The Covid-19 pandemic has altered our lives, forcing millions of people to quarantine and self-isolate, setting aside all non-essential businesses and needs, and expanding critical sectors, primarily the pharmaceutical. A growing number of citizens are staying home and limiting their public lives, keeping in touch with the outside world mostly through the screens of their phones and PCs.
The unrecommended use of cash has also given rise at unprecedented levels to digital banking. For many it is their first time using apps and online banking, particularly the older generation, making them highly susceptible to shady persons.
It is in this surreal environment that criminals have found the vulnerabilities they need to enact scams and frauds to the detriment of financial institutions, the healthcare sector, and the world population.
How are criminals exploiting the coronavirus crisis?
On April 1st, the Financial Action Task Force’s (FATF) president, Xiangmin Liu, issued a statement concerning the measures to combat illicit financing during the Covid-19 crisis.These also include fundraising for fake charities and medical scams targeting virus-anxious innocent victims. There is also the fear that many of these criminal activities may be used to raise funds for terrorists.
Below are a series of examples that may aid analysts to spot potential red flags.
How to detect scammers profiting from the coronavirus crisis?
These types of scams are becoming increasingly common. When faced with a large transfer for the acquisition of medical supplies, there are a few potential red flag that may lead to the suspicion of a scam:
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Tax havens: the money is being transferred to a tax haven or a country considered to be non-compliant with regard to the exchange of tax information or benefiting from considerably favourable taxation of professional income in relation to the place of its actual activity.
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Background check: does the company have offices or branches in the country where the money is supposed to be transferred?
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Contact information: ask your client who they spoke to and check if the person’s email is legitimate. Also check if that person truly works for the company he purports to.
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Check the prices: coronavirus scams involving medical equipment often comprises of material sold at very cheap or discounted prices. Ask your client at what price they are buying the items and compare it to legitimate sources.
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Website: if the scammer company has a website, give it a thorough look. Scam sites are distinguishable by the fact that they sell very few items, primarily masks and hand sanitisers, at discounted rates.
The FATF has also warned that, “national authorities and financial institutions should apply a risk-based approach to ensure that legitimate Non-Profit Organization activity is not unnecessarily delayed, disrupted or discouraged.”
How to detect money mules profiting from the coronavirus crisis?
The foundation hired people through online job search platforms to help investigate local pharmacies that were suspected of violating medical pricing policies. Each individual was asked to file a report with the foundation and to keep receipts for travel reimbursement.
Once the trust of the "employees" was gained, the foundation requested assistance in transferring a "donation" from a contributor for the fight against Covid-19.
This methodical and carefully orchestrated strategy demonstrates that criminals have the ability to create presumably legitimate systems for laundering large amounts of money with limited resources.
By manipulating a person's goodwill, criminals have sought to take advantage of people's empathy to enable them to launder funds from stolen credit cards without raising questions. With this case it was done through a process of financial untraceability using virtual currencies and mules.
Let’s analyse potential red flags that an AML analyst may encounter that may give rise to money mule suspicions:
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No relation: a client may receive a sum of money from a healthcare foundation/company, but that specific client’s business has nothing do to with healthcare.
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Funnel account: the client may receive a sum of money from a healthcare foundation/company, then cash it out at an ATM (equivalent opposite transactions).
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Communication: ask the client where he/she received information on any jobs pertaining to healthcare. Many money mule jobs are posted online on website such as Monster.com or Indeed.com.
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Legitimacy: check if the name of the foundation/company exists online. Does it appear in a database concerning companies? When was it first constituted?
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Website: if the foundation/company has a website, check when it went live online. This can be done by following this quick guide. If the website has been up and running for only a number of days or weeks, then it’s most likely a scam.
How to detect fake investments profiting from the coronavirus crisis?
When faced with a client wanting to invest in a little-known pharmaceutical company, an AML analyst should watch out for the following red flags:
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Small Microcap stock: is the stock a small microcap? Most of the companies that enacted this scheme are of that size.
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Information: where did the client hear about the stock? If online, check the source to see if it’s legitimate.
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History of the stock: check the history and the recent volumes of the stock. Were they low and have they skyrocketed in the past few days?
What is the future of crime post-pandemic?
Warnings are elevating that criminal organizations will most likely acquire small companies on the verge of failure due to the pandemic to use for money laundering purposes.
A rise of the use of usurary instead of traditionnal banking system is anticipated.
Antonino di Matteo and Roberto Tartaglia, two Italian magistrates fighting the Mafia, have issued a warning that criminal organizations will most likely acquire small companies on the verge of failure due to the pandemic to use for money laundering purposes. Compliance and AML Officers should scrutinize the transparency of the companies their institution does business with, particularly who and what other companies are behind them, who exactly are the UBO’s, and any negative news related to them. Financial institutions should adapt their adverse media screening tools to capture new categories related to coronavirus crimes and money laundering that have and will emerge in news outlets. They must also not accept clients who have an obfuscated company structure.
Compliance and AML Officers and analysts will need to be aware of new trends in criminal activity so as to counter them in the most efficient way.