Author: Dave Gowan

Charity, Unemployment, Utility and Coronavirus Treatment Scams continue to target the Elderly and Unemployed

As access to the financial system has decreased due to the COVID-19 crisis, criminal activity has increased in several areas of interest, with much involving various forms of social engineering[i] and technology. This increase is largely due to the inaccessibility of conventional banking; in turn, fraud and money laundering conspirators have had to adapt. While many of us in the Banking Compliance arena do not personally feel susceptible to these types of scams, it continues to be important to consistently communicate to our members and customers regarding schemes and the propensity for financial loss by misdeeds and misrepresentation.

The elderly are specifically susceptible to both online and in-person COVID-19 scams. Many of these scams tend to take advantage of fear by attempting to sell fake cures and preventative medicines specifically formulated for the coronavirus. Other scams are even more nefarious, involving individuals offering services such as grocery and medicine shopping and delivery, ultimately taking the funds up front from immuno-compromised or elderly persons, and disappearing without delivering the items.[ii]

An interesting twist on specific abuses of the elderly and disabled involves caretakers, nursing homes, and assisted living facilities attempting to withhold the stimulus checks of those under their care.  The Federal Trade Commission goes on to assert it is receiving reports, “facilities are trying to take the stimulus payments intended for their residents on Medicaid…requiring those people to sign over those funds to the facility…claiming that, because the person is on Medicaid, the facility gets to keep the stimulus payment.”[iii]

Meanwhile, the CARES Act[iv] is due to expire at the end of July, 2020, with the Federal Government currently deliberating on its extension. This impending expiration has given rise to many Utility Shutoff Scams, where an unsuspecting recipient receives a phone call from a scammer reporting to be a utility demanding payment from a number of methods to avoid shutoff.[v] These methods often involve the use of prepaid cards, remittance, or basic debit or credit card information over the phone. Additional CARES Act-related scams involve the pre-funding of unemployment benefits and additional stimulus payments, none of which have been approved yet.

Social Engineering tends to play a large role in many of the schemes we see today. To end on an obvious note, but if it seems to good to be true, it more than likely is!

[i] https://www.csoonline.com/article/2124681/what-is-social-engineering.html#:~:text=Social%20engineering%20definition,to%20buildings%2C%20systems%20or%20data.&text=%5B%20Learn%20what%20makes%20these%206,signing%20up%20for%20our%20newsletters.%20%5D

[ii] https://www.wlvt.org/blogs/montgomery/scammers-targeting-senior-citizens-with-new-coronavirus-scams/

[iii] https://www.consumer.ftc.gov/blog/2020/05/did-nursing-home-or-assisted-living-facility-take-your-stimulus-check

[iv] https://home.treasury.gov/policy-issues/cares

[v] https://www.consumer.ftc.gov/blog/2020/07/utility-company-calling-dont-fall-it

As the country slowly reopens after its response to the COVID-19 pandemic, many smaller financial institutions may be feeling the overwhelming effects of new rules in place to continue to slow the spread of the coronavirus. Likely, many institutions have seen a soft shutdown of normal services involving physical locations due to the obvious danger of maintaining normal activities within their branches and service centers. To add to the strain on daily operations, many have surely encountered staffing issues, Personal Protective Equipment (PPE) supply shortages, and the overwhelming onslaught of member questions regarding stimulus payments, small business loans, and the like. The coronavirus has affected both members’ health as well as staff; there is no shortage of related situations causing a strain on our communities, and with reopening comes the unknown.

Specific to financial crimes compliance, there have been reports of malicious scams involving various payment networks, as well as social engineering exploits imposed on the general public. The overall theme of many of these fraudulent activities is to play on the emotions of those that are experiencing extreme insecurity and are looking everywhere for assistance, in an attempt to assist them with some sort of prepayment arrangement, or some other expedited access to funds that involve government stimulus payments or unemployment insurance (UI) claims. This is in addition to the workforce shortages that many compliance departments are enduring, forcing many to multitask or put on pause many of the functions for which they were responsible for, in order to assist with various daily operational tasks deemed necessary to business continuity plans.

Now, with what some are calling “The Great Reopening,” your financial institution can be sure to see an uptick in activities that were previously put on pause: cash transactions, business banking, negotiable instrument purchases, and other activities which usually require face-to-face interactions with members and customers. It’s no doubt that criminal enterprise has been struck equally as hard, and the natural expectation is that the pause in activity due to closure will also cause an uptick in conventional suspicious activities. When one puts it all together, balancing the monitoring of new and established criminal typologies, as well as the daily to-do’s, can be a daunting task.

So, how does a compliance professional balance everything given the situation at hand? First, its important to give yourself and your department some grace. Try using this approach to acknowledge that everyone is working hard to get things done and reported in a timely manner and are also balancing everything in their own lives on top of the work that must be done. Adding to this, do not make drastic and blanket changes to the workload, such as auto-closing your red-flag alerts, Currency Transaction Report (CTR) monitoring, or other methods of monitoring using manual and automated systems. Continue to work through your queues and report with as much effectiveness as possible. It may seem obvious to most, but I reiterate the point because when under the stress of balancing all these things, the concept of skipping over work may not be too far off.

Considering a risk-based approach to balancing financial crimes compliance operations can be helpful in protecting your members and customers from crime. Taking a measured effort at distributing the scarce resources and temporarily focusing effort on immediate issues is one way to use a risk-based approach, while acknowledging that the need to catch up and get things done will ultimately come. Every financial institution is dealing with their form of balancing the needs versus the availability of resources, and bank regulators are acknowledging the sudden influx of changes affecting financial institutions, as seen in the following link: https://www.federalreserve.gov/covid-19-supervisory-regulatory-faqs.htm. One final word: look to your regulator as a partner in this ever-changing situation and reach out to your representative if you have questions on addressing financial crimes or other related issues. Communication between the financial institution and your regulatory agency is key to success.