In a story that highlights how AI affects the tax collection/compliance process, politicians in Washington DC say they worry about the use of artificial intelligence to track Americans' financial affairs. This is yet another example of blurring the boundaries between compliance, legitimate privacy, and transparency.

Republican lawmakers have asked the US administration to probe the Internal Revenue Service’s alleged use of AI to surveil the financial data of US citizens.

Yesterday, Jim Jordan (R-OH) chairman of the Judiciary Committee at the House of Representatives, and Harriet Hageman (R-W), sent a letter to Treasury Secretary Janet Yellen and Attorney General Merrick Garland opening an inquiry into the IRS’s use of artificial intelligence to scrutinize Americans' financial information. 

Family Wealth Report has contacted the US Treasury for a comment and may update this article in due course.

“The Committee and its Select Subcommittee have reason to believe that the IRS and Department of Justice are actively monitoring millions of Americans' private transactions, bank accounts, and related financial information – without any legal process – using an AI-powered system,” Jordan and Hageman’s letter said. “This AI-powered warrantless financial surveillance is highly concerning and raises serious doubts about the federal government's respect for Americans' fundamental civil liberties.”

The controversy highlights how the boundaries between legitimate privacy and transparency are hot political issues. At a conference last week in Monaco – at which FWR’s editor was a panelist – the way that governments’ zeal to find tax data clashes with privacy was a constant theme. At the start of this year, the US Corporate Transparency Act became law, imposing a new set of beneficial ownership disclosure requirements on businesses. One topic was how AI could be a threat to privacy – and a possible way to protect it.

The IRS has been tasked by the Biden administration to pursue tax evaders, such as HNW US citizens.

Details 
The Jordan/Hageman letter also requests that Alex Mena – an Internal Revenue Service official working in the agency's Criminal Investigations Unit who admitted that the IRS has "a new system" that uses AI to target Americans – appear before the Committee for a transcribed interview.

"The Committee on the Judiciary and the Select Subcommittee on the weaponization of the Federal government are conducting oversight of the federal government’s use of artificial intelligence (AI) technology to surveil American citizens' financial information,” the letter said. “Based on recent reporting and other information obtained by the Committee and Select Subcommittee, we believe that the Department of the Treasury possesses information necessary for our oversight and we request your full cooperation,” the letter said. 

“In September 2023, the Internal Revenue Service announced that it was using AI to 'help IRS compliance teams better detect tax cheating, identify emerging compliance threats and improve case selection tools.'

“According to the announcement, 'the IRS is deploying new resources towards cutting-edge technology to improve our visibility on where the wealthy shield their income and focus staff attention on the areas of greatest abuse,' including 'cutting-edge machine learning technology.' 

“On February 28, 2024, the Treasury Department publicly acknowledged that it has 'implemented an enhanced process using AI to mitigate check fraud in near real-time by strengthening and expediting processes to recover potentially fraudulent payments from financial institutions' since late 2022,” the letter said.

The letter said the Treasury’s use of AI in law enforcement has, according to the Treasury itself, led to active cases and arrests, leading to recovery of $375 million in the 2023 financial year.

"However, recent reporting alleges that the IRS's use of AI has also included actively monitoring American citizens' bank accounts en masse and without legal process,” the letter continued. “Video footage obtained by an investigative media outlet appears to capture Alex Mena, an IRS official working in the agency’s Criminal Investigations Unit, admitting that the IRS has 'a new system' that uses AI to target 'potential abusers' by examining all returns, bank statements, and related financial information for 'potential for fraud.'

“Mena asserted that the new AI system has the ability to access and monitor 'all the information from all the companies in the world.' In the video, Mena suggested that the AI-powered system can 'see the amount' in every American's bank account, adding that this 'invasive' system is 'working really well' 'nationwide.' Mena also noted that IRS agents 'have no problem, like, going after the small people, you know, putting people in prison. Like destroying people's lives, they have no problem doing that.' When asked whether the system is constitutional, Mena replied, 'I doubt it',” the letter concluded.