rm or obtain and explosives permit. in 91% of the cases 2043 separate occasions, those known or-- what can be done about this? director comey: immediate alert is sent so they can incorporate that information in their investigation. it is challenging because known or suspected has not been adjudicated, that if somebody is a terrorist, we are investigating, so we do not want to blow our investigation. senator feinstein: in 2007, the bush administration justice apartment drafted legislation to

close what is a gap and prevent a known or suspected terrorists from buying a gun or explosive in this country. in 2009 attorney general holder expressed the obama administration support for the legislation. i introduced similar legislation last year. the question comes for the law enforcement element of the administration to come forward and be supportive of this because the national rifle association, even opposes this. this is terrorists. we have people coming into this country meaning to do us harm, and they can go in and buy a weapon to carry it out. that is simply unacceptable. so i want to bring it to your attention you know. we have to come together and prevent this from happening. your biggest concern is the lone wolf. the lone wolf can come in

unarmed, he can buy explosives the gun. this must be stopped. director comey: thank you senator? senator feinstein: no comment director comey: i have nothing intelligent to say about that. i'm focused on the upper is a shuttle -- on the operational piece of it. senator feinstein: i would like to know where you stand. director comey: i and the fbi -- senator feinstein: i do not stand. senator boozman: thank you, mr. chairman. director jones first of all i would like you to send our condolences to the special agent's wife and the young children. i and he has lost a battle with cancer. director hylton we want to

express our condolences to josey wells, and to family and friends and u.s. marshals service. again, these things illustrate what you all are about, and we do appreciate you. in regard -- i want to follow up on what senator mikulski was talking about and senator lankford in a different way, and just the tools we have out there to try and fight the drug epidemic and them along with that the crime that comes with that. director jones as response to the crime in little rock, i understand potentially candidates to be named a violence reduction network -- can you talk a little bit about that act and that initiative and how that is helpful. director jones: director jones: thank

you for the question. there filings reduction -- not violence reduction network is an initiative that is a collaborative effort with not only federal law enforcement across the board but with state and locals to address violent crime at a multitude of levels. i know little rock in particular has been discussed not only as a vrn potential site, but is a site that we have done some work through our new orleans field division to try and address the unacceptable levels at times of violent crime. but the vrn really has a lot of potential. in its genesis, there are 10 cities now. it has -- there has been a conference here. we're brought the stakeholders. d.a.'s, state and local police

departments, all the federal agencies represented here to discuss in a very focused way the nature of the violent crime problem, the perpetrators of violence in those communities and sustainable strategies to lower it eradicate it, and sustain it. senator boozman: very good. and related, can you talk about -- and how that fits in. ms. leonhart: the agencies at the table -- >>senator mikulski: tell the senator what those initials stand for. it sounds like talbots you to us. ms. leonhart: it is the high intensity drug area program and

it allows us -- there are numerous hidas, different initiatives that bring state local, federal together, and in these hida task forces we are able to concentrate on a regional concept the threats both drug and other violent-type crime that are wreaking havoc on those communities -- senator boozman: so is there a way -- and we could go down the line. we have got all these programs going on. is there a way to integrate the programs so when you are doing your thing director jones, and you are doing your thing director hytlton, fbi, do we integrate those when we go into a community?

ms. leonhart: absolutely. the beauty is some of the groups around by the fbi concentrating on the violent gangs that the fbi brings expertise to the table on. others are fugitive related and run by the marshal service to make sure that we are going after the most significant wanted violators in the area. and then ones that are concentrating on firearms are run by the atf. all the different initiatives and taskforces, each other, and that is why our four departments and our state and local partners can almost seamlessly work between these taskforces to go after the threat. senator boozman: thank you. ms. hylton, if we reduce the federal prison population, how

is that going to affect you guys? director hylton: as the prison population decreases our -- and as all of us fight for gangs to be reduced, i see that population coming in to detention as we address those issues. i think we will still see them in coming. you will see it come back up. senator boozman: thank you, mr. chairman. thank you for being here very much. senator shelby: senator murphy. senator murphy: i wanted to follow up on some of the questions regarding the work that atf is doing surrounding -- following on the law enforcement officers protection act. this was just for the committee's regulation, a peace of legislation that was passed in 1986 why a 421-1 margin,

passed by unanimous consent in the senate, and president reagan set upon signing at that there are certain forms of ammunition that have no legitimate sporting, recreation, or self-defense use. there has always been tricky work to try to stay true to the act's intentions of stopping criminals from killing law enforcement officers with specifically dangerous type of weapons, while also preserving the right of sports men and hunters to enjoy their pastime. but i just wanted to first thank the atf -- you mentioned in your prepared testimony for the maney -- the amazing work around the sandy hook surety. i was in that firehouse hours after the shooting took place and i had a law enforcement officer who was standing next to me remark that in a way he was

glad that adam lance took his own life because he feared for the life and safety of his officers should a shrewd have occurred, giving that -- given that admin-ish, given the power of the weapons that were found on mr. lancza's possession. i wanted to just ask a follow-up question as to why week were considering this particular type of ammunition in the first place . it is my understanding that what has happened here over time when we talk about these clean tips is they were initially exempt in part because they were only used in rifles, but they now are able to be used in handguns. and we look at handguns in a different way given that they

are much more likely to be used in an assault on an officer and in fact the underlying legislation references handguns specifically as something atf should be looking at. i think it would be helpful for us to understand why you got to the point of proposing that we take a new look at a type of ammunition that had been exempted for a period of time. it is used in a different way today. that is the reason for the re-look, correct? director jones: it is important to remember that this framework requires additional exempted's. the classification for that particular round which is military surplus, which is 55.56, steel core, following into the parameters as armor piercing was

given, and it has had an exemption for 30 years. it has been on the market for that long. it has been available to folks for 30 years or more. i think the challenge for us, separate and apart from how do we create exemptions going forward and he given recent experience, it is probably not going to happen anytime soon come is the evolution of firearms technology and some of the platforms assault rifle-based platforms that have evolved over those 30 years in the capabilities of those and conceal ability of those, and in fact some of them that would qualify as pistol platforms create some challenges for us. now, i do believe that this is going to take work across the board, that this is not going to be something that atf loan is going to do through a regulatory process.

is absolutely critical to officers' safety. if you pay attention to some of the challenges there the handgun phenomena the crime gun phenomena, primarily pistol phenomenal but as we see more of the firm arms being classified as pistols that could be used as any 5.56 round, it is a challenge for officer safety public safety. bottom line -- you all have an opportunity maybe to have a discussion that we would gladly help you with, because it was passed in 1986 and a lot has happened in the last 30 years. senator murphy: i appreciate the answer. i point out that the genesis of the law, just to remind folks. this was bipartisan at the outset, and as we perfect it and as you mention this will

contemplate a something far more types of imitation, that it involves prohibiting that we should remembered the bipartisan spirit in which we'd begin this effort, and hopefully we can regain that. thank you very much. senator shelby: senator capito? senator mikulski: i did not know when you were leaving. i think there's a real bipartisan interest due this committee ground this issue. doj is supposed to give me -- not me, excuse a -- that was the old days -- the committee -- [laughter] senator mikulski: a report, an interim report. when begin that, we will have a staff briefing, so we can all be up to date and really have a concerted effort in it. i just wanted to say that. senator capito: i apologize for missing your testimony.

