake tax return for someone living in Idaho, there is a high chance either that the individual will send in a real one, or that there will be previous years’ returns to compare with the fake one. An individual living in Puerto Rico may never have filed a federal tax return — but will still have a real Social Security number.

While criminal activities are the fault of the criminals who commit them, the ambiguous position of Puerto Rico’s residents made the deception easier.

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