News / Canada

‘I should be a smart guy... I wasn’t': How the CRA tax scam keeps duping us

How did Tom Kane end up at a Bitcoin machine pumping in $5,000 to send to a scam artist? The answer helps explain one of the most effective ways Canadian victims get bilked.

Says Tom Kane, seen at his Toronto home, of the CRA scam: "It's not just some frail, vulnerable people who fall for it."

Torstar News Service

Says Tom Kane, seen at his Toronto home, of the CRA scam: "It's not just some frail, vulnerable people who fall for it."

Tom Kane taught computer technology at Centennial College for 22 years. In retirement, he takes night courses in photography at Ryerson. He sometimes helps others protect themselves against phishing and other computer fraud.

He is thoughtful and articulate.

Still, he recently got taken for $5,000 in a telephone scam: the one in which a menacing caller purports to be a member of the Canada Revenue Agency seeking back taxes.

“I should be a smart guy. I wasn’t,” says the 74-year-old. “It’s not just some frail, vulnerable people who fall for it. It’s also people who know better.”

Kane now hopes that telling the story of how he was duped will serve as a warning to prevent someone else from being robbed.

The scam typically begins as a robocall. Someone, usually identifying himself or herself as a federal agent, claims to be from the CRA and states that legal action has commenced and an arrest will be made if the call isn’t returned. The deceit is that tax money is owed. There is always a sense of urgency.

Most shrug it off. Kane didn’t.

Kane came home to his High Park residence one night in October to find a message from “the enforcement division of the CRA.” He believes it was a live voice on the recording stating that there were issues with his tax returns and he was under threat of arrest.

Kane phoned the next morning and was informed by an officer, Dexter Cruz — who sounded like the man in the recorded message — that he had falsified his last three returns and owed $4,995 immediately. If he didn’t pay the police would be at his door within the half-hour.

Thomas Kane was pressured to get to a Bitcoin machine to buy $5,000 in the cryptocurrency, which is very hard for authorities to trace.

Torstar News Service

Thomas Kane was pressured to get to a Bitcoin machine to buy $5,000 in the cryptocurrency, which is very hard for authorities to trace.

That began a horrible day that ended with Kane standing at the back of a variety store on Queen St. E. near Parliament, pumping 50- and 100-dollar bills into a Bitcoin machine, money destined for who knows where.

“I’m very embarrassed about this whole thing,” he says. “It was pretty stupid, and I used to be known as someone who was very cautious about this kind of stuff.”

Kane is not alone. The CRA scam is one of the more common frauds perpetrated on Canadians. The calls typically originate from offshore, boiler-room operations in places such as India; frequent victims are seniors or new Canadians who don’t yet fully understand how our system works.

The Canadian Anti-Fraud Centre (CAFC) classifies telephone tax fraud as extortion, a category that includes computer ransomware and an immigration ruse that threatens its victims with deportation. In 2017, the CAFC received 14,551 complaints about extortion scams and classified 1,046 people as victims; the vast majority of those fell prey to the CRA scam. After a decrease that followed an international raid, the crime is prevalent again.

The dollar loss was almost $5 million.

One person just north of Toronto — the CAFC cannot offer identifiers beyond that — initially paid out $4,000. Hounded further, that victim eventually made 60 payments with an accumulated loss of more than $200,000. Another person from the GTA, conned right around the time that Kane was scammed, made three payments totalling $125,000, all of it in Bitcoin.

Payment in Bitcoin has become more frequent — and the request a further warning to potential victims — in the CRA scam, according to Jessica Gunson of the CAFC. Gunson is the acting call centre and intake unit manager at the centre in North Bay, Ont. She says larger sums tend to be sent that way rather than previous payouts in iTunes and Steam cards.

“It’s less suspicious, and there’s less chance that a retailer will alert the potential victim that it could be a scam,” says Gunson. “They eliminate the middleman when they ask for digital or cryptocurrency to be used as payment. Bitcoin (is also) very difficult to trace.”

The CAFC estimates it hears from less than 5 per cent of victims. Many are likely too embarrassed to report that they got taken.

Tom Kane came to Canada as a draft dodger and has always felt leery of the police, which likely clouded his thinking when threatened by the telephone scammer.

Torstar News Service

Tom Kane came to Canada as a draft dodger and has always felt leery of the police, which likely clouded his thinking when threatened by the telephone scammer.

Kane did report his loss.

In retrospect, Kane feels he simply panicked when threatened with the arrival of the police. He came to Canada as a draft dodger in the 1960s after growing up in Chicago, where, he says, he developed a distrust of cops. Even after paying the scammers, he was hesitant to return home thinking the police would be lying in wait.

“All the signs were there that it was a fraud but they scared the living daylights out of me,” he says.

“My sensibility just went poof. From the first call in the morning until I got home, I was basically operating in a state of panic.”

Kane’s friend Carl Melvin believes that Kane, because of his past, lived for a long time with the apprehension that the police would “roust him in the middle of the night. I’m sure all that stuff was coming up.”

Kane says the fraud was quite sophisticated and he received more than a dozen calls during that tumultous day and ended up dealing with five different people on the phone, all of whom, he says, were excellent actors.

The first was Cruz, demanding that the $5,000 be paid in 30 minutes or the police would be dispatched. Kane told him “that’s ridiculous.”

“I had to convince him I didn’t have the money in the house.”

Kane then demanded more information and was transferred to the accounting department of the fake CRA and spoke with a Ryan Williams, who was very stern and also threatened to send the police.

