Blog / May 15, 2020

Fighting COVID-19 Related Financial Fraud

Whenever crises emerge, scams seem to follow, because while criminals can be strategic, they are also opportunistic. Since COVID-19 (Coronavirus) has caused a great deal of uncertainty and panic, fraudsters have found unique ways to target and victimize both businesses and their customers. And unlike many disasters of the past, the pandemic has localized a global concern, leading to a surge of frauds preying upon the desperate.

While this is just the latest battlefront in a long campaign against financial fraud, institutions can act. Sometimes, the best defense is a good offense.

Arm Yourself with Awareness

An effective strategy to combat financial fraud first requires familiarity with fraudsters’ tactics and detection. In many ways regarding Coronavirus-related financial fraud, the more things change, the more they stay the same. Cyber criminals’ approach to COVID-19 hysteria so far mirrors many of the scams financial institutions and their clients have dealt with for years, only tailor-made to the pandemic. Their strategies to take advantage of public anxiety include:

  • Selling fake products or treatments for COVID-19 that claim almost miraculous results, from testing kits and protective equipment to immunity pills and outright cures
  • Phishing emails where fraudsters pose as reputable organizations like the World Health Organization (WHO) and Centers for Disease Control and Prevention (CDC)
  • Seemingly legitimate websites and apps that release malware locking access to your devices until receiving a ransom
  • Crowdfunding or charities purporting to funnel donations toward a cure to individuals in great need (either jobless or ill, for instance)
  • Robocalls or emails making fraudulent offers to sell high demand goods or services, such as respiratory masks or toilet paper
  • Emails claiming a subscription or account has been locked, which then require clicking a link to reenter credit card or personal information
  • Medical scams such as supposed medical providers obtaining patient information for COVID-19 testing or extending fraudulent offers of free COVID-19 tests. These are designed to fraudulently bill consumers for tests and procedures and/or obtain Medicare beneficiary information to submit false medical claims for unrelated, unnecessary, or fictitious testing.
  • Insider trading through which investors have taken advantage of the market volatility of COVID-19 and nonpublic information to game the system

Build a Financial Institution Battleplan

The above list can be overwhelming, but many financial institutions are already putting preventative measures into action. This situation is unprecedented, so in addition to dealing with financial fraudsters’ business as usual, financial institutions must account for some key differences.

Under financial strain or out of concern for their employees, some financial institutions have reported considering whittling down or restructuring resources, including financial crime compliance teams. At the same time, everyday people are shifting money around, just as they shift transactional patterns and gravitate toward digital banking and other methods of remote transactions such as online trading or making payments via an app. This trend could lead to a volatile surge in transactional and fraud detection alerts, with smaller teams to analyze and communicate suspicious activity. In addition to following financial crime best practices in light of Coronavirus, remember to:

  • Educate your employees and your customers, providing a scam watchlist both externally and on your secure employee intranet
  • Protect your institution from Coronavirus-related security threats by exercising caution through a secure internet, a virtual private network and increased alertness
  • If you absolutely must curtail your AML and fraud teams, use cross-trained and skilled staff from your talent pool to monitor the rise in alerts and communicate suspicious activity reports in a timely manner. Make sure you have strong documentation around these changes to ensure compliance
  • Update customers on your external website as the situation develops. Communication is key, and an alliance between institutions and their customers creates a unified front against financial fraud

Combat Customer Cons

Times of crisis create opportunities for scammers to capitalize on panic and anxiety. With the unprecedented nature of COVID-19 and its effect on everyone, regardless of geographic location, many are at risk of falling victim to financial scams in a coronavirus-related disguise.

However, this also presents an opportunity for financial institutions to lead from an informed vantage point and combat susceptibility before it happens. Communicate with your customers about the common scams above and encourage them to be cautious and informed before clicking unsafe links or letting panic give scammers a strategic advantage.

If you’d like to know more about fighting financial fraud, or other virus-related topics, check out our COVID-19 Crisis Management Roundtable.

Becki LaPorte serves as compliance director for CSI’s Regulatory Compliance Group. She has over 20 years of experience in the financial services industry, including compliance, conducting investigations, developing and delivering comprehensive training, and consulting on program development and implementation. Becki is CAMS and CFCS certified.

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