of what it make sure got here, but i thank you for your service. i appreciated very much. director comey we are proud by the work that the fbi facility in hartford does. over the years biometrics has been a exceedingly useful to the fbi as partners in a law enforcement and intelligence community. not only to intend to kate identity, -- to authenticate that you say who you are come up to figure out who someone is by either a fingerprint on a murder weapon one or a bomb. typically by scanning a database of records for a match. it is been a leader for information in decades him and the fbi has been send it text appears hundreds of millions of dollars by defray the cost of running and modernizing its fingerprint repository. but this budget seems to jeopardize those efforts. includes an offset of $120

million for this function. director comey, and you tell the people on this committee what the impact would be and how this reduction could affect fbi's ability to invest in the latest biometric technology, including facial recognition iris scans and dna, to name a few? director comey: thank you. during my opening statement i was bragging about my folks because they are hidden gem in the fbi, and i believe they are the frame upon which hangs all of law enforcement. the information we share identities we share, dna -- all of it goes through that great facility, and i'm excited we're going to open very shortly biometrics facility with dod that will make this country safer. so i told them when i visited them, as if people do not know how cool you are here in west virginia, and that is part of the testament to the quality of your work. you do it so well that everybody takes it for granted. her excited about -- very

excited about. the answer is i do not think it will have an impact. there is an offset in the budget that is about -- additional moneys that came for fee from service. the statute restricts use of those funds, and i am looking for ways in which these inconsistent with the law. my understanding is this 120 $5 million, the loss of that will not affect next-generation identification. even if we are unable to, it will not affect the rest of the work. senator capito: that is good, because the modernization is something that is ongoing. we are pleased to have these folks in the fbi in oxford paid has been a wonderful addition to our community and we know how

great it is out there, too. i appreciate that. i would like to ask director jones a question because we also have a facility in west virginia. there is an aspect of the budget which i'm pleased about and would like to ask you regarding the investment of the proposed atf tracing facility in martinsburg. i think this would be an app of the occasion of what is already existing, but you are requesting an 8.1 million dollars increase for the facility for a mixer personnel and equipment software upgrades. and you discuss the work being done at the tracing center there, and white is increase would be justified? director jones: i love our facility in west virginia because it does such critical work to what we do. we had our national firearms branch there that processes the ever-increasing number of requests for nfa licenses.

that has been driven by silencers. we have almost 250,000 requests last year. that a $.1 million will do two things. it will allow us to add permanently 10 or more legal instrument examiners that are crucial to processing n thefa and we are progress -- we're making progress on cutting down the time, and it will give us money for contractors, because have of our workforce in martinsburg is contract there's that not only do nfa licensing but the crime gun tracing, and we have a violent crime branch technology branches out there. that is kind of the heart of our gun work at atf is out there in that martinsburg facility. senator capito: that is good news, and i will be supportive of that. i would ask -- make a quick comment because i missed the discussion on herrelloin, and i

am assuming that is a reflection of the rise in herrelloin, younger people being affected. even a state like estrogen yet, this is having some devastating effects. and i certainly would love to be a part of some preventive measures, either at the supply or demand side to try to stop what we see happening and destroying lives all across this country. i want to be supportive of those efforts. thank you. senator shelby: senator shaheen? senator shaheen: thank you very much for your service and for being here. i guess i want to start with administrator leonhart, because i want to follow up on senator capito's comments, about thate h

eroin epidemic. we have been seeing it in new england. in new hampshire in the last 10 years, we have seen people admitted to state treatment programs increase 90% for heroin use, 500 percent for prescription drug use, so it is truly an epidemic. one police chief said if we have somebody shooting up at 2:00 in the parking lot in target in bedford we know we have a problem. we have a problem. what i am interested in is not which lanes people are in. i am interested in what coordination is going on between agencies, and specifically, one of the things i have done a series of roundtables meeting with law enforcement, treatment officials and the medical

community in you have to because one of the things that we have heard is that the heroin abuse is the result of prescription drug abuse. and that one place where there is a breakdown in how we address this issue has to do with prescribing. and the medical community needs to be very involved in that discussion. and as far as i can tell at the national level we are not doing as much as we should be doing. so can i ask you, or anyone on the panel, i suppose but what are you doing to coordinate the efforts that your agency is engaging in, and how are you getting out information about those activities to local communities, the availability of grant moneys, what resources are available in local communities?

ms. leonhart: with the exploding prescription drug problem what follows is a heroin problem. what we have done and have done very well with our state and local partners in the northeast is form -- we have got tactical divers and squads of -- tactical diversion squads and officers and they become the teams that are responsible for not only did prescription drug problem, but also that rise in heroin abuse in those communities. senator shaheen: are you working with the medical community and with the medical colleges around the whole prescribing challenge, because one of the issues is that doctors are not given it a

lot of guidance because it is a variable issue depending on the disease on the individual. ms. leonhart: that is correct. it is the one drug problem that is not just about law enforcement. there are a number of efforts. we had been at the table with medical professionals. we have gone out, we have at seminars, we have worked with our u.s. attorneys to bring the medical community, the law enforcement community treatment, prevention people together. a number of those have actually occurred in the northeast. but overprescribing is one of the major problems, and in our working with hhs the lanes for doctored education falls with them. however, we have all partnered together and have put on -- we have offer training, and we have

gone out to schools -- senator shaheen: how has that then reflected in your budget, as you let at the priorities in addressing the issue? how would you rate the enforcement side versus the prevention and outreach efforts you are doing? ms. leonhart: thank you for bringing that up, because there is a piece of the budget that the subcommittee could be couple with, and that is our part of the budget that handles divers and control. with that budget, it will allow us to continue to do outreach. part of that is working with medical association, getting the word out. we put a number of things on our website. we give them training manuals, a number of things. the budget for 2016, if we were to get that money, that will allow us to continue that outreach as well as bring 50

additional diversion investigators into the program. enforcement is just one piece. we feel the public outreach is very important and with our 66 die version -- diversion squads around the country, allowing additional resources to be able to go out and reach the medical community is one of our priorities. senator shaheen: thank you. senator shelby: senator baldwin? senator baldwin: thank you to our panel of witnesses for your service and commitment of the men and women you lead. i want to follow in right on this line of questioning with administrator leonhart. reports indicate the dea is investigating drug diversion from a veterans affairs medical

facility in wisconsin, which is also this facility is also the subject of a broader v.a. investigation into opioid and other prescribing practices at the medical facility. of course, the v.a. is itself a federal agency. and the possibility that elicit drug use -- illicit drug use and sale may be financed by the federal government is extremely troubling. i look forward to your discussion of the investigation in the close session, but i have questions related to this session. as the dea identified v.a.

medical facilities as a potential source of illicit opioid drug distribution? ms. leonhart: i am not in this setting not going to be able to talk specifically about -- but i will say in general that we are concerned with any medical facility that is contributing to diversion and interesting to prescription drug abuse. we had the other 30's. -- we have the authorities. we have regulatory authorities and administrators that we have used and will use, whether it is a v.a. facility or not. we share your concerns especially when this is regarding our treatment for our veterans. senator baldwin: you noted in your testimony that prescription drug abuse and particularly prescription of opioids has become a national crisis. the cdc has reported that more

than 16,000 people died using prescription opioids and that is about 37% of all drug overdose deaths in the united states during the calendar year 2013. experts see a direct connection between this and the increase in heroin use an overdose deaths. we have heard some of my colleagues cite local numbers and tragedies in this regard in wisconsin and in milwaukee county. we saw 72% increase in heroin -related deaths from 2013 to 2014, one year. so i know you have been asked this in many different ways, but what is your overall strategy, your overarching strategy that

we need to know about for cracking down on prescription drug diversion and heroine abuse abuse, and does your request has sufficient funding to meaningfully address this? ms. leonhart: thank you senator. yes, if you support the budget request, it will allow us to continue at the dea to prioritize heroin and prescription drug abuse. we cannot separate the two. you're absolutely correct, that the prescription drug use has led to a heroin epidemic. the funds that we are asking for in the 2016 budget allows to do a number of things. one is continue expansion of our tactical diversion squads. those are the squads that are going to be able to go in to immunities, but we have actually started to move these out into smaller cities in pockets of

the country that has had severe prescription drug problems. we are working on those problems and also able to both on our divers and sigh -- diversion side and enforcement side working on these areas and working with our state and local partners or other federal partners, take off those distribution organizations. at the same time, with our diversion control personnel, we are using them to use every tool we have got in the toolbox regulatory authority administrative authority. we have pumped up the regulatory side to make sure they are doing cyclical investigations, and we are focusing on the entire strea m. so from the manufacturers to the distributors pharmacies,

