The coronavirus pandemic has created many vulnerable targets, including the elderly and unemployed, and fraudsters are taking advantage at an alarming rate. Community banks and credit unions partnered with their communities to help families and businesses through these unprecedented times, causing spikes in consumer fraud that must be faced head on. The Financial Crimes Enforcement Network (FinCEN) calls upon financial institutions to remain alert to COVID-19-related consumer fraud by understanding the current scams and red flag indicators that may indicate this illicit activity.
FinCEN Calls on Financial Institutions to Protect Consumers from COVID-19 Fraud
- FinCEN issued a second advisory around COVID-19 fraud schemes and their red flags.
- Imposter schemes are spiking and targeting consumers, but financial institutions can help stop them by looking out for these red flags.
- Money mule schemes focus on bad actors recruiting individuals to transfer illegally acquired money on behalf of fraudsters.
FinCEN issues second red flag on COVID-19
On July 7, 2020, FinCEN issued the second red flag COVID-19 advisory relating to fraud and certain red flags that could be indicative of fraudulent activity. The July release centers around consumer protection, and what role financial institutions can play in protecting their customer or members, differing from their May 2020 COVID-19 medical scam advisory. Both advisories further remind institutions that detecting and reporting fraud and other illicit activity is critical to our national security and protecting innocent people from harm.
According to the new advisory, two fraud typologies are trending: imposter scams and money mule schemes. Imposter scams involve criminals acting as government officials, non-profit groups, universities, or charities and offering fraudulent products or services to defraud victims by solicitation of payments, donations, or personal information. Money mule schemes consist of bad actors recruiting individuals to transfer illegally acquired money on behalf of the fraudsters (i.e. solicitation to work from home for $40,000/month).
Red flags to look for with imposter scams
While consumers are the targets for these scams, financial institutions play an important role in protecting their customers/members by understanding the following red flags for imposter scams:
- Communication from a person, either by phone, email, text, or social media, claiming to represent a government agency and asking for personal information, particularly regarding a “stimulus check” or “stimulus payment”
- Receipt of a check or prepaid debit card from the U.S. Treasury less than the amount expected, with instructions to contact the fraudulent agency to receive the full benefit
- Phishing communications instructing readers to open links or files to provide personal information
- Email addresses related to COVID-19 that contain misspellings or use the domain name of “.com” or “.biz” for an alleged government agency
- Specific email subject lines that have been identified as phishing campaigns, such as:
- 2020 Coronavirus Updates
- Coronavirus Updates
- 2019-nCOV: New confirmed cases in your City
- 2019-nCov: Coronavirus outbreak in your city (Emergency)
- Solicitations in person, by email or social media seeking donations on behalf of a reputable charity but is fraudulent
- A charitable organization soliciting donations that does not have an in-depth history or cannot be verified
Red flags to be aware of for money mule schemes
Reg flags for money mule schemes may include financial transactions as well as customer/member interaction:
- Customer/member account starts to receive transactions out of the norm, including:
- Overseas transactions
- Purchase of large sums of virtual currency
- Sudden increase in account balances
- Mention COVID-19 or work from home and reason for increased activity
- Customer opens new business account with balance transferred out soon after opening
- Customer opens several accounts at different financial institutions with high-velocity movement of funds
- Customer receives multiple state unemployment payments
- Customer receives unemployment deposit from a different state in which he/she previously worked
- Customer receives unemployment payments for numerous employees and “remit to” name does not match
- Deposited funds quickly wired out to foreign locations with poor anti-money laundering controls
- Customer makes unusual overseas transactions indicating it is for a person overseas needing financial assistance due to the COVID-19 pandemic
- Customer has documentation from an employer or recruiter using a free email service rather than a company-specific email
- 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
- Customer has been asked by an individual for financial assistance to send funds to their personal account. The individual may claim to be one of the following:
- U.S. Service member stationed abroad
- U.S. citizen working or traveling abroad
- U.S. citizen quarantined abroad
How to properly file a SAR for these types of fraud
In filing a suspicious activity report (SAR) related to these two COVID-19 fraud types, FinCEN requests that you include the key term “COVID19 MM FIN-2020-A003” in SAR field 2 (Filing Instruction Note to FinCEN) and in the narrative.
As with many fraud trends, it is important to train front line staff in the red flags of COVID-19 fraud, as they have the most opportunity to interact with customers/members. Casual conversations not only build relationships, they can lead to discovery of a possible scam. Anyone can be a victim of fraud and COVID-19 is creating a greater number of vulnerable targets. Financial institutions are in a unique position to educate customers/members and detect fraud before the victim suffers financial loss and embarrassment.
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.