COVID-19 Could Fuel Suspected Ambulance Fraud and Money Laundering Schemes

By Daniel Bethencourt

Banks should prepare for a rise in suspicious payments tied to fraudulent medical-transport schemes as criminals seek to exploit the COVID-19 pandemic, sources told ACAMS

Amid confirmation that the novel coronavirus has infected at least 550,000 people around the world as of Friday, including 90,000 Americans, federal prosecutors around the U.S. have warned that they anticipate a spike in healthcare-related fraud and asked the public to report any potential fraudulent activity related to the crisis.

Investigators and compliance sources pinpointed one scheme in particular as a likely candidate for growth: transportation providers that bilk the federal Medicare program and private insurers out of millions of dollars through fraudulent invoices that inflate the number and cost of rides they have given.

Medical transport firms sometimes begin as legitimate enterprises before yielding to the temptation of exaggerating the volume and the quality of their service for financial gain, according to a former federal investigator who declined to be named.

“Once insurance companies started paying for ambulance coverage, they just moved to billing for ambulance rides never given,” the investigator said. “Unfortunately, like every other kind of fraud, you are going to see a noticeable increase.”

Ambulance transports have already drawn federal suspicion. In 2015, an inspector general’s report found that nearly 20 percent of claims related to a sample of 7.3 million rides reviewed by auditors involved questionable billing and led to at least $50 million in potentially fraudulent payments in just one six-month window in 2012.

More recently, two former owners of Guam Medical Transport pleaded guilty in October to perpetrating a fraud and money laundering scheme after giving dialysis patients unnecessary ambulance transportation to overbill Medicare as much as $10 million from 2010 to 2014.

The pair used the funds for personal expenses that they then mischaracterized in business records as corporate purchases to avoid taxes, according to federal prosecutors, who said the scheme ranked among the largest of its kind in U.S. history.

State prosecutors have also brought cases. In September, the New York attorney general’s office charged the owner and driver of Purple Heart Transportation in Queens with defrauding the state’s Medicaid program out of at least $1 million and laundering the proceeds.

The company also billed for $19 million in services without matching documentation as part of the scheme, which allegedly involved a third conspirator who fled the United States.

“Large sums of that money were then purportedly funneled through bank accounts to the individual defendants and to … shell companies,” prosecutors said in a press release. “Additionally, portions of the money were then allegedly used by several defendants to make multiple real estate purchases, while further sums were transferred out of the United States.”

Separately, more than 20 medical transport firms along the East Coast that operate rurally and employ only limited staff have drawn scrutiny in the past two years after filing claims for hundreds of thousands of dollars, and even millions of dollars, to Medicare or Medicaid, according to an individual familiar with ongoing investigations into the alleged schemes.

Investigators suspect the firms used consulting businesses or other corporate entities to layer the proceeds, made structured cash deposits into accounts they controlled and wired funds to third parties with which they had no clear commercial relationship, the individual said on condition of anonymity.

The payments probably would have passed through conventional transaction-monitoring filters unnoticed because they originated from well-known agencies of the federal government that administer health insurance, the individual said.

“I think across the board we’re going to be seeing more frauds,” the person said. “Fraudsters take advantage of opportunities like this … they take advantage of vulnerable people.”

The volume of suspicious activity reports filed on potential healthcare-related fraud schemes has increased every year since 2015 to reach 1,056 in 2019, according to the U.S. Treasury Department.

Financial institutions filed 100 healthcare-related SARs in February, the most recent month available, after filing 84 in January and 70 in December.

But private sector anti-money laundering staff are poorly positioned to identify bogus ambulance rides and other complex healthcare-fraud schemes that hinge on medical records to which they would almost certainly not have access, according to a compliance officer for a large lender on the East Coast.

The existence of a fraudulent company “is something that should have been [discovered as] part of the account-opening due diligence,” the person told in a email. “I’m not really sure how [banks] would pick that up during the course of the relationship.”

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Topics : Anti-money laundering , Fraud
Document Date: March 27, 2020