doctors, you name it. a piece of that we are also concentrating on is educating the public. there are certain tools that doctors should be using, pharmacists -- it is important for them. we now have 49 states that have either past laws for pdmp's, and we understand in missouri, the last state, has just passed or there is a bill being looked at. using every tool to include disposal getting the drugs out of the medicine cabinet has been very important in this fight. it is not just enforcement. it is not just the outreach. it is hitting at each and every level to be able to take care of the prescription drug problem and we have seen over the last

year, year and a half, it level off, but the herald -- heroin problem continues to rise. the majority of the heroin that is hitting the streets is coming from mexico, and it is being trafficked by the same organizations that are bringing coke, mess, marijuana, you name it to your communities. these are the same organizations , and we have partnered with their partners in mexico who now have done over the last year, have taken a look at the heroin problems they see the role they play, and we have done some very good work together with them to focus on the problem. senator shelby: thank you. senator coopns? senator coons: i would like to say how grateful i am for your focus. widely a veritable -- widely

available heroin is killing people in wilmington, delaware. it is touching all backgrounds all income levels, all communities, and we are eager to work in partnership with you and with all of federal law enforcement in finding more effective models for diversion treatment, and prosecution of the crimes. it is something that is a significant challenge for our community, as it is from baltimore to miami to wisconsin, all over our country. we're seeing a smith shift from the prescription drug epidemic into -- we are seeing a significant shift in the prescription drug epidemic into heroin. the first cities participating ok oakland, and i'm grateful to talk to about it.

the program is newly engaged in the work in wilmington despite are fairly small side relative to detroit and chicago. wilmington has one of the highest rates of violent crime and murder in the last three years, and a newly energized mayoral and policed -- mayor and police chief are tackling this challenge effectively. i would love to hear from each of you, and i will invite you to start, director jones what you're hearing about progress in willington what you think are the resources challenges that might remain and if you have input on me on what will be critical to turning the corner? reports i am hearing so far about the federal role is earned positive, so my input is to say thank you for the resources being delivered the advice, mentorship, and guidance to my hometown. but if there are other things i need to hear or things we can do to strengthen this that were, i would appreciate hearing it. director jones: it will give us

an opportunity to enhance the collaborative effort, and i think in wilmington, delaware, and i have been up there, i have met with president agent -- resident agents. we are we are starting to see the results when we have groups like in wilmington that have been working for a long time in single digits and enhanced task force officers are barely holding it together to actually give new atf ages of that. one is partnering with the police department to make sure that when there are shooting incidents that we are on them very fast and following leads to identify the trigger pullers. the other aspect of what we have had some success, not only in wilmington but up and down the

eastern seaboard, is the traffickers, and the iron highflying up i-95 where there are guns available in some source states that travel up, and wilmington is along the pipeline to do what we can to disrupt the firearms trafficking networks. we have had some success recently in wilmington with people who are essentially unlicensed dealers, for lack of a better term. so that effort, focusing on crime, gun, draining the crime gun, pool, and training folks so it is sustainable really is the short-term focus of our efforts. senator coons: i hear that all his have been making a difference and i am grateful for

your personal engagement. i've relatively little time left . if any of the three of you would like to contribute, i would appreciate it. director comey: senator scott hope you know in our wilmington office we have a 22-member file it gang task force that is part of the violence reduction network effort. we are focused as director jones said, focused on the trigger pullers who are part of these neighborhood-based gangs not national gangs, but thugs who are in a particular neighborhood. we're trying to be strategic and focus on those and rip them out of the community with the hope that good people fill in the space. it is too early for me to be able to tell you what success we've had, but is something we watch cosi. senator coons: the cdc has completed a thorough review of the data set from a public health perspective as well as from a criminal justice perspective of who is the

universe of folks who are committing violent crimes, what is their background, what interactions do they have with education, health care, but a fascinating data set that the governor and i set down through lunch the other day. if the director wants to offer one more answer? director hylton: we have an operation ongoing now that is born out of that effort, and we are particularly focus on the larger cities of the tri-city area, and we are operating out of camden, philadelphia, and wilmington. after one week of the separation, we have over -- this operation, we have over 664 file it criminals arrested, with 89 gang members sex offenders, but there been 48 of them that are related to homicide arrests also. we work to bring those warrants income and we are able to share

information across the investigative agencies. the earlier questions of how we interface with each other, that is the work we push out back and forth to each other. 27 firearms, 1.86 kilograms of narcotics, and currency, and that is part of dismantling some of these organized criminals that are opportunists that are seeking to push drugs out and across. i think that collective work is really starting to prove beneficial. we are focused on attacking that corridors that run. camden can put out 400 office, but it only pushes it down to wilmington. we're focusing on the smaller law-enforcement agencies to bolster them on reviewing the fugitives. thank you. senator coons: we are grateful for your partnership and support. senator shelby: thank you senator coons.

i have a couple of questions that i would submit to the record. i will submit them for the record and ask you to hopefully get them back to us within 30 days. senator mikulski? senator mikulski: thank you. i know we will go to the classified hearing. and i too have questions for the record. i want to say again to the men and women who worked at these wonderful agents is, i want to thank them not only for the service we do, but we want to thank them that there are people in the united states america who want to do this work. who really want to do this work. and we own them a debt of gratitude, and therefore, my comments about lifting domestic budget caps, it is not political grandstanding, that if we are going to lift the caps to defend

america, there's a lot of defense right here in our country for our communities. the second thing is the issues of the appropriations committee were related to hiring and sustaining the people we hire. the last point is technology. i am proud of the labs and other technology uses we make in their agencies. i think really about 9/11 and that the maryland state troopers stopped one of the terrorists. at that time the databases were so's skimpy, we knew more about a dead heat dad than someone who was planning this horrific attack. and we look at the beltway snipers, when this whole community came to a standstill, when somebody who worked at the fbi and the supportive service was coming out of home depot and killed the whole community stopped. because of the lab, we did not

know if it was terrorism, if they were multiple killers but thanks to this lab and the way we could work with the fbi we will able to have local law enforcement in charge and we were able to be able to catch the people of these terrible acts. i could go to each and everyone what you do is amazing, and we need to support you, and i look forward to doing it. senator shelby: senator shaheen? senator shaheen: i would like to follow up on something that was said because i was just hearing any armed services committee with the general who is the head of southern command and one of the things he was talking about was their works to interdict drugs coming into central america and mexico. and the impact that additional sequestration caps are going to have on their ability to continue with that interdiction and support those countries in

central america that are trying -- and mexico -- that are trying to address this effort. i think it is important for us recognize that that is going to have a huge impact on the efforts that we are not just -- if those cuts go forward, the impact on the national security side because of the drugs coming income up at that one have an impact on the work that you are trying to do, that all of your tried to do. if we can address and rollback does cuts from sequestration. i thought it was important, mr. chairman to point out that this has huge domestic potential impact. thank you. senator shelby: thank you. i think the witnesses. we will not temporarily recess and reconvene in the closed session as soon as we can get back over to the capitol. the committee is in recess. [captions copyright national cable satellite corp. 2015]

[captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> president obama is in phoenix visiting veterans hospital that triggered a widespread investigation into mismanagement of the a facilities and workers were falsified waiting lists to delay care. the president and the v.a. segregate meet with veterans groups. "the hill" supports the president will create a new advisory committee so it can meet the needs of current and former service members. >> c-span is in new hampshire for road to the white house coverage of several republican candidates.