Williams told Kane that his bank was also under suspicion so he wasn’t allowed to speak with anyone there. Williams says the CRA had cut off his ability to transfer money electronically during its investigation and suggested the Bitcoin option.

In retrospect, Kane says many red flags were raised — the real CRA, for example, wouldn’t have made its initial contact by phone and it would never request Bitcoin payment. But he was caught up in trying to avoid arrest. He says the convincing patter of the fraudsters was “well-scripted and practised.”

And Kane never took a breath to look objectively at the situation.

“I didn’t pause, I didn’t stop,” he says. “Even between calls, I didn’t step back.”

Well, he did once. That only made things worse. After his first chat with Cruz and Williams, he researched their phone number on the computer.

“Guess what? It said it was Canada Revenue.”

Scammers have the ability to “spoof” phone numbers to hide a call’s origin and make it appear to be from legitimate government offices or financial institutions.

Kane dipped into two accounts to come up with the $5,000. And the fraudsters emailed him a QR code so he could forward the money. They also provided the address of a store near Queen and Church Sts. with a machine that exchanged cash for Bitcoin. When he got there, that ATM-like device didn’t work so the scammers, without hesitation, provided a new address near Parliament St.

Through the process, the con artists kept calling him, urging him to hurry as he walked along Queen. They even had a fake female police officer call Kane, demanding to know his location. He told her he was going to make the payment but she didn’t need to know where he was.

“The scammers create that sense of urgency,” says Gunson. “This is a very serious matter. You could be going to jail, you could be deported. You could be paying all these additional fees, but this will all go away, if you just do this.”

Kane realized he’d been duped when he returned home and the police were not waiting for him.

“I had carried around suspicion but I didn’t properly act on it,” he says. “So it didn’t take me long to come to the conclusion that I’d been had.”

Gunson says that if the scammers see that the victim is scared and co-operative, they’ll often come back looking for more. That’s why some victims make multiple payments.

“It’s like opening the door to a stray dog and feeding it,” she says. “It’s always going to come back.”

The fraudsters did try to get more money out of Kane but, by then, he realized he’d been duped and he instead went to the police. The Toronto police, he says, didn’t want to handle it because of jurisdictional questions. He then called the RCMP, and while they were courteous and “didn’t try to make me feel like a fool,” he sensed no one would be prosecuted. And the money was gone for good.

The fraud is difficult to police because of the technology that allows the perpetrators to bypass phone companies. The calls also originate overseas, outside the jurisdiction where the complaints are made.

The abandoned call-centre room in Thane, a Mumbai suburb, raided by police in 2016. More than 700 employees worked in the facility.

W5

The abandoned call-centre room in Thane, a Mumbai suburb, raided by police in 2016. More than 700 employees worked in the facility.

In October 2016, a fraudulent call centre operation in the suburbs of Mumbai, India, was raided and 83 people were arrested and charged. CTV’s W5 toured the facility afterwards and found row upon row of empty work stations. The program said it revealed the vastness of the criminal enterprise; scripts used to extort Canadians and Americans were still on the desks.

“Once that takedown happened, it was like someone had flipped a switch,” says Gunson. “We saw an instant decrease (in CRA scam calls). And then steadily since then, we’ve seen them increase again. We’ve been inundated.”

On Monday, police in India raided a call centre in Pune and arrested three men who had targeted thousands of Americans, posing as officials from the Internal Revenue Service. According to a Washington Post report, police seized laptops and hard drives that contained personal details of 11,000 people in the United States, including bank account numbers, phone numbers and addresses.

It was not immediately clear if there was any Canadian connection.

Gunson, from the CAFC, urges people who believe they’ve been victimized or targeted in a scam to make a confidential call to the centre (1-888-495-8501) and to their local police department. The crimes can also be reported online at www.antifraudcentre.ca.

The CAFC acts as a central repository for mass marketing fraud and the information it gathers is used by law enforcement. It’s almost impossible to recover lost funds but awareness of the crime allows the police to be proactive.

“In terms of recovering the money, this is very well orchestrated and a well-played-out scam,” says Gunson.

“We’re not dealing with somebody down the street that’s calling you up and ripping you off. These people work out of the country. It’s very difficult to investigate but when consumers come forward with as much information as they can, it gives investigators a place to start.”

The CAFC reminds consumers that the CRA will not contact you by phone or email but will instead send a registered letter. It also says to contact the CRA to confirm whether you owe back taxes or are entitled to a refund. Also, never provide personal information on incoming calls. And remember that the CRA would never request payment via iTunes or other gift cards or Bitcoin or a money service business.

There is also an online version of the CRA scam. An email is sent out indicating a refund is pending from the CRA and includes a link to a website that mimics the actual CRA. Consumers are urged to input their information — including social insurance number, date of birth and bank info — in order to receive the money. No refund is ever issued and victims are subject to identify fraud.

Kane says there were so many warnings in his case that he didn’t heed. The contact by phone, the request for immediate action, the claim that electronic transfers had been cancelled, the threat that police had been dispatched (which the CRA doesn’t do), the frequent haranguing phone calls and the request for Bitcoin.

“I don’t go through every day regretting it anymore. The first couple of weeks were pretty grim that way,” says Kane. “Why did I let this happen? I have all this computer background so I shouldn’t have. How could I be so stupid? That’s a helluva lot of money. I’m not poor. I’m on a decent pension. But $5,000 is emergency money.”

Gunson urges consumers to “trust their gut.”

“If something doesn’t sound right, it’s all right to take a minute. If you receive a call and you phone these people back and don’t like what you’re hearing, it’s OK to hang up the phone.”

More on Metronews.ca