COVID-19 Outbreak Prompts Financial Institutions to Adjust Transaction Monitoring

By Daniel Bethencourt

Compliance officers are reassessing their approach to monitoring transactions to account for dramatic shifts in customer behavior amid the global pandemic of the new coronavirus disease, sources told ACAMS

COVID-19 has infected more than 200,000 individuals globally, and killed nearly 10,000, since being identified in China at the end of last year, spurring governments in nearly all continents, including federal, state and local authorities in the U.S., to ask many people to work from home and refrain from interacting with one another, among other drastic measures to curb the outbreak.

As global citizens practice “social distancing,” and elderly people in particular are confined to their homes, banks may see a spike in large cash withdrawals and growing use of digital financial services by customers who typically would not engage in such activity, said Jim Richards, the former chief of BSA compliance at Wells Fargo.

“We’ve seen [this activity] before, but not at a national level,” said Richards, now principal of RegTech Consulting in California.

The U.S. Treasury Department’s Financial Crimes Enforcement Network said Monday that financial institutions should alert the bureau to “any potential delays in their ability to file required Bank Secrecy Act (BSA) reports” as a result of the outbreak.

Three senior compliance officers told they recently adjusted, or plan to adjust, various thresholds that trigger alerts for suspect transactions as their clients modify their financial behavior to respond to the pandemic, but that the volume of such alerts remained largely manageable so far.

According to a compliance officer at an Asian lender in New York, wire transfers have dropped by nearly a quarter since the start of February amid disruptions in the global economy, balancing out the surge in cash withdrawals, online banking and cryptocurrency-related activity.

“People are withdrawing hard currency in a state of panic,” the compliance officer said. “We also have a number of people turning to mobile apps [for banking] because they think that it’s safer, and a huge influx of people using virtual currency in a volume we haven’t encountered before.”

The shifts are making it harder for lenders’ anti-money laundering staff to discriminate between legitimate activity in a time of crisis and illegal transactions.

FinCEN also said Monday that it has already received multiple suspicious activity reports, or SARs, flagging attempts by fraudsters to exploit fears of the pandemic to sell sham cures, raise funds for fraudulent charities and dupe victims into handing over money by impersonating government officials, among other scams.

Such schemes reflect typologies typically seen after natural disasters, like hurricanes or earthquakes, according to the bureau.

A mid-sized bank in the midwestern U.S., for example, is considering treating a much larger volume of digital payments as normal after restricting clients to accessing services at its physical branches only via ATMs and drive-through windows, one of the compliance officers said.

“I do think we are entering uncharted territory and [the crisis] will be seen as an avenue for some for increased laundering attempts or activity,” the person said in an email. “At the same time, we don’t know exactly what to expect from our customers.”

Attorney General William Barr Monday instructed federal prosecutors across the country to go after fraudsters exploiting the pandemic, while the U.S. Attorney in Pittsburgh, Pennsylvania, announced that one of its prosecutors would serve as a dedicated “COVID-19 Fraud Coordinator.”

Banks are separately taking steps to protect their employees, including by having their AML staff largely or entirely work from home.

Staff assigned to tasks like model risk validation are already teleworking, the compliance officer at the Asian lender said, while other critical employees are still going into the office, but in shifts that enable them to keep their distance from one another and still actively monitor for potential sanctions violations and other suspect transactional activity.

Small lenders, however, may have too limited IT infrastructure to let compliance officers work remotely in an efficient manner, and should reach out to FinCEN since they may struggle to file SARs within normal time limits, said Richards, the former Wells Fargo compliance executive.

“I would tell regulators I won’t have all my people in, so I will focus my resources first on sanctions, second on fraud and third on AML, so AML may slip,” Richards said, in reference to those smaller institutions.

Contact Daniel Bethencourt at

Topics : Anti-money laundering , Counterterrorist Financing , Know Your Customer
Source: U.S.: FinCEN
Document Date: March 18, 2020