tonight live on c-span, we will take you to a partny with jeb bush. on saturday, scott walker and republican party grassroots workshop. sunday night at 9:35, senator ted cruz. road to the white house 2016 on c-span. here are some of our programs for this weekend. saturday at 1:00, "book tv" is live from the university of arizona for the tucson festival of books. sunday at 1:00 we continue coverage of the festival with panels on the obama administration future of politics and the issue of

concussions in football. saturday morning at 9:00, on c-span3, we are live from farm bill, virginia, for a civil war seminar, talking about the closing weeks of the civil war in 1865. sunday morning we continue live coverage on the seminar with remarks on the surrender of the confederacy. find our complete television schedule at www.c-span.org and let us know what you think about the programs you are watching. call us, e-mail us,l or send us a tweet. join the c-span conversation. like us on facebook. follow us on twitter. >> the senate finance committee examined some of the latest scams being used during the tax filing season. lateral, state, and local law enforcement officials discuss their efforts to protect consumers and measures that can be taken. the committee is chaired by

orrin hatch. this is an hour and a half. senator hatch: the committee will come to order. criminal acts are perpetrated by thieves hiding behind telephone lines and computers preying on honest taxpayers and robbing the treasury of tens of billions of dollars. we're here to the day to hear from officials on the frontlines of the fight to catch these crooks and protect taxpayers. i want to talk about one case in particular. and one very large number, by the way. this is a hearing that is long

overdue as far as i'm concerned. we will get into it. i have to apologize. senator wyden is not here yet, but he is coming. in this town, and especially right here on this committee, we often talk in terms of hundreds of millions, billions, or even trillions of dollars. some joke about a number being referred to as budget dust, even if that number has nine or 10 zeros behind it. let me tell you about a number that is stunning, $15,800. that $15,800 saved through hard work, sacrifice, and honest living. that is saved for the down payment of a new house for a growing family. that is $15,800 in savings that has been wiped away by criminals who use fear, confusion, and intimidation as their weapons.

this is a story of a family from taylorsville, utah. i would like to play a clip of a utah affiliate who tells their story. can we do that? [video clip] >> these crooks have gotten a lot more sophisticated and a lot more aggressive. this family learned that the hard way, one week ago. brendan and melissa dagen are excited for christmas but only have a few christmas presents under the tree. on december 5 melissa got a phone call saying she owed taxes from 2009 and was about to be arrested. melissa: i was like, what can i do to fix this? i can't be arrested. i have no one to watch my kids and they would not let me get off the phone. anchor: another scammer was calling her phone with the bogus caller i.d. -- 911. melissa was convinced they were

on the way and withdrew $15,800 which he used to buy prepaid cards and gave the code numbers to the thieves. that money was gone before she realized she had been victimized. melissa: i have not been able to stop crying. i cannot eat. i am sick to my stomach, embarrassed, just lost that all of this money we were trying to save for a down payment on a home -- because we need a bigger home to take care of three kids -- and my heart has been totally ripped open because of this. anchor: the story is too familiar to lieutenant hoyle of the unified police department which is investigating dozens of these cases. lieutenant: they suspects are demanding people pay and get prepaid debit cards, and they are telling them they have outstanding warrants for the arrest. anchor: for the record, neither the irs or police collect payments over the phone.

melissa wishes she knew that a week ago and has a message for the people who did this. melissa: i forgive you, but it is sick and wrong and i do not have they can live with themselves. i do not know how they can make phone calls and hurt people. not any time of the year, but especially during christmas. anchor: melissa's cousin has started a go fund me page where they can recoup some of those losses. friends and total strangers are giving whatever they can to melissa and brendan's fund to help this family recover. we have put a link to melissa and brendan's go find me page on our website, goodforutah.com. at last check it has raised more than $4000. senator hatch: that is one family out of millions of that have been targeted and thousands victimized. this is one scam. make no mistake, taxpayers across the country are facing identity theft in record numbers.

account takers -- account takeovers and other criminal attacks. once again, we have to stop this. taxpayers must be more aware of the risks and better protected from attack. these criminals must be found and brought to justice. i look forward to the testimony of eyewitnesses on today's panel. we will be hearing more about how to accomplish these goals. let me turn the time over to senator wyden. senator wyden: thank you chairman. i appreciate the chance to talk and work on these issues in a bipartisan way. since the days the irs opened its doors, scam artists have been hatching up slick new ways of stealing taxpayer dollars from the treasury. what is new is that the ripoff artists are now stealing americans' identities and personally threatening them on an industrial scale while directly robbing them of their hard-earned money. the fraudsters are constantly

dreaming up new tactics, and then they milk them for all they are worth before they start getting caught. then it is lather, rinse, and repeat. on to the next scam, always one step ahead of the law. today, the committee will examine several of the fraudsters' latest strategies that are plaguing taxpayers. the one that is hitting oregonians hardest is the fake phone call demanding money or personal information on behalf of the irs. in fact, these calls were the number one consumer complaint registered with the oregon department of justice just last year. not everybody knows that the irs simply does not cold call individuals making demands or threats. it is pretty clear from my vantage point there is a lot

more work to be done to defeat this scourge. given the sophistication of this criminal activity and the fact that a lot of it comes from overseas, this sure looks to me like an emerging type of organized crime. so the real question is, what is it going to take to root it out and get the bad actors on the sidelines? what is the role for more prosecutions, stronger deterrence, more cops on the beat? and what is the best way of getting the word out so taxpayers are not tricked into surrendering their life savings to some intimidating voice on the other end of the phone line? even if our people managed to avoid the phone calls, you can bet that the crooks find other ways to profit. tax preparation software has become the scammer's new fast lane.

these sharks manage to acquire data from the black market or hack into commercial databases and then they filed false returns electronically. the victims may not find out until too late. there have been thousands of reports of this in 2015. we will hear some software vendors are not doing enough to prevent fraud. in my view, part of the challenge is getting the states, internet tax services, and irs on the same wavelength. they have to work together to make sure the criminals cannot just in a nimble fashion slide from one jurisdiction to the next, as they rip off more unsuspecting americans. some taxpayers may choose to avoid the software, but not even a paid tax preparer is guaranteed to be safe.

in fact, many of them do not meet any standards for competence. there are far too many of these con artists out there who are willing and able to prey on the people who come through their doors. in some of the most offensive cases, they secretly falsify their victims' returns to boost the refunds and then they pocket the difference. once the tax season ends, the crooks disappear from storefronts they occupy and there is no trace on where they have gone. a few states like mine have rules in place to help shield the taxpayer from this kind of ripoff. most states do not. so senator cardin and i have introduced a taxpayer protection and preparer proficiency act at the beginning of this congress to give all americans the security they deserve. our colleague senator nelson is also a leader on this issue of keeping taxpayers safe from identity theft and fraud. all of us wish, as i indicated to chairman hatch, to work on

this in a bipartisan way. the bottom line is there is no end to the ingenuity of the con artist, so my hope is that we will get some fresh ideas for catching up to this wave of fraud and stopping it. obviously, it cannot come soon enough. we have got a distinguished panel here today. i'm especially pleased that the director of consumer outreach and education in the oregon attorney general's office is here. thank you to all eyewitnesses. i look for to working with you on a bipartisan way. senator hatch: our first witness is attorney general caroline cirillo of the tax division of the u.s. department of justice. she was appointed attorney general of planning and policy of the tax division in january of this year. prior to that, she was chair of the tax and litigation group in baltimore.

we welcome you to the committee and look forward to hearing your testimony. ms. ciraolo: thank you. chairman, members of the committee, thank you for the opportunity to appear but are you to discuss the department of justice efforts to combat identity that and tax refund fraud. the department greatly appreciates the commitment that the committee has brought to this very important issue. combating the theft of personal information to file fraudulent tax refund claims is a problem >> is a top priority of offices across the country. your efforts to bring attention to this growing crime will help educate taxpayers about the importance of detecting and reporting identity theft and fraud. today's hearing also sends a strong message that the government is determined to identify and prosecute the individuals behind these

schemes and in doing so, will bring all its resources to bear. the department tax division, which i have the privilege of leading as acting assistant attorney general, has one purpose, to enforce the nation's tax laws fully, fairly, and consistently through civil litigation and criminal prosecutions. our close working relationships with irs criminal investigation, tigda, the fbi, the u.s. postal service, and local law enforcement partners continue to attend the government possibility to respond quickly, efficiently and forcefully to changing patterns of criminal conduct. stolen identity refund fraud, or surf, is an example of this type of challenge. in surf crimes, they filed a

false refund claim and have the refunds of electronically deposited to a bank account or mailed to an address where the wrongdoer can access a check. surf crimes often involve multiple vendors who have access to databases with large volumes of personal information. surf crimes hit vulnerable members of our society. these include, and are not limited to, the elderly, the hospitalized, students and members of our military deployed overseas. while the irs will make good on any refund due to the taxpayer there are inevitable burdens and delays while the matter is addressed. the victims often experience a profound sense of violation. moreover, we are all victimized by loss in the u.s. treasury.

