The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) has issued a notice to financial institutions, highlighting the use of shell companies by bad actors in the construction industry to commit workers' compensation and payroll fraud, leading to state and federal tax evasion; this has negative impacts on legitimate contractors and workers, putting them at a competitive disadvantage. The notice outlines how these fraudulent activities are carried out through shell companies, including obtaining minimal workers' compensation policies to cover more workers than intended and paying workers "off the books" to evade payroll taxes. A case study involving a contractor involved in such schemes is provided, where $192 million in payroll checks led to $68 million in income tax loss. FinCEN also provides red flags for financial institutions to watch out for, such as new construction companies specializing in a specific trade with minimal online presence, non-U.S. passports used for identification, unusual transaction volumes, and high numbers of checks to separate individuals. The notice is part of FinCEN's broader efforts to combat the use of shell companies for illicit activities in the construction industry. For more information click the link!

https://www.constructiondive.com/news/feds-warn-banks-construction-fraud-workers-comp/691305/