United States

FinCEN issues fraud advisory related to COVID-19

AML AND COMPLIANCE NEWS  | 

The Financial Crimes Enforcement Network (FinCEN) recently issued an alert in response to the rising occurrence of medical scams related to the COVID-19 pandemic. The three major categories that have been identified with respect to COVID-19 scams include medical-related frauds, nondelivery of medical-related goods fraud, and price gouging and hoarding of medical-related items. We’ve outlined these three types of fraud below to help you understand potential red-flags so you can protect your organization. 

Medical-related frauds 

Federal agencies have identified medical-related fraud as scams that include fraudulent cures, tests, vaccines and services offered to the public. Claims of cures and vaccines created by unlicensed and unregistered companies are at the forefront of the scams. Financial indicators/red flags may include: 

  • Financial institution’s customer is using similar images, names and websites of well-known or legitimate companies
  • Financial institution’s customer is using a personal account related to the sale of medical merchandise
  • Merchant is selling highly sought after merchandise at deeply discounted or highly inflated prices
  • Merchant requests purchases be made through unusual payment methods (e.g., Municipal Services Bureau, prepaid cards, convertible virtual currency, etc.)

Nondelivery of medical-related goods fraud

The COVID-19 pandemic has created a global shortage of medical supplies and goods. This has caused an exploitable situation that criminals can use to defraud consumers and companies through nondelivery scams. These scams consist of charging consumers for goods/services through websites, robocalls or the darknet, and then failing to deliver as promised. Financial indicators/red flags may include:

  • The corporation was created in the last few months
  • The corporation has no physical address or employer identification number
  • The corporation is reluctant to provide invoices, tracking numbers or proof of shipment

Price gouging and hoarding of medical-related items

Due to the increased reporting of suspected hoarding and price gouging, the Department of Justice has established the COVID-19 Hoarding and Price Gouging Task Force). This task force is responsible for developing measures that will identify COVID-19-related illicit activities. Financial indicators/red flags may include:

  • Financial institution’s customer begins selling medical equipment with a company not known to be a medical supply distributor
  • Customer sets up a company after January 2020 for online sale of highly sought after COVID-19-related goods (e.g., hand sanitizer, gloves, toilet paper, face masks, etc.).

Additional red flags and case studies can be found on the FinCEN website.

The advisory also provides a location for financial institutions to access information on complying with Bank Secrecy Act obligations during the current pandemic. Suspicious activity report (SAR) filing and information sharing through 314b requests are critical in the fight to identify and prevent COVID-19 scams. FinCEN recognizes that with the current climate there may be increased challenges with respect to BSA obligations, specifically timing requirements for BSA report filings. To address these issues and other updates, FinCEN encourages institutions to visit https://www.fincen.gov/coronavirus

To further aid the public, the DOJ requests that any information pertaining to suspected fraud schemes related to COVID-19 be relayed to the National Center for Disaster Fraud (NCDF) hotline (+1 866 720 5721). The NCDF will enter all information into a centralized system that can be accessed by all U.S. attorney’s offices, as well as DOJ law enforcement components which will lead to identifying, investigating and ultimately prosecuting fraud schemes. 

The Rapid Response Program has also been temporarily expanded to support law enforcement and financial institutions in the recovery of funds stolen via fraud, theft and other crimes associated with COVID-19. To request immediate assistance in recovering cybercrime- and COVID-19-related stolen funds, financial institutions should file a complaint with the FBI’s Internet Crime Complaint Center, contact their local FBI field office or contact the nearest U.S. Secret Service field office.

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