COVID-19 Fraud, Money Laundering Evolving with Pandemic

By Valentina Pasquali

Financial institutions have reported far more transactions as potential attempts to launder funds amid the novel coronavirus pandemic than initially forecasted and have separately had to contend with a constantly evolving array of fraud schemes, according to the FBI.

Businesses that have continued with their normal volumes of financial activity during the past two-and-a-half months as others have drastically curtailed or entirely ceased operating may have unintentionally flagged themselves as suspicious to their banks, an FBI official said Thursday during an online discussion of pandemic-related financial crimes.

“This mall kiosk that’s obviously not operating and is still making large cash deposits every week without fail, or the travel agency that has been making large cash deposits” should arouse suspicion, the FBI official said. “We thought it would be more fraud … but we’ve got a lot of great SARs [suspicious activity reports] in … money laundering as well.”

COVID-19, which has taken more than 100,000 lives in the United States and more than 350,000 lives worldwide since first emerging in Wuhan, China, at the end of last year, has pushed many countries into massive economic crises and prompted governments to implement equally unprecedented stimulus spending—typically a magnet for fraudsters.

The U.S. Paycheck Protection Program, or PPP, which has enabled businesses forced to close during the pandemic to access hundreds of billions of dollars in forgivable loans to continue paying their employees, mortgages and utilities, has been the target of widespread fraud since the program began on April 3, and as such has become an investigative priority for the FBI.

The bureau has even taken on cases that agents would typically not pursue, including fraud schemes or attempted fraud schemes involving small or no monetary losses to victims or their financial institutions, the official said during the webinar, which was hosted by Cleveland-based consultancy AML RightSource.

The Treasury Department’s Financial Crimes Enforcement Network in an advisory last week laid out two-dozen red flags of pandemic-related fraud and encouraged compliance officers to formally cite the document, COVID19 FIN-2020-A002, when reporting suspected wrongdoing with those characteristics.

The FBI official on the webinar asked financial institutions to cite the name of the program or its acronym in their filings to assist investigators.

As recipients slowly reach eligibility to have their loans forgiven—roughly eight weeks after receiving their first installment—recipients and their banks should stay alert for fraudsters tweaking the scams they used when the program first launched, Lauren Kohr, chief risk officer of Old Dominion National Bank in Virginia, said during the webinar.

Whereas fraudsters may have promised to jump an applicant to the front of the line for a fee, they may promise, for a similar fee, to get forgiveness requests fast-tracked or their approval guaranteed, Kohr said Thursday.

Compliance officers should also prepare to file on clients that use PPP funds to cover personal debt or other expenses outside the terms of the program, the FBI official added.

“Absolutely we want you to file on those … that money was articulated for specific purposes and if you as a financial institution see the money going to somewhere else…that’s illegal and we’ll be working those cases,” the FBI official said.

Other schemes have also grown in prominence during the pandemic, including variations of old-time business email compromises, romance scams and investment frauds.

The FBI has seen an increase in fraudsters tricking victims into processing ostensible donations for medical research or charities through their bank accounts, as well as a general increase in the recruitment of “money mules” amid widespread unemployment and remote-work arrangements.

“You can keep a small portion of the funds but withdraw the rest and deposit it into Bitcoin ATMs, which seems very prevalent right now,” the FBI official said.

The bureau also anticipates an imminent rise in benefits fraud, led by scams to embezzle or divert state and local unemployment subsidies for which more than 40 million American workers have applied in the past 10 weeks.

“A person receiving the unemployment benefit who isn’t the person applying for the unemployment benefit, or … the unemployment benefit request filed on the East Coast and being paid on a West Coast account,” the FBI official said. “Those are huge red flags, like the names on the account not matching the names of those who applied for the benefit.”

Small publicly traded firms that advertise fraudulent treatments, cures or tests for COVID-19 to increase their stock prices, or pitch similar “magic potions” to unsophisticated investors to raise funds, are also on the rise, the official said.

Contact Valentina Pasquali at

Topics : Anti-money laundering , Fraud
Source: U.S.: Law Enforcement
Document Date: May 29, 2020