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.

7/14/2020

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.

Imposter Scams

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

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.

Legal Briefs

National Credit Union Administration

Field of Membership – Rural Districts
The NCUA released letter to credit unions 20-CU-21 which covers the next steps now that the Supreme Court denied the ABA’s petition to review the D.C. Circuit Court of Appeal’s decision on the NCUA’s field of membership rules.

Q1 2020 State Credit Union Data Report Now Available
The NCUA released first quarter 2020 data for state credit union data. Federally insured credit unions generally saw asset, share-and-deposit, and loan growth over the year ending in the first quarter 2020.

Consumer Financial Protection Bureau

CFPB Issues Final Rule on Small Dollar Lending
The CFPB issued a final rule which rescinds the mandatory underwriting provisions of the 2017 Payday, Vehicle Title, and Certain High-Cost Installment Loans rule. The rule does not rescind or alter the payment provisions of the 2017 rule.

CFPB Ratifies Prior Regulatory Actions
The CFPB ratified most of the regulatory actions the Bureau took between Jan. 4, 2012 through June 30, 2020.

CFPB Releases Report on Debt Settlements and Credit Counseling
The CFPB released a report examining recent trends in debt settlement and credit counseling. The report shows that nearly one in thirteen consumers with a credit record had at least one account reported by the creditor as settled or with payments managed by a credit counseling agency from 2007 through 2019.

Internal Revenue Service

IRS Issues Guidance on Reporting Qualified Sick and Family Leave Wages Paid
The IRS issued guidance in Notice 2020-54 to employers which requires the employers to report the amount of qualified sick and family leave wages paid to employees under the FFCRA on Form W-2. Employers will be required to report these amounts either on Form W-2, Box 14, or in a statement provided with the Form W-2.

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.

U.S. Department of Labor/Occupational Safety and Health Administration (OHSA)

COVID-19 Frequently Asked Questions
OHSA released a set of FAQs which address topics related to COVID-19 and provides links to resources for workplace safety and health.

U.S. Department of Housing and Urban Development

HUD Provides Eviction Prevention and Stability Toolkit in Latest COVID-19 Response Effort
The HUD announced the ‘Eviction Prevention and Stability Toolkit’ to encourage landlords to plan for and implement strategies to keep families stably housed and mitigate hardships due to Coronavirus. The toolkit is composed of a PHA best practices guide, tenant brochure with tips to avoid eviction, HCV landlord flyer to encourage engagement with tenants before the moratorium expires, and repayment agreement guidance in addition to sample documents to provide increased clarity for landlords and renters utilizing the resources.

FHA Expands Home Retention Measures for Homeowners Financially Impacted by COVID-19
The FHA announced additional home retention measures to help homeowners with HFA-insured single-family mortgage who are financially impacted by the COVID-19 pandemic to bring their mortgage current at the end of their COVID-19 forbearance. Mortgage servicers will be able to use an expanded menu of loss mitigation tools, known as a “waterfall”, to assess homeowner’s eligibility for other options to bring their mortgage current if they do not qualify for FHA’s COVID-19 National Emergency Standalone Partial Claim.

Both Fannie Mae and Freddie Mac have announced further extensions of origination guidance related to the COVID-19 pandemic (Fannie Mae Lender Letters 2020-03; 2020-04 and Freddie Mac Bulletin 2020-27). The guidance now applies to applications received on or before Aug. 31.

Office of Foreign Assets Control

OFAC has updated the SDN list as of July 10. The last update prior to this was July 2.

Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].