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5 Ways Your Transaction Monitoring System Can Detect COVID-19 Related Fraud

Terri Luttrell, CAMS-Audit, CFCS
August 19, 2020
Read Time: 0 min

Experiencing life during a global pandemic is something most people never thought would happen in their lifetime. The COVID-19 impact is real, as is the associated isolation, anxiety, and sometimes grief. These factors are known to lead to a growing population of vulnerable targets for fraudsters who prey on these circumstances. As with any global or regional disaster, illicit actors are taking advantage of the increased pool of possible victims.

COVID-19-related fraud schemes are escalating at an alarming rate. Advisories from the Financial Crimes Enforcement Network (FinCEN) and other federal and state agencies address the increase in the number of reported fraud cases tied to the pandemic. Fraudulent or non-delivery of cures, tests, vaccines, and services related to the virus, as well as price gouging and hoarding of medical-related items such as face masks and hand sanitizer has exploded. Many are finding themselves victim to these scams when during normal times they would not been hooked by the fraudster.

Although the emerging fraud trends are not new typologies, many have a new spin that is getting the attention of an ever-growing vulnerable population. Imposter scams, money mule schemes, tax fraud, charity solicitations, and cybercrime exploitation methods have all found solid ground to twist a known fraud typology in something that looks legitimate during the fears of the pandemic. Now more than ever an institution’s transaction monitoring should be robust enough to detect these bad actors and protect both the institution and its customers/members.

Suspicious activity monitoring is the cornerstone of a strong anti-financial crime program. As stated by the Federal Financial Institutions Examination Council (FFIEC), monitoring and reporting are critical to the United States’ ability to combat terrorism, terrorist financing, money laundering, and other financial crimes, such as fraud.

In an economic and regulatory environment where compliance resources and budgets are stretched thin even without a global pandemic, the decision of where to use valuable resources should be risk-based and supported by your BSA risk assessment. The Financial Crimes Enforcement Network (FinCEN) and federal bank examiners understand that it is not possible for financial institutions to detect all illicit transactions, but solid policies, procedures, and processes must be in place to monitor higher-risk products, services, customers’ entities, and geographies. The escalation of COVID-19 related fraud increases the burden for financial institutions to remain diligent in detection.

How can your transaction monitoring system detect trending COVID-19 related fraud?

Whether or not your monitoring system includes a separate fraud suite, your anti-money laundering (AML) system has always detected fraud, either in the form of elder financial exploitation or other fraud typologies. 

Below are five ways typical AML software catches fraud: 

Spike or Anomaly Scenarios

Spike and anomaly scenarios generally detect increases (or decreases) in aggregate transactions compared to a specified historical period. These alerts can detect the following COVID-19-related fraud scams both in dollar amount and number of transactions: 

  • Imposter scams: Funds sent to a seemingly legitimate charitable organization or health-related agency, such as the Center for Disease Control or the World Health Organization. Look for ACH and wire descriptors against keywords for possible non-governmental organization (NGO) activity to detect outgoing contributions requested by a fraudster. 
    • Customer starts to receive transactions out of the norm, i.e. overseas, virtual currency, increase in balance (spike in deposits) 
    • Customer has been asked by an individual for financial assistance to send funds to their personal account 

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Velocity Scenarios

Velocity Scenarios  

  • Money Mule Scams: Velocity scenarios track rapid movement of funds in and out of an account.  
    • Deposited funds are quickly wired out to foreign locations with poor AML controls 
    • The customer has been asked by an employer to deposit funds into their personal account and then transfer funds via wire, ACH, mail, or money services businesses 
    • The customer opens several accounts at different financial institutions with high-velocity movement of funds 
    • The customer opens a new business account with the balance transferred out soon after opening 
  • ACH Fraud scenarios: A business and/or individual stealing credentials and initiating ACH transactions 
    • Account takeover or business email compromise (BEC) 
  • Check Fraud: COVID-19-related unemployment/stimulus check fraud 
    • The customer receives multiple state unemployment payments 
    • The customer receives unemployment payments for numerous employees and “remit to” name does not match 
    • Kiting 
  • PPP Loan fraud: Detection by transaction monitoring during EDD reviews, checking use of funds from PPP loan proceeds 
    • The borrower uses PPP funds for illicit purposes 
    • Ability to “tag” PPP loan accounts or use unique product code for identification 
    • The financial institution should track the flow of funds and document usage of proceeds  


Use your AML software to capture these typical typologies

If an institution’s AML software can capture these typical and frequent typologies, adding a COVID-19 related fraud section to their procedures will show that they are aware of the threat and are mitigating it. Give examples of the identified schemes and determine which monitoring scenario(s) will be usedBSA professionals should consider lowering their parameters during the pandemic to capture more fraudulent activity on a risk-focused basis.  

If an institution does not currently have a separate fraud monitoring module, they may consider enhancing their monitoring program by including a fraud suite. This pandemic is not forever, but for now they may look a little deeper into transaction monitoring to stop this illicit activity from flowing through the institution and harming their clients. 

Abrigo's AML software and fraud detection software can help strengthen an institution's AML/CFT program and protect against COVID-19-related fraud. Contact us to set up a demo and see how. 

About the Author

Terri Luttrell, CAMS-Audit, CFCS

Compliance and Engagement Director
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.

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