Sunday , August 9, 2020

Fraudsters’ Schemes to Get a Share of Covid-19 Stimulus Funds Draw a Warning From FinCEN

With trillions of dollars in federal stimulus money sloshing around in the economy to help consumers who have lost their jobs due to Covid-19, fraudsters are ratcheting up their efforts to get a piece of that pie.

Two popular plans of attack are imposter scams, where criminals impersonate representatives of government agencies, non-profits, and charities to defraud victims, and money mules. The threats from both scams have grown to the point the Financial Crimes Enforcement Network (FinCEN) issued an alert this week for financial institutions to be on the lookout for them. FinCEN is a bureau of the U.S. Treasury.

“This tumultuous period is the year of greed, need, and speed,” says John Buzzard, a fraud and security analyst for Javelin Strategy & Research, Pleasanton, Calif. “The speed quotient comes into play through technology as criminals leverage digital channels to execute advanced deposit scams, Covid-19 stimulus check fraud, and unemployment fraud.”

Imposter scams occur, for example, when criminals contact consumers pretending to be a representative of a government agency or charitable organization to persuade the victim to make a digital payment, provide personal information, or unknowingly download malware. The malware can then be used to gain access to passwords and other financial information. One way  criminals are adjusting the scam to fit the times is by posing as health-care workers engaged in Covid-19 contact-tracing activities and requesting personal or financial information as part of the tracing efforts, FinCen says.

Criminals need money mules to set up bank accounts into which illegally acquired funds can be deposited to cover their tracks. Deposited funds can then be transferred later to another account controlled by the criminal.

During the pandemic, criminals have recruited money mules by using work-from-home, good Samaritan, or romance schemes, says FinCEN. Potential mules can be contacted by Internet or social-media advertisements, email, or text messages. Payment is offered in return for setting up a bank account. Accounts can be set up in the mule’s name or as a business account. In some cases, money mules will open accounts at several banks.

“Criminals have a constant demand for money mules, but with so much stimulus money out in the economy, banks are seeing an increase in mule-account activity,” says Trace Fooshee, a senior analyst for Boston-based Aite Group’s fraud and anti-money laundering practice. “There are a lot of unemployed people sitting at home stressed over how they are going to pay their rent or bills that are more willing to turn a blind eye when it comes to participating in these scams.”

Fraudulently obtained unemployment benefits are becoming a big source of money flowing into accounts set up by money mules, says Fooshee. A common scam is to have an imposter apply for the unemployment benefits in the name of a deceased individual. “Criminal rings have lots of consumer data they can use to falsely apply for unemployment benefits and it’s easy to apply, because they can do it online,” says Fooshee.

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