FinCEN Issues Advisory on COVID-19 Related Medical Scams

Terri Luttrell, CAMS-Audit
May 20, 2020
Read Time: min

FinCEN issued an advisory on May 18, 2020 to alert financial institutions to medical scams related to the COVID-19 pandemic as well as new SAR key terms for reporting these scams.  FinCEN reminds financial institutions that “detecting, preventing, and reporting COVID-19 scams and illicit activity is critical to our national security.” While this advisory is for medical-related scams, criminals may use similar methods for other COVID-19 related scams similar to those used before the pandemic.  

The advisory references several red flags for detecting pandemic related fraud in three major areas:  

  • Fraudulent cures, tests, vaccines, and services
  • Non-delivery of medical related goods
  • Price gouging and hoarding of medical-related items, such as face masks and hand sanitizer

Within each of these categories many of the red flags center around customer due diligence processes such as review of business documentation, website review, negative news searches, and high-risk jurisdiction activity. If any of these red flags are detected, further due diligence should be conducted to determine if fraudulent activity is occurring.

Your transaction monitoring processes should include these transactional red flags related to COVID-19:

  • Medical supply related transactions through a personal account
  • Merchant requires pre-paid cards, virtual currency, or other hard to trace mean of payment
  • High chargeback and/or return volume in the customer’s account
  • Newly opened account received a large wire transaction that was not disclosed at account onboarding
  • New accounts opened after January 2020 for the purpose of selling medical supplies or highly sought-after goods (toilet paper, masks, disinfectant, etc.)
  • Customer begins to use an established account differently after January 2020 without an explainable purpose
  • Customer’s account is receiving or sending electronic fund transfers (EFT) to/from a new business with no known physical or internet presence
  • Customer’s account is used for COVID-19 related goods with a company that is not a medical supply distributor
  • Customer makes unusually large deposits that are inconsistent with the customer’s profile or account history

If any of these red flags, along with other red flags mentioned in the advisory, leads to uncertainly of the legitimacy of the activity, it may be COVID-19 related fraud and a suspicious activity report (SAR) may be warranted. When filing a COVID-19 related SAR, FinCEN requests that SAR field 34(z) (Fraud Other) be selected and the key term “COVID19 FIN-2020-A002 be referenced in SAR field 2 (filing Institution Note to FinCEN) as well as in the body of the narrative.  

 

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Remaining aware of COVID-19 related red flags and training staff on key indicators will enhance your transaction monitoring program and assist you in detecting fraud perpetrated upon victims struggling during this difficult time of pandemic.  You may consider lower parameter limits on certain scenarios, such as spikes in deposits, or create monthly ad hoc reports. Adding this advisory to written fraud monitoring procedures will enhance your program and demonstrate that your financial institution is on top of current trends. FinCEN intends to send further advisories concerning COVID-19 related crime based on future data and analysis which will assist in keeping your financial institution up to date. In addition to the current advisory, FinCEN issued a notice reminding financial institutions of their BSA reporting requirements, expecting financial institutions to continue following a risk-based approach and to diligently adhere to their BSA obligations.  

About the Author

Terri Luttrell, CAMS-Audit

Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size. She has successfully worked with institutions in developing BSA/OFAC programs, optimizing various automated solutions, and streamlining processes while ensuring all regulatory requirements are met. As the Compliance and Engagement Director at Abrigo, Terri provides insights that contribute and support long-term banking strategies based on analysis of market and industry trends, competitor developments, and financial and regulatory technology changes. She is an audit-certified anti-money laundering specialist and a board member of the Central Texas chapter of the Association of Certified Anti-Money Laundering Specialists (ACAMS). Terri earned her bachelor’s degree in business administration, specializing in business and finance, from the University of North Texas.

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