to this end, the tax division expedites the review procedures surf cases. the authority to initiate tax related jury investigation and to charge those involved in complete without prior authorization. the collaborative efforts of the tax division and the law enforcement partners have strengthened the response to the crime. through december 31, 2014, they prosecuted over 1400 individuals and courts are imposing substantial sentences. to further leverage from its investigation, in february, the assistant attorney general created a sirf advisory board. the board works to develop and implement a national strategy to ensure consistent and infected

-- effective nationwide and prosecution of sirf crimes. for example, they conduct sessions for fraud analyst, they provide training and resources to prosecutors across the country. it works with u.s. attorney offices to develop local task forces. these initiatives enable prosecutors and law enforcement agencies to work together to identify schemes and to pursue the most culpable offenders. while providing the irs with real-time information that can be used to improve its filters and stop the issuance of fraudulent refunds. the prosecution of sirf crimes is a national priority, and together with our law enforcement partners, we will continue to look for the most effective ways to punish the offenders and bring this conduct to an end. thank you again for this opportunity to provide the department's perspective on this issue. i look forward to answering any

questions you may have. chairman: thank you so much. our next witness is timothy camas, the deputy inspector general at the treasury. mr. camus has served at the inspection service for over 23 years. he has a long career of having successfully investigated cases of domestic terrorism, bribery and fraud. we certainly welcome you and we look forward to taking your testimony at this time.

treasury secretary camus: thank you for the opportunity to testify on the topic of the tax schemes and scams during the 2015 filing season. by raising public awareness about criminals efforts to swindle honest americans out of their money, we may provide the next person from becoming a victim, which is a very good thing. each year, the irs compiles what it sees as the dirty dozen tax scams on its website. many of these schemes take during the filing season as people repair returns or utilize the service of paid preparers. my statement today briefly outlines the top schemes and scams currently affecting taxpayers as they have proven to be surprisingly effective ways to steal money, in many cases before the victim realize they have been scammed. the first scams, the phone impersonation scam which landed on the top of the dirty dozen list. it is the largest and most pervasive impersonation scam we are aware of. it has claimed thousands of victims. here's how it works. the intended victim receives an unsolicited phone call from a person claimed to be an irs agent.

the caller, using a fake name, and tells the victim a made up badge number. the callers may know the last four digits of the victim's social security number. they say that if they fail to pay, they could be arrested, or could lose their drivers license, or be arrested. i received one of these calls at my home on a saturday. tigda has received many reports of these calls averaging between 9000 and 10,000 calls coming to my agency. as of march 9, 2015, over 3000 individuals have been victimized by this by paying a total of $15.5 million for an average of $5,000 per victim. the highest reported lost by one individual was a staggering $500,000. in one particularly sad story, a member of this committee forwarded a letter to us from a constituent whose close

relatives suffered a tragic death after receiving harassing phone calls from this. to help taxpayers, we are reaching out to the media, irs national trade commission, and providing testimony to this type of abuse and to prevent vulnerable individuals from becoming victimized. anotehr scam involves the story the victim has won the lottery. this is a continuation of an old scam and starts with an e-mail or telephone call out of the blue, declaring that the victim has want a lottery. -- won the lottery.

in order to declare the winnings, they must first pay the tax to the irs. the lottery scam often, but not always, originates from outside of the united states. in the end, the victims pay the money, but they never received any lottery winnings. just as serious as these scams the risk of taxpayer refund identity theft. the irs has made improvements in identification of identity theft returns before fraudulent tax refunds are released. continued attention is needed to effectively combat this crime. for example, the irs still does not have timely access to third-party income and withholding information. most of the third-party information is not received by the irs until well after the taxpayers begin filing returns. the deadline for most information returns with irs is march 31. yet, taxpayers begin filing returns, this year, on january 20. this gap in time prevents the irs from conducting validity checks. legislation would be needed to accelerate the filing of the information returns. the irs has taken steps to effectively prevent the filing of identity theft tax returns by locking the tax accounts of deceased individuals to prevent others from filing returns using the departed's name social

-- name or social security number. for 2014, the irs rejected over 338,008 file returns and stopped paper returns through the use of these locks. just 11 days after the filing season this year began, the irs reported that it had prevented the issuance of more than $2 million in fraudulent refund -- refunds as a result of filters. other schemes, such as prisoner fraud, tax preparers, and

phishing scams, are discussed in depth in my written testimony. much work is being done on multiple fronts to address real activities. we hope this work will reduce or eliminate their impact on taxpayers. chairman hatch, thank you for the opportunity to share my views. i look forward to questions. chairman hatch: thank you so much. i will turn briefly to introduce our next speaker. senator coats: thank you very much. thank you to the leadership of mike pence and our department of revenue. they developed a plan that stopped $88 million in attempted identity theft in the last filing season. this involves 78,000 fraudulent returns in 12% of all the refund dollars that were requested. the cost to that, as mr. aly will explain, he cost the state $8 million. the return of the investment was $88 million. compared with some of the things we do around here, which is usually the opposite, spend 88 and got eight back. we are currently bringing the needed changes to our state.

the commissioner brings a wealth of private sector experiences, he has worked for decades in the banking industry. he is a cpa, he has started businesses, so he understands firsthand how important customer service is for the department of revenue. chairman, i thank you for inviting him to testify and look forward to his testimony. chairman: thank you for inviting me to discuss this important topic with you today. mr. alley: on behalf of governor pence and the citizens of indiana, it is our honor to be here and share our story. i would like to share the points with you today. first, the nature of the problem and overall breadth.

we want to discuss the steps indiana has taken, recommendations to fully and effectively address this epidemic problem. tax refund fraud is one of the most lucrative platforms for criminals to monetize the volume of stolen identity information. the advent of electronic filing and processing, that has only enhance the ability for us to file large volumes of fraudulent returns at nominal cost. as senator coats indicated, in 2014, 12% of the total refund dollars that were requested from indiana were thought to be fraudulent. fortunately, we were able to stop them. it represented 78,000 fraudulent returns that we stopped that contained manufactured or stolen ids. again, we saved the state $88 million in the process. it is still early in the 2015 filing season. we are already seeing a dramatic increase in the use of valid ids, which have been stolen. with the increase of the reported successful hacks across the united states of u.s. companies, we believe the availability of valid stolen ids has never been greater.

