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.