An International Scam

A few years ago, an American expatriate couple living in South America for many years found themselves victims of credit card fraud.  The perpetrator of the fraud had managed to intercept credit cards issued and mailed to them by their U.S. based bank; a well-known financial institution with which they had maintained checking and savings accounts since 1966.  Discovering the fraud upon receiving their March credit card statement, the couple was alarmed to discover fraudulent charges in excess of $22,000, even though their credit line was limited to $5,000.  Bewildered, they attempted in coming months through a series of phone calls, letters and faxes to cancel their credit cards, get the charges reversed and question the credit discrepancy.

In the ensuing months they continued to regularly receive credit card statements but not checking account statements.  The policy of the bank was to debit their checking account for any monthly credit card charges.  Without receiving statements of their checking account, they could not determine whether the fraud control department of the bank had responded to their correspondence.  Then, fully five months after the couple discovered that their credit cards had been misappropriated, the bank's fraud control wrote them:  'Our investigation has not revealed information confirming the unauthorized use of your account.'  Adding to their anxieties, someone, representing himself as a financial officer of the bank in their foreign country of residence, telephoned several times, offering to reopen their credit card account and requesting personal information.  The couple became convinced that persons within the bank were working in collusion to defraud them.

In the end the husband had to travel to the United States and hire the services of a legal acquaintance to have the fraudulent charges reversed and demand more than a half year of missing bank statements.  He had attempted unsuccessfully to appoint a representative from his home in South America, but the bank refused to recognize the appointment without his showing up in person at the U.S. bank branch.  Presently, nearly a year later, some $5,000 remains in dispute.  The couple reported the fraud to the F.B.I.

What happens if the couple doesn't recover the $5,000?  On their U.S. tax return, they will be able to deduct the loss as a casualty or miscellaneous deduction.  As an Itemized deduction they will also want to include other deductions for medical expenses, income or sales taxes, interest charges, gifts to charities, and certain other sundry expenses.  In the event their income exceeds the threshold of these Itemized deductions and their exemptions, they will have lowered their federal income taxes by as much as 35%, which really means they recover $1,750 of the $5,000 loss.