the fraudsters have clearly upped their game and we must do the same. in 2012, we realized we were suffering losses from refund fraud. accordingly, we worked with governor pence and his team to effectively identify a program that we could begin building. we knew that we needed to take significant, systemic modifications and we needed to do it before the next filing season. our staff reached out to states through the federation of tax administrators and also our partners at the irs, to see if there were some ideas we could borrow and implement rapidly. the response was very supportive and we noted partial solutions and fragmented efforts across the group. with strong support from governor pence, we initiated a pilot program to screen all returns for suspicious identities. this program used lexis-nexis, a third-party vendor, to screen returns and note identity theft information such as name address, social security information, and other

identifiers. we would tell the ones that proved to be suspicious and sent a confirmation letter to have them confirm identities. again, this had a dramatic impact in our ability to recognize fraudulent identities and stop those refunds. the identity confirmation quiz is only part of a larger process. it became very clear in the beginning that the department would need to make some systemic changes by making significant investment in both staff technology, and further, we needed to change our approach to how we deal with fraud. for the '15 filing season, we have implemented new pre-filter platforms and matrix that include decision-makers that will allow us to better identify those valid ids. we have also defined great expectations from our certified software vendors as to the information they will provide to us and the level of fraud they send our way. we are still battling this

problem, but a few key lessons have been learned. first, it must be a strategic priority. identity theft and refund fraud is here to stay away to address it. it requires a fiscal investment in leadership, staff technology, and third-party resources. second, collaboration. no one has all the answers and we cannot solve this problem by ourselves. sharing data, best practices experiences, among all the revenue agencies across the states as well as the federal and software vendors, is going to be important. having access and ability to communicate on a timely basis is critical. we have got to develop targeted solutions. fraudsters will continue to change approaches and we have got to stay ahead. finally, note that prepaid debit cards is an issue that needs to be addressed. it is a preferred tool of fraudsters in receiving refunds. we found that over 50% of those returns with prepaid of the cards are fraudulent. in terms of some recommendations on things we can do, we consider that the solution really

encompasses a three-legged stool concept, in that the state, the irs, and the software vendor make up each leg. each has unique data perspectives, and capabilities that the system requires in order to make better decisions. the irs is in a great position to help us manage highly sophisticated fraud. states must work together. finally, software vendors also have the information and can be helpful in providing and sharing their intelligence. in conclusion, i just want to summarize that the problem is here to stay and we've got to address it. secondly, collaboration and sharing of information among the irs and state, reducing some barriers. anonymous aggregate information is critical. third, we have to make investments. we made an investment that yielded a 10 times return. i am confident that providing continuing investment is the only way to get out ahead of this and beat it. on behalf of the citizens of indiana, thank you for allowing

us to share our story. i look forward to trying to answer any questions you may have, and thank you for allowing us to be here. chairman hatch: thank you, we appreciate you making an effort to be here. our next witness is commission chair john valentine with the united states tax commission. chairman valentine was a member of the state senate where he served with distinction until 1988 until his commission as the tax commission chair in 2014. before that he was in the utah house of representatives and was an attorney in private practice. chairman valentine, we are grateful you have taken time out of your schedule to be with us today. and for joining the hearing this morning.

mr. valentine: thank you chairman hatch. and ranking member wyden, thank you very much. i'm here to discuss ways to reduce the tax frauds that we are seeing develop. there are issues you need to consider. number one, strength and information sharing between the irs and states. number two, stricter regulation of the financial prepaid debit cards. number three, regulate the practice of applying refunds to payment of fees for filing services. a practice in the industry called refund transfers. and finally, number four, a third-party funding services tightening front insecurity using multifactor authentication and other measures to secure data from unauthorized disclosure and identity theft.

prior to the commencement of the 2015 filing season, utah installed a state of the art software system to identify fraudulent returns. on january 20, the utah tax commission open filing of tax returns deployed the system. as we processed returns, the system started sending out error notices saying these were fraudulent. we followed up with verification letters of the suspicious returns to the taxpayers. within 10 days of opening the filing season we received calls from taxpayers saying we have not filed returns yet. we initially thought these were isolated incidences, but it was clear they were not. we found several factors that were common in all of the calls. one, the returns had the direct deposit information changed from previous year's bank account to a debit card.

two, the returns contained routing numbers that were different from the federal and state returns. three, most of the returns appear to have the exact 2013 return data populated in the 2014 return. the next issue that was common with the address on the returns that was the same as the address on the 2013, even when there were errors in the address. finally, since most were made through one vendor, it appears something in their process was compromised. after communicating with that vendor, and notifying other states of what we were finding we talked with the internal revenue service saying we think there may be a compromise of the mef, that's the modernized electronic finance system. the accounts in question that we identified were sent to the service center. 31 returns in the first week were confirmed suspicious.

we asked in a phone conversation to confirm on their side, we are waiting to hear from them. many have asked what actions were undertaken when we discovered the attack. in short, we hurried. we stopped refunds until we could get our arms around it. during the first week we found 5 fraud schemes. four which were ones we had seen before. the institutions and preparers. one was new. someone had actual tax returns. not identity thefts, but tax returns from prior years. as we continue to prevent the outflow of fraudulent refunds, we found difficulty determining the nature of the financial institution and account information. specifically, we found there was no uniformity in numbering to determine traditional debit cards from traditional bank accounts. in other words, we could not tell whether we were refunding to a prepaid debit card or funding to a legitimate bank account. there is an easy fix.

the easy fix is to require the financial industries to have identifier numbers in the routing number or account number identifying this as a prepaid debit card. we do that already with checking and savings accounts already not with prepaid debit cards. in the investigation we found a practice perpetrating fraud without anything at risk to the refund transfer. the refund transfer, here's how it works, the fraudster deducts the third-party funds from the refund. the third party gets paid, the fraudster gets the cash, the state is out the money. third-party finance services lack front end security measures. quality firewalls need to be installed by third-party

vendors, both for the irs and state tax commissions. thank you chairman and ranking member wyden. chairman hatch: finally, i welcome ellen clem. she serves as a director of consumer education and outreach at the attorney general's office working to protect oregon residents from financial scams including the scams and schemes we are working on today. we welcome you here and look forward to taking your testimony. ms. klem: thank you senator hatch and ranking member wyden. every day i hear stories from oregon residents about a wide variety of frauds and scams. these stories have focused exclusively on the irs impostor scam. that is because as senator wyden mentioned, in 2014 this scam topped oregon's list of consumer complaints. last year we received more than 1300, twice the number as the next highest category.

what's worse, the victims reported losses more than $75,000. we know from testimony presented today that that number is just the tip of the iceberg. that is why i hear today to tell you the story of two victims and to talk about what the oregon attorney general is doing to prevent this from happening to others. the first story is of a woman i will refer to as diane. in august of 2014, she lost $15,000 to an irs imposter scam. this is the largest individual loss reported to the oregon department of justice in 2014. like many victims she had a message on her answering machine from a man claiming to be from the irs directing her to call him back at a phone number with a 202 area code.

the person who answered let her an affidavit for her arrest, threatened her with a fine of $25,000, and 18 months in prison, and told her she would be arrested later that day. diane was terrified. she pleaded and begged, but the scammer said he could settle the matter for $15,000 on prepaid money cards. diane made the only choice she thought she had. she complied with the request and was out $15,000. individuals like diane, who send money to the scammers, i'm not the only victims. in september of 2014, i was contacted by marissa phillips. her employee, linda, was victim to an imposter scam. after sending a small amount of money, linda realized she had been had and did not pick up the phone.

when it was clear they would not get a hold of linda, they called marissa's small business that provides in-home care services for seniors and those with disabilities. when marissa called me a few days later, she told me the scammers called at a rate of 100 phone calls per minute for 20 minutes. the calls prevented her from providing help to those who needed it, the seniors, their families, hospitals, and staff. marissa was forced to change her phone number, and all of the marketing materials. thankfully, not everyone in oregon who receives a phone call from an irs imposter falls victim to a scam.

i would like to think that is because we are working hard to educate oregon residents. the oregon attorney general has several educational tools aimed at scam prevention, because she and i know that well-informed oregon residents are more likely to recognize fraud and less likely to become victims if they are educated. we know the scams can be hard to track and prosecute. the oregon attorney general has invested in strong partnerships with federal, state, government entities, tribes, community organizations, advocacy groups and members of the media. through these partnerships we share complaints, coordinate investigations, and disseminate investigation to the public. our partners give us a stronger voice to share information and keep oregon residents like diane, linda, and marissa safe. this concludes my testimony, again, thank you chairman hatch and senator wyden for the opportunity to share the stories.

