FinCEN Issues Advisory on Imposter Scams and Money Mule Schemes Related to COVID-19
Credit unions should provide all pertinent and available information regarding scams in SARs.
The Financial Crimes Enforcement Network recently issued FinCEN Advisory FIN-2020-A003 to alert financial institutions of potential indicators of imposter scams and money mule schemes, which are two forms of consumer fraud observed during the COVID-19 pandemic. Many illicit actors are engaged in fraudulent schemes to exploit vulnerabilities created by the pandemic, and the advisory provides descriptions of imposter scams, financial red flag indicators for both, and information on reporting suspicious activity.
In imposter scams, criminals impersonate organizations such as government agencies, nonprofit groups, universities, or charities to offer fraudulent services or otherwise defraud victims. While imposter scams can take multiple forms, the basic methodology involves an actor contacting a target under the false pretense of representing an official organization and coercing or convincing the target to provide funds or valuable information, engage in behavior that causes the target’s computer to be infected with malware, or spread disinformation. In the case of schemes connected to COVID-19, imposters may pose as officials or representatives from the Internal Revenue Service, the Centers for Disease Control and Prevention, the World Health Organization, other healthcare or nonprofit groups, and academic institutions.
Given that many scammers may be targeting members as opposed to credit unions directly, credit unions, when interacting with their members, should remain on the alert for potential suspicious activities. Some financial red flag indicators of imposter scams may include:
- Requests via phone/e-mail/text requesting verification of personal information in connection with COVID-19-related stimulus payments or benefits, including Economic Impact Payments .
- Unsolicited communications from purported trusted sources or government programs related to COVID-19, instructing readers to open embedded links or files to provide personal or financial information, including account credentials.
- Solicitations where the person, email, or social media advertisement seeks donations on behalf of a reputable organization, but the hyperlink points to an unaffiliated website.
Money Mule Schemes
A money mule is “a person who transfers illegally acquired money on behalf of or at the direction of another.” Money mule schemes, including those related to the COVID-19 pandemic, span the spectrum of using unwitting, witting, or complicit money mules. An unwitting or unknowing money mule is an individual who is “unaware that he or she is part of a larger criminal scheme.” The individual is motivated by his/her trust in the actual romance, job position or proposition. A witting money mule is an individual who “chooses to ignore obvious red flags or acts willfully blind to his/her money movement activity.” The individual is motivated by financial gain or an unwillingness to acknowledge his/her role. 7 17. For examples of how a witting money mule is recruited and used, see id., p. 5. A complicit money mule is an individual who is “aware of his/her role as a money mule and is complicit in the larger criminal scheme.” The individual is motivated by financial gain or loyalty to a criminal group. During the COVID-19 pandemic, U.S. authorities have detected recruiters using money mule schemes, such as good-Samaritan, romance, and work-from-home schemes. U.S. authorities also have identified criminals using money mules to exploit unemployment insurance and the SBA EIDL grant programs during the COVID-19 pandemic.
Some financial red flag indicators of COVID-19 money mule schemes may include:
- A member who typically maintains a low account balance starts to receive transfers that do not fit his or her transactional history profile, including overseas transactions, purchases of large sums on convertible currency, etc.
- A person opens a new account in the name of a business and, shortly thereafter, someone transfers the funds out of the account.
- A person opens accounts at multiple institutions in order to receive money from various individuals and business, then moves the money to other accounts at the direction of the member’s purported employer.
SAR reporting, in conjunction with effective implementation of due diligence requirements by credit unions, is crucial to identifying and stopping financial crimes, including those related to the COVID-19 pandemic. Credit unions should provide all pertinent and available information in the SAR and narrative.
- FinCEN requests that financial institutions reference this advisory by including the key term “COVID19 MM FIN-2020-A003” in SAR field 2 (Filing Institution Note to FinCEN) and the narrative to indicate a connection between the suspicious activity being reported and the activities highlighted in this advisory.
- Financial institutions should also select SAR field 34(z) (Fraud – Other) as the associated suspicious activity type to indicate a connection between the suspicious activity being reported and COVID-19. Financial institutions should include the type of fraud and/or name of the scam or product (e.g., imposter scam or money mule scheme) in SAR field 34(z). In addition, FinCEN encourages financial institutions to report certain types of imposter scams and money mule schemes using fields such as SAR field 34(l) (Fraud – Massmarketing), or SAR field 38(d) (Other Suspicious Activities – Elder Financial Exploitation), as appropriate with the circumstances of the suspected activity.
Question of the Week
Q. What is the credit union’s liability if we offer an account that requires two signatures for transactions, and we perform a transaction with only one signature?
A. The credit union would be liable if an item/transaction with only one signature was cleared. An account is a contract, and an account with two joint owners is a contract between three people: Joint Owner #1, Joint Owner #2, and the credit union. If the contract requires two signatures for transactions, the credit union would be breaching the contract by allowing a transaction with only one.
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Financial Crimes Enforcement Network
Advisory on Imposter Scams and Money Mule Schemes Related to COVID-19
FinCEN released Advisory FIN-2020-A003 on imposter and money mule scams related to the Coronavirus Disease 2019. The advisory contains descriptions of imposter scams and money mule schemes, financial red flag indicators for both, and information on reporting suspicious activity.
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Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].