AML Transactions Monitoring in the wake of COVID-19

The COVID-19 pandemic revealed again the solidarity between people and nations with many raising funds and humanitarian initiatives across the world. But there is also clear evidence of malicious and fraudulent financial activities.

There are attempts to solicit donations, steal personal information, or distribute malware by impersonating government agencies and international organizations such as the World Health Organization (WHO).

There are also cases of investment scams falsely claim that the products or services of publicly traded companies can prevent, detect or cure Coronavirus.

Cases of product scams, selling unapproved or miss-branded products that make false health claims pertaining to COVID-19 or fraudulent marketing of COVID-19 related supplies, such as certain face-masks were also identified

In the UK, for example, 21 cases of fraud linked to the virus reported last month, with victims’ losses totaling over ￡800,000. Ten of the reports involved the purchase of face-masks from fraudulent online sellers.

Cyber-criminals had been using phishing and malware to target victims in Italy, the United States, Ukraine and Iran, among other nations. The scheme involved fraudsters emailing potential victims and pretending to be from organisations working with the WHO and CDC (Centers for Disease Control and Prevention). The fraudsters claimed to be able to provide a list of infected people in the victim’s area. The victims were then asked to click on links to malicious websites in order to obtain the lists and were at times asked to make payments in Bitcoin.

With many people being laid off or working from home due to the pandemic, cyber-criminals are recruiting “money mules” - people who get roped into money laundering schemes under the pretense of a work-at-home job offer. Those offers frequently related to fabricated non-profit organizations, telling new employees they’ll be collecting and transmitting donations to a Coronavirus Relief Fund.

Governments in nearly all continents ask people to work from home and refrain from interacting with one another, among other drastic measures to curb the outbreak of the COVID-19.

This “social distancing” change the way of using bank services. Wire transfers have dropped since the start of February amid disruptions in the global economy, balancing out the surge in cash withdrawals, online banking and cryptocurrency related activity.

Following the governments instructions, Financial Institutions are taking steps to protect their employees, including by having their AML staff largely or entirely work from home. But not all the Financial institutions have the proper IT infrastructure to let compliance officers work remotely in an efficient manner. Small Financial Institutions that have limited IT infrastructure might focus their resources first on sanctions, second on fraud and only third on AML. This makes it much harder for anti-money laundering staff to discriminate between legitimate activity and illegal transactions and to file SARs within normal time limits.

The combination of a “social distancing” policy instructed by the governments and Financial Institutions having fewer resources to adjust the dramatic change in patterns could lead to a “perfect storm” scenario that fraudsters will use to game the system.