chairman hatch: we want to thank you and the witnesses. i think a lot of people will be surprised at how this is growing. let me turn to you commissioner valentine. i want to thank you for coming back here to testify in the midst of filing season. i applaud the innovative approaches you are taking, you and other state commissioners like you and commissioner alley are taking. in your testimony you said you would like to strengthen information sharing between the irs and the states. i would appreciate it if you could elaborate a little bit more on that idea and to explain what information would be useful, and what information you could provide the irs that would be of use to them. if you have suggestions about how the finance committee could facilitate that, i would also like to have your information on that.

mr. valentine: thank you, mr. chairman, there are a couple of rub points, but as a background, we have a great working relationship with the irs, especially the ones we deal with. we share information. the trouble is it is not being shared in real time. the information is very delayed. sometimes, we are not getting information we could use to look at the returns as they are coming. one thing that the finance committee may consider is the idea of moving up the filing deadline for the w-2s for employers. as senator wyden indicated, we have a problem. as w-2s go out to the individuals on the 31st, we have them out until march 31, so we

have a two month gap. there is pressure as is the federal government to make the refunds. yet, we cannot give them the refunds without knowing for certain that the right person is getting the refund. that gap is a big problem. that would help a lot. another is for the senate and house to encourage the irs to have a more formalized sharing of information. i gave you the example of the 31 returns six weeks ago. they should have a quick response. we have identified them as fraudulent, confirmed that they had not been filed by the taxpayers, yet we do not hear back in real time. those are things that could really help. chairman hatch: thank you very much. mr. camus, let me ask you this. i want to thank you and the inspector general for all of your efforts to catch the criminals and to educate the public about these scams.

in my opening statement i showed a video about a family. the same criminals are targeting other americans. is your office doing everything in their power to track them down and stop them? can i have that commitment? mr. camus: you more than have that commitment. those who work at the tax administration are working day and night, and partnering with other law enforcement agencies as well. it hurts us when these victims are victimized as described. we instruct our agents when you hear from a victim who has lost money, we spend time with them and hear their story, and attempt to get as much information as possible. we have an aggressive ongoing investigation at this time. i hope we can describe the

success of that investigation in the near future. chairman hatch: a scam that worries me is the stolen identity refund fraud it was calculated the irs paid $5.8 billion in fraudulent refunds to identified theives in 2013. you have suggestions on how the irs can detect this type of fraud earlier and a stop fraudulent payments from going out the door? mr. camus: as was noted by the opening statements of the witnesses and committee members, one of the challenges is the criminals are watching the internal revenue service. they know one point $3.1 trillion goes through the irs, refunds.

as they irs continues to advance filters in response to the approaches, the criminals change because it is such a lucrative environment. our audit staff is looking at the filters and recommending additional and approved filters. we have seen improvement in some, but it continues to be a major challenge to keep up with a criminal enterprise. senator widen: this has been a suburb panel. thank you for the wonderful work you are doing in our state particularly for older people. i am really glad you're out there on that beat. very important. let me ask you about the question of the foreign government.

it looks as though, and you mentioned in your testimony, and it is clear that the phone scams are originating overseas. it looks to me like this is essentially an emerging form of organized crime. you are conducting an investigation, and i realize there are things you cannot say, but let's talk about the things we should look at from a policy standpoint. the question of whether we should initiate efforts in terms of work with foreign governments. and what they can do to assist us. the second, what is the rule for local law enforcement? -- role for local law enforcement? you can go after the money runners who collect the payments, in other words the ripoff artists overseas, they need money runners to collect payments. let's start with those and other opportunities. i know we have strike forces for medicaid. tell us about, and nothing will compromise your investigation, but tell us about what we can look at those give you more tools to fight the ripoff artists that have done so much damage from overseas.

mr. camus: thank you for the opportunity. the challenge when we are dealing with these attacks being launched offshore is getting our hands on these people. the relationship with various foreign governments can create issues. the problem that we are seeing is that because there has been money paid, we are seeing spinoffs of this crime. although we are focused and think we know where it originated to start, we are seeing indications that other criminals have ripped off the original idea, and are launching these types of attacks. it continues to be a challenge but i think we are onto something. it would be something we could use help on down the road, in terms of getting our hands on a foreign national and bringing them to justice in the united states for a white-collar crime.

senator wyden: without compromising the investigation can you give us an example of those problems? mr. camus: as you can imagine in the world today, not all governments are sympathetic to the united states, and they don't care about the integrity of the financial system is suffering these types of scams. that is why my agency takes these so seriously. there are those out there that do not feel bad for the united states and are not interested in helping us bring these types of criminals to justice. senator wyden: let's move onto the anthem case. this shows the industrial scale

of these ripoffs. 80 million people. cyber identity theft. they are one of the biggest health insurers in the company -- in the country, and have indicated 80 million americans may have been hacked. opening the door for fraudulent health claims and criminal enterprises that we are talking about today with identity theft, including tax fraud. a question i raised with the inspector general in the past. it seems to me that blocking this type of tax fraud, is increasingly falling on the shoulders of tax collectors, both in the irs and the state. i am interested in the panel's recommendations on what else we need to do to give you the tools to fight identity theft from cyber attacks. any of you that would like to get into it. i saw the state officials nodding their heads.

why don't we hear from indiana to keep things in the center. i like to get to the center before the far right and far left. mr. alley: thank you, senator wyden. we are seeing the impact of that. many of the steps they are taking, corporations across the country are taking, are doing more multifaceted authentication. i think many companies have not invested adequately to prepare for that and allow themselves to be vulnerable. that is one thing that corporate america, and all of us in the government level need to focus on. in terms of what we can do as a group, it goes back to the three

-legged stool. we get a lot of information that we share with each other, but it is not on a timely basis. i would like to see the irs to take a greater role in driving the standards and expectations. we have 50 states. many have taxing mechanisms. they're all doing disparate things. if we could have the irs help to bring everyone together to establish a coordinated collaborative set of standards and expectations from software vendors, financial institutions, i think that could be a great deal in bringing everyone together on the same platform. senator wyden: my time is up but that sounds too logical. we will have to pursue it.

senator thune: thank you for holding this hearing, and thank you for the panelists for being here and testifying. i think every taxpayer should feel confident knowing their information is secure when they file with the irs, and there will not be a false return fraudulently filed in their name. i think we have seen the impact that identity theft could have on a family's well-being. and hopefully we are able to move legislation forward in congress. one measure for preventing identity theft has been recommended by number of commentators, is that the irs identify information from a third party like the social security administration. i'm wondering, what are your thoughts on how much fraud that would prevent, and are there potential downsides? mr. camus? mr. camus: generally speaking, as mr.

valentine pointed out, the fact the irs does not have a w-2 and its automated system to match at the same time the taxpayer files their return, that inhibits their ability to do a simple validity check before issuing a refund. there's a great expectation to get the refunds as soon as possible. anything we can do to increase the timeliness, or two get the time the taxpayer can file the return, this year it was january 20, to jive with the time the administration has the information that is not due until march 31, that will help. senator thune: anybody else on that subject or is that shared or any downsides?

mr. valentine: there are three points that can affect the fraud issues. one on the front end. the authentication issues. the next on the discovery phase. the transfer of information back and forth between the different tax agencies. the third is the method that you pay. that is why my comments try to affect all three. any of those are helpful. in all three areas, you have a better chance of cutting down on fraud. senator thune: it has been a number of years since congress enacted a taxpayer's bill of rights. when a taxpayer has a fraudulent return filed in his name, is the recourse with the irs sufficient? mr. camus: again, our audit staff looks at that. what they can do to help the

victim. we continue to look at that and recommend changes or improvements in the program. senator thune: are there additional measures to get them the assistance they need? mr. camus: of course it is a very traumatic for the victim. any time identity is compromised they are very upset. i'm not ready to comment on where we are at, but from our auditors i understand there has been an improvement, and they work to make that experience better for the victim. mr. valentine: senator, i can tell you from the state of utah, we have a focus on that issue.

