COVID-19 Fraud Scams: Tips for AML Compliance


While most people are confined to their homes during the COVID-19 pandemic, there is nothing stopping criminals from looking for any possible weaknesses to commit fraud.


COVID-19 is now one of the central themes in fraudulent activities according to banks and law enforcement agencies. For the most part, the scams are familiar – the only difference is the fear of coronavirus may cause people to let their guard down.


“The pandemic is dangerous enough without wrongdoers seeking to profit from public panic and this sort of conduct cannot be tolerated,” said U.S. Attorney General Attorney William Barr in a memo to all US Attorneys.




Scam List Swells With New Schemes

The list of known swindles related to COVID-19 has grown. As of April 21, 2020, the FBI’s Internet Crime Complaint Center had received and reviewed more than 3,600 complaints related to COVID-19 scams, according to a statement by the U.S. Department of Justice. The scams include:


  • Internet Crime Complaint Center has seen an increase in reports of online extortion scams
  • Offers of Cleaning cleaning services or filters to protect from COVID-19
  • Electrical power companies threatening to disconnect power for non-payment.
  • Phony Centers for Disease Control and Prevention (CDC) or the World Health Organization (WHO) offering fake lists for sale of COVID-19 infected people in your neighborhood
  • Public Health Agency falsely saying you have tested positive for COVID-19 in order to get your credit card number for a prescription
  • Pretending to be a known charity offering free medical products like masks in exchange for a donation.
  • Government departments sending out coronavirus-themed phishing emails tricking you into opening malicious attachments
  • Door-to-door salespeople selling household decontamination services
  • Private companies offering fake COVID-19 tests for sale
  • An illicit website pretending to solicit and collect donations to the American Red Cross for COVID-19 relief efforts.
  • Emails that look like they are from Amazon asking you to sign into your account to get a free bottle of hand sanitizer with your next purchase. Of course, it is also a fake.




Criminals Jump on Opportunities

Whether fraud is small-scale on a crowdfunding blog, or large-scale laundering attempts, criminals are using any opportunities they see to make money during a crisis like COVID – especially since we are now making transactions online.


“We must also be alert to the sudden advent of new typologies of fraud, and opportunities for money laundering and sanctions evasion, as a result of the crisis. Organized criminals are exploiting the fears of consumers, some of whom are having to use online systems for the first time, John Binns, a lawyer with BCL Solicitors LLP wrote in an opinion column.


Many banks and FIs have put out bulletins warning their customers to be on the lookout for phony bank communications.


For example, CIBC in Canada warns that old tactics are being used with the new COVID-19 as the element that is different.




Beware of Impersonation Fraud

The frauds include telephoning you and claiming to be from:


  • CIBC (or other banks) and requesting your banking information
  • A health or government agency, like Health Canada, World Health Organization or a local hospital, and requesting your personal information (unless you’ve been tested)


Impersonating essential services such as:


  • A utility company or service provider to ask for funds due to a late or unexpected charge
  • The CRA or RCMP and demanding immediate payment through cryptocurrencies like Bitcoin, CIBC Global Money Transfer or a wire transfer from a money sending service


Taking advantage of the present situation by impersonating:


  • Small business suppliers requesting a payment, or providing updated payment instructions
  • A charity or organization and asking for a donation




Old Themes, Similar Fraud

One of the first fraud scams was also one of the oldest online scams – a phishing email that appeared to be from the WHO. The scam suggested reading an attachment with official information on how to protect yourself from the coronavirus.


However, clicking on the link downloaded a hidden installer that let criminals have access your data by recording your keystrokes. The email phishing campaign is one of several coronavirus-related swindles.


Several U.S. and state agencies have warned of financial crimes associated with COVID-19, including the IRS, FBI, Justice Department, Commodity Futures Trading Commission, Financial Industry Regulatory Authority, New York State Attorney General and California’s Attorney General, according to an ACAMS report.


On a related note, Amazon has also removed over a million products from its marketplace from those who either priced the items unfairly or made false claims. Meanwhile, the Better Business Bureau warns about emails tied to fake coronavirus tests you can purchase.




What Should Compliance Teams Do?

Financial institutions may need to adjust their transaction-monitoring systems to avoid producing alerts on customers simply because their activity drops as a natural side-effect of the pandemic.


Most businesses should show a significant drop in transactions and activities because people have been ordered to stay home.


On the other hand, reports quoting AML experts suggest it could be a sign of money laundering if there are unchanged levels of activity among businesses that would be expected to show declines, such as restaurants and bars.


Keep in mind that cash is being used less in legitimate transactions. Therefore cash-type businesses should show less revenue.


Bars, restaurants, flower shops and hair salons are either closed or seeing significant reductions. These businesses are the types that can be seen in money laundering schemes, so there may be a shift to other businesses for laundering activities.


Financial institutions and the compliance teams need to watch businesses – in particular new ones – to see if there is an unusual level of business at a time they should be struggling.


Suspicions could be raised if there are new companies suddenly being set up to defraud the government compensation programs or to launder and mix funds.




Sanctions Staffing Shortage Causes Concern

Another common issue seen in financial institutions is in the area of sanctions compliance. Many banks have seen fewer workers on their compliance teams and that has been a significant decrease in staffing focusing on certain geographic areas.


Some banks have split their teams and are concentrating on transactions from higher-risk countries, leaving less scrutiny on lower-risk countries.  This could give criminals an opportunity to focus their actions as there are fewer eyes monitoring transactions.


While FIUs have made some guidance on compliance with regulations during the pandemic, experts suggest sanctions units involved in remediation work should create relationships with regulators and try to buy more time to resolve any issues or delays in filing regulatory reports.




Other Notable Cases

Doctor Charged With Fraud After U.S. Says He Sold Treatment as ‘100 Percent’ Cure for Covid-19

Federal prosecutors this week charged a Southern California doctor with selling coronavirus treatments online — including a drug repeatedly promoted by President Trump — as a “100 percent” cure, officials said.


Federal authorities thwart hundreds of online COVID-19 related scams

On April 9, the U.S. Food and Drug Administration issued a warning for a church selling chlorine dioxide products known as “Miracle Mineral Solution” (MMS) claiming to be used as treatment for COVID-19. The FDA warned that the “treatment” is actually a powerful bleaching agent known to cause potentially life-threatening effects.


Interpol cracks complex mask scheme

The COVID-19 scams are not just isolated fraudsters – there is also an effort from organized crime to take advantage of the desperation felt by countries struggling to find supplies to treat the millions of people being treated for the disease, which so far has no cure.


Interpol also had a recent scheme unmasked when they found fraudsters using compromised emails, advance-payment fraud and money laundering in Europe.


The sophisticated scheme used compromised emails, payment fraud and money laundering and was tracked across Europe, including Ireland, Germany and the Netherlands.


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