The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has issued a special bulletin on their analysis of transaction reporting during COVID-19 pandemic.
The Canadian Anti-Fraud Centre’s (CAFC) analysis of fraud reporting has shown areas that may pose an increased money laundering risk associated with the exploitation of the pandemic.
While the COVID-19 pandemic has not had a significant impact on the overall volume of suspicious transaction reports (STR) and electronic funds transfer reports (EFTRs), the volume of casino disbursement reports (CDR) and large cash transaction reports (LCTR) has significantly decreased.
FINTRAC says the overall decrease in large cash transactions is likely a result of the physical distancing and public health measures as they have resulted in a general decline in cash transactions and business closures, including casinos.
While large cash transaction decreased, there was an 86 per cent increase associated with reporting from dealers in precious metals and stones.
Observations in FINTRAC Transaction Reporting
An analysis of STRs containing a reference to COVID-19 highlights general suspicions of money laundering based on the nature of transactions, FINTRAC stated.
They also reported they are suspicions of the laundering of fraud proceeds as Financial Intelligence Units in other jurisdictions have reported similar findings.
The COVID-19 pandemic represents an unprecedented situation that may lead to unusual transaction activities, FINTRAC stated. While many unusual patterns may reflect legitimate needs to access financial services during this challenging time, some individuals may attempt to profit from the current situation to facilitate money laundering.
The COVID-19 pandemic, and associated closures and physical distancing measures, has disrupted some money laundering methods – particularly those that rely on the placement of illicit cash into cash-intensive businesses – and may expose criminals seeking alternate venues to integrate illicit proceeds into the financial system.
The characteristics of suspicious transaction reports highlighted below may not necessarily be indicative of money laundering, but should be examined along with additional risk indicators:
- Transaction activity that is atypical or not in-line with the client’s financial profile.
- Being unable to comply with reporting entity requests for further information regarding client financial activity.
- Large currency exchanges for unclear purpose, or for the purpose of travel that is not plausible given the COVID-19 pandemic.
- Large cash deposits where the source of funds is unclear, or not plausible given the current pandemic.
- Explanations for transactions deemed unlikely given the business profile and the anticipated impact of the COVID-19 pandemic on the operating model (e.g., restaurants, bars, gyms, travel industry, etc.).
- Unusual large cash deposits to business accounts, particularly in sectors most impacted by the COVID-19 pandemic or outside the norm for any business types.
- Unusual or suspicious transactions involving the sale or procurement of personal protective equipment or other medical or hygiene supplies that are in high demand due to the COVID-19 pandemic. Transactions may involve individuals seeking to purchase small quantities or large-scale procurement by institutions.
- Transactions that may be related to COVID-19 variations of existing mass marketing fraud schemes.
- Large cash withdrawals by individuals may be indicative of fraud victimization or the laundering of proceeds of fraud activities, often using mules who may have previously been victimized.
COVID-19 Fraud Trends
FINTRAC reports the COVID-19 pandemic is having a significant impact on the global economy. Although it is still too early to determine how this pandemic will alter the money laundering landscape, the crisis has implications for organized crime by creating significant new or expanded opportunities for the perpetration of fraud.
Counterfeiters have focused on selling fake COVID-19 home test kits and pharmaceuticals, and offering unconfirmed and often false advice on the treatment of COVID-19 on the Internet and the darknet, with transactions conducted using virtual currencies, said FINTRAC.
The increased use of online services during the pandemic also enhances the risk of cybercrime. Cyber criminals are exploiting the current situation to target individuals, businesses and entities with COVID-19 variants of popular phishing and blackmail scams, which are increasingly directing victims to send virtual currency for donations and ransom payments.
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