a way to process quickly without having to go through the bureaucracy. we have done that with our services division in a letter that we sent out to authenticate that the person who's calling is the right person. that type of thing may be something service could consider, as well, as a way to expedite a particular complaint of identity theft. senator thune: the recent hack on turbotax has made headlines. the reason why turbotax has experienced this, is there reason why other companies haven't? mr. alley: we have identified breaches with that one vendor and we have taken additional steps to try to mitigate, that i think we are finding in indiana it is not just them that are impacted, the fraudsters are moving with greater agility permit if they impact one and

have greater success, when those doors close, they readily moved to another set of doors. i think it is a systemic issue and it goes across the entire is -- industry. senator thiune: thank you very much. senator warner: we currently interview law saying that they don't believe that they find out that you have been the victim of identity fraud they don't even tell you as a citizen that you are a victim of that fraud. they don't notify law enforcement. so the notion whether i believe

they could do it administratively or we could write them and shake them up a little bit more, but if we can't do it administratively, one step that we could take is to make sure that the irs as a partner in this effort and identification when it comes to their attention that somebody has become a victim of identity theft that we notify them and we don't of -- and we notify law-enforcement. i think we see some nods from the panel there, and again, the numbers are huge as you pointed out in your testimony by $.8 billion in 2000 -- $5.8 billion in 2014? i was going over those numbers briefly, but some level of mandatory data breach reporting? we now have, it is a very gray and developing area when you are looking at the retail side, they

got a data breach, and we have seen countless indications of data breach, but there is no obligation, there is no standard yet when a company needs to report this information, and i think there needs to be such a standard. one of the things that we have learned from the banking committee side is that this is an area where there is a lot of finger-pointing between the retail sector and the banking and financial sector, and rather than creating another interchange battle trying to have the financial sector and the retail sector actually collaborate better, and i am going to get to a question here, it would seem to me as well and one thing that i would like the panel's comments on, is there not a way, it is her to the irs

or in collaboration with a private provider -- either to the irs or in collaboration with a private provider, this is not something that we can simply solved by government entities, we need a private sector solution, why haven't we created a single is he to use portal -- single, easy to use portal, like the story in utah, there is a place where you can at least check whether this is a real claim or not. do you all want to speak to that notion as to why we have not had the irs more active in acting in collaboration with state tax departments and others in making an easy to find site of the

private sector providers and turbotax and the others to collaborate with that one single portal? mr. valentine: one, there is the issue of the texture and two is checking that, and utah identified both of those issues by having a real-time issue of identification, and we actually tell them. we don't have the impediments of the irs in that regard. and then a filer can check if there return has been accepted to be it you go to the tax website and fill out the authentication issue, and then you can find out whether or not it has been filed. we always remind people to please check to see if your return has been filed, and if you had not filed it and it has been please take this number and call it. senator warner: again, the

disproportionate amount of fraud is at the federal level instead of the state level? mr. valentine: i would agree, it is just a matter of finding the funding -- mr. alley: i would agree, it is just a matter of finding the funding and getting together. senator warner: i know my time is up mr. chairman, but when we look at $5.8 billion in fraud, "the washington post" said we have seen a 37 times increase in fraudulent claims, we need to have that resource to fight that, and we need to have an administrative change or a legislative change by the iris to inform people that they know if there is identity theft, and i think those would be steps in the right direction. thank you.

chairman hatch: thank you so much, senator, and senator grassley is head of the subcommittee, and on behalf of senator grassley tigda has revealed how much the iris these two -- to work on child tax credit writ between $5.9 billion and $7.1 billion to the child tax credit, but both of these credits pay tax benefits before receiving any tax paid, making them prime targets for anyone wishing to engage in tax scams or fraud. at the same time, the rules governing both these credits are

complex, allowing them to be rife with human error. mr. camus how much of improper payments would you attribute to fraud or taxpayer error, and would you anticipate a significant amount as a result of fraud? mr. camus: it is clear that the fraudsters look for any opportunity whatsoever to get money, and they are ruthless in their attempt. the fact that they would use credits that are legally available to folks filing tax returns is not a foreign concept, i just don't have that information available, and i will have to try to get a response to senator grassley. mr. alley: if you would -- chairman hatch: if you would, i would like to have that response as well. senator isakson: thank you mr. chairman, thank you senator

wyden, i walked in the backdoor last weekend my wife said to listen to a voicemail, and it was precisely the call that you said, where a woman said i own a substantial amount of money and to call as quickly as i could or they would arrest me next week. being a member of this committee, i realized i was being the victim of a fraud, and i knew that number could not be real because the iris knows the edification number of all of the numbers, and i thought i should know that, but the american people don't know that. it would be good that the irs or the treasury would let american people know that these phone numbers are not part of the iris and that they was a very convincing phone call. ms. klem: thank you senator

this is very common and very upsetting when that call comes in, and this is precisely why that scam is so successful. we have counterparts at the fcc and the irs and others and we do share information like this info graphic that is in front of me right now, which is a great info graphic and i would be happy to share it with the committee about the irs imposter scam. how will the iris first contact you -- irs first contact you? by phone no, by text, no, by e-mail, no, they will mail you. senator isakson: whatever problems is we don't have a game plan to get that information out there. we have a department call the consumer finance protection

bureau which is in the business of protecting consumers, and it would seem like this would be a perfect place for them to take these stories to try to help people who are victims of business of fraud and protect them from tax fraud as well. mr. camus: yes sir senator isakson, and we have been in contact with them, and we will definitely continue this, and i will go on any television interview that we have, not because i am a ham, but because i want to spread disinformation and i am so happy about this hearing in that it will also get the word out. when you get those calls please, hang up the telephone and i really appreciate we are trying to work with that bureau.

senator isakson: i represent georgia where for bening is located and i noticed in your testimony today that a member of a medical team at fort benning stole information from a number of troops at fort benning and committed tax fraud against them. do you think that the position of these individuals in power could take advantage of this to take advantage of these individuals? ms. ciraolo: i joined the department two months ago, and i can certainly report back on whatever problems remain within the department of defense. we certainly take seriously any

allegation against members, and we are particularly focused on the vulnerability of individuals within our society, in particular are military members. senator isakson: if you would get the dod membership out there and the leaders of that as well, that would be great. ms. ciraolo: of course. senator isakson: one of the problems that exist in the united states senate is that we don't have a security bill. the pending bill that we hope will be before us soon have provisions that protect information that can flow to the government and enforce that against the tax fraudsters and would be used with cyber security. i hope that we are part of the solution and not part of the problem. the quicker we and congress enact that legislation, the more taxpayers will be safe from fraud. that is my editorial comment. chairman hatch: thank you

senator, senator casey, you are next. senator casey: i want to thank the witnesses for your testimony, your presence, and your commitment to stopping this crime, i am struck by what i have seen in pennsylvania, and this could be replicated in many states. i am just looking at a small sampling of headlines, and this is from a television station in erie, way up in the northwest corner of our stay, and the title of the news article about which they are reporting is iris scams ramp-up in werie. and over by the eastern border of our state, the iris scam is widespread, and then in my home area of northeastern pennsylvania, the iris phone scam is reaching more parts of northeastern pennsylvania. a lot of what you have heard and a lot of what you have discussed

are things that we have had direct experience with. i have a particular question to assistant attorney general cira olo, i was in the eastern side of our state and i was with the district attorney, john adams, and mr. adams kind of walked through the basic challenges of prosecutorial standpoint, and he emphasized, among other things that the perpetrators were first, highly organized, number two, are in jurisdictions very far away from the victims and very out of reach from local authorities, and i'm sure you have all seen, they are residing in foreign countries. so that is among the many challenges that much of your testimonies pointed to. i don't want to be pessimistic,

because i do want to get to your part of the testimony, we talk about what has been happening with the justice department and some of the success you have had, but there is i think a sense, because of the scope and the gravity of the problem, that we are not winning. i want to just ask you how you would >> we have a dual role. we prosecute the offenders. we are receiving substantial and increasing sentences. we share information we obtain from these cases with the irs who is working hard to improve filters and better identify fraudulence. that is the tax divisions role.