COVID-19 pandemic turning into a financial crime threat

Edward lilly April 16, 2020 8 minutes read

01 Money mules Schemes to exploit COVID-19
02 Money laundering and Financial Crime cases expected to grow
03 Eliminating financial crime through contactless technology
04 Touchless KYC verification
05 Ongoing AML checks
06 Know your business (KYB)
07 Conclusion

A few months back when the World Health Organization (WHO) declared coronavirus a “pandemic” it left out the consequences of the outbreak. On the one hand, millions of people are suffering from this novel disease and thousands have lost their lives in the battle against coronavirus. With the countries being locked down, people are confined to their homes. This has raised an unknown panic and fear among individuals regarding this novel outbreak.

One of the major concerns linked with this outbreak is how financial criminals and scammers are exploiting it. It’s a well-understood fact that the panic and attention that comes with such outbreaks and natural disasters open new doors for shady people to take advantage of the situations and fulfill their malicious intent. In fact, the regulatory authorities and financial crime units are continuously warning individuals to beware of scams and frauds. Recently in one of his statement, the chief of FBI’s financial crimes section, Steven Merrill said

“When there’s an opportunity for a criminal, a fraudster to take advantage, they will. And in this case, they’ve taken advantage of the fact that we’re all very scared, we’re vulnerable, and we’re looking for answers.”

As time is passing, there has been a significant increase in corona-related scams; new cases are reported every day. Panic is itself a condition that just freezes an individual’s capability to think and act properly, and one of the reasons why scammers and criminals are successful in their intents.

Money mules Schemes to exploit COVID-19

The regulators and crime units are continuously issuing reports and warnings about the potential coronavirus threats. Recently, the FBI has issued a report highlighting the possible threat scheme that criminals may use to exploit individuals during the COVID-19 pandemic. The money mule scheme sounds quite tempting and criminals can easily take victims into trust, similar to the romance scams where the victims searching for love unintentionally become money mules.

It seems like a harmless request, starting off with a simple job email or through social sites. What criminals do is ask their targets to provide their bank account information for the transaction flow. All they have to do is just transfer the received amount into another account and in return, they get some cash for their efforts. This sounds quite profitable and an easy job and people fall for it very easily. And that’s where they make their biggest mistake of becoming a money mule and end up in prison. It can ruin them financially as well as harm their reputation.

According to the FBI, the con artists are putting coronavirus outbreak to their advantage. They are laundering their black and ill-gotten money by luring victims into becoming their mules. Criminals can convince their mules to transfer money through fund transfer and now with the corona outbreak they are even emotionally exploiting people creating fake scenarios such as ‘they are overseas and want you to transfer money to their loved ones battling COVID-19”

But no one knows the source of money they are transferring; it can be from internet scams or other ill sources such as illegal business schemes, human trafficking, drug trafficking, or terrorist funding.

What are some common COVID-19 scams reported?

To date, the Federal Trade Commission (FTC) has received more than 17,400 consumer complaints about corona-related scams. Following are the main types:

Public Health Scams in which scammers are claiming to be from public health organizations such as WHO and CDC and fulfilling their malicious intents through the latest form of phishing attacks
Fake supply scams in which fraudsters are running away receiving payments for the COVID-19 essentials such as sanitizers and face masks and never supply them.
Data scams in which cybercriminals are launching cyberattacks on the employees working from home and businesses.
COVID charity scams in which fundraising hackers are utilizing licit donation platforms and social pages to gain users’ trust and sympathy.
Government check scams in which scammers pretend to be from the Social Security Administration (SSA) and try to get the victim’ Social Security number or money.

Money laundering and Financial Crime cases expected to grow

As the coronavirus continues to take the world into its clutches, Europe regulators are stating more stringent instructions for the financial institutions to stay vigilant and closely monitor the transactions. In fact, the European Banking Authority (EBA) issued a statement last month warning financial institutes and banks about the emerging evidence of a new wave of criminal activities amid the corona outbreak. This is because COVID-19 has prompted the financial criminals to seek new ways of transferring illicit funds across borders without getting detected; money mules being the one as highlighted by the FBI.

In addition, the businesses and individuals seeking to purchase the COVID-19 essential types of equipment and supplies are on the top of the target list of criminals. Europol reported one such incident in which a company transferred €6.6 million to a company in Singapore to purchase protective masks and alcohol gels which they never received. And this is not the only case.

Eliminating financial crime through contactless technology

While there is no cure for COVID-19 currently and we can’t say for how long it’s going to stay like this, criminals are not going to stop here. In fact, in upcoming days the threat will even grow. The traditional measures are outdated due to the emergence of new contactless technology. Businesses such as financial institutes, banks, e-commerce platforms, can eliminate financial crime by incorporating advanced AI solutions.

Touchless KYC verification

Know your customers (KYC) processes are mandatory for the institutions dealing with money to curb money launderers and terrorist financiers. Due to lockdown because of the corona outbreak, the businesses have adopted remote work that makes it impossible to verify customers using traditional KYC methods. Then what else can they do? The answer is simply, go for automated KYC alternatives that work on the principle of artificial intelligence.

By incorporating digital KYC solutions such as ID verification, document verification, video KYC, face verification, businesses can verify and authenticate customers ensuring secure customer onboarding and eliminating frauds during COVID-19.

Ongoing AML checks

Experts are predicting that undoubtedly the situation is going to remain the same, increasing the threat of financial crime. Therefore, businesses need to step up their protection game to combat money launderers during this outbreak. This can be done by implementing digital ongoing AML checks that can keenly monitor the customers. Moreover, with ‘Know your transactions (KYT)’ organizations can verify and monitor the transactions done by the customers.

Know your business (KYB)

Many incidents are emerging in which the criminals are cloning the businesses or pretending to be authentic supplier organizations to defraud people. Under such scenarios, the instant Know your business (KYB) solution is an effective way to check the authenticity of the business before carrying out a purchase or undergoing a contract with them. KYB checks include the verification of company registration, business license, identification of a business, and other executives of the business.

Conclusion

The COVID-19 pandemic has become a threat to many businesses. Fraudsters have developed new ways of financial crimes which are increasing problems for financial institutions. Unfortunately, financial crimes like money laundering, terrorist financing, and other frauds have significantly increased. Monitoring transactions with Know Your Transaction solution and verifying customers with KYC veirifcation are two of the most effective ways of dealing with financial crimes. Moreover, ongoing AML checks make sure your business is free from money laundering activities.