FinCEN AML/CTF Priorities Part 7: Fraud and COVID-19

Patrick Thomas, CFE, CAMS
August 27, 2021
Read Time: min

COVID-19 creates new opportunities for fraudsters

Fraudsters have taken advantage of COVID-19-related fraud schemes with the influx of money from government stimulus and vulnerable individuals.

Would you like others articles like this in your inbox?

Hannakah Rubin, CAMS also contributed to this article

Recent statistics show cyber-enabled fraud is on pace to reach new highs for this type of illegal activity. COVID-19 stripped away thousands of jobs, and people are more susceptible than ever to quick-money promises and schemes. The influx of money from the U.S. government only adds to the fraud-feeding frenzy. In March of 2020, the US Department of Treasury, the Office of Fiscal Service, and the Internal Revenue Service provided 3 rounds of fast monetary relief in response to the COVID-19 pandemic in the United States through the passing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Billions of dollars of 100% guaranteed loans were made available to small businesses through the Paycheck Protection Program (PPP). An extension of the Small Business Administration's (SBA) 7(a) loan program, the PPP aimed to help small businesses affected by the pandemic keep their workforce on payroll.

In addition, President Biden oversaw the passing of the American Rescue Plan Act of 2021 (also known as the COVID-19 Stimulus Package or American Rescue Plan), which extended employment assistance and waived some federal taxes on unemployment benefits. Other expansions in government financial assistance include an increase in the Child Tax Credit to assist families who care for children and the Emergency Rental Assistance program, which makes funding available to government entities to assist households that are unable to pay rent or utility bills. In total, $1.9 trillion was designated to stabilize the U.S. economy.   

“Help is on the way,” is what the public hears. Unfortunately, fraudsters have taken advantage of vulnerable populations seeking help, especially groups that are less tech-savvy. Fraudsters have adapted quickly to the digital environment and are adept at using social engineering in conjunction with cyber techniques to take advantage of the less sophisticated or financially distressed. 

Current State of Fraud

What are the threats?

Fear is a powerful contributor to making bad decisions and COVID-19 has allowed fraudsters to exploit that fear. 

Last year, the FBI’s Internet Crime Complaint Center (IC3) released the 2020 Internet Crime Report, laying out an astonishing overview of the increase in consumer/victim complaints (2,000 per day and over 440,000 annually) and monetary losses due to fraud schemes (2020 reached $4.2 billion).  

Breaking down the data by categories of crime show an interesting distribution of the victim totals. 

Type of Crime 

Number of Victims per Crime 

Phishing/Vishing/Smishing/Pharming 

241,342 

Non-Payment/Non-Delivery 

108,869 

Extortion 

76,741 

Personal Data Breach 

45,330 

Identity Theft 

43,330 

 

CBS News recently published several videos offering education on cybercrimes and refer to this recent activity as a “surge” in cybercriminal behavior. Many scams are pandemic-based, posing as government aid or healthcare agencies. “Hackers have begun taking advantage of deep-fake technologies to create fake video and audio recordings of corporate leadership to scam unsuspecting employees,” commented Ronan Lago of CYE. 

Read our blog series on the FinCEN's priorities. Start with Part 1: Implications for Community Financial Institutions.
Read now
Going Forward

What can community financial institutions do?

Now more than ever it is important to foster communication and build relationships between BSA officers and their counterparts in law enforcement. 

The Cybersecurity & Infrastructure Security Agency (CISA) offers assistance in combating cybercrimes for individuals and institutions by providing streamlined reporting avenues. This is what they have to say about the roles law enforcement and criminal investigators play in this environment: 

“Law enforcement performs an essential role in achieving our nation’s cybersecurity objectives by investigating a wide range of cybercrimes, from theft and fraud to child exploitation, and apprehending and prosecuting those responsible. The Department of Homeland Security (DHS) works with other federal agencies to conduct high-impact criminal investigations to disrupt and defeat cyber criminals, prioritize the recruitment and training of technical experts, develop standardized methods, and broadly share cyber response best practices and tools...Criminal investigators and network security experts with deep understanding of the technologies malicious actors are using and the specific vulnerabilities they are targeting work to effectively respond to and investigate cyber incidents.” 

We are seeing these threats affecting financial institutions and targeted individuals. For individuals, utilizing government reporting avenues can be an effective way to stymie fraud. For financial institutions, frequenting trusted sites (International Finance CorporationFinCENUS Department of the Treasury), utilizing webinars and training offered by Abrigo, can increase awareness of current fraud schemes and activity.   However, awareness, diligence, and vigilance amongst the BSA community will have the greatest impact in fighting fraud 

About the Author

Patrick Thomas, CFE, CAMS

Risk Management Consultant
Patrick Thomas is a Risk Management Consultant with Abrigo in the Advisory Services Group. He has over 20 years of Risk Management and Compliance experience working in both the Mortgage and Banking industries. In his career, he has worked as a Fraud Manager, AML Compliance Officer and Lead Government Mortgage

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.

 

Looking for Banker’s Toolbox? You are in the Right Place!

Banker’s Toolbox is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to Banker’s Toolbox Community Online.

Make yourself at home!