The Financial Crimes Enforcement Network (FinCEN) issued advisory FIN-2020-A007, Advisory on Unemployment Insurance Fraud During the Coronavirus Disease 2019 (COVID-19) Pandemic. The advisory was issued to alert financial institutions to unemployment insurance (UI) fraud observed during the COVID-19 pandemic. The advisory includes descriptions of COVID-19-related UI fraud, associated financial red flag indicators, and information on reporting suspicious activity.
Financial red flag indicators of UI fraud may include:
- Account(s) held at the financial institution receive(s):
- UI payments from a state other than the state in which the customer reportedly resides or has previously worked;
- Multiple state UI payments within the same disbursement timeframe;
- UI payments in the name of a person other than the accountholder, or in the names of multiple unemployment payments recipients;
- UI payments and regular work-related earnings, via direct deposit or paper checks;
- Numerous deposits or electronic funds transfers (EFTs) that indicate they are UI payments from one or more states to persons other than the accountholder(s);
- A higher amount of UI payments in the same timeframe than similarly situated customers received.
- The customer withdraws the disbursed UI funds in a lump sum by cashier’s checks, by purchasing a prepaid debit card, or by transferring the funds to out-of-state accounts.
- The customer’s UI payments are quickly diverted via wire transfer to foreign accounts, particularly to accounts in countries with weak anti-money laundering controls.
- The customer receives or sends UI payments to a peer-to-peer (P2P) application or app. The funds are then wired to an overseas account, or withdrawn using a debit card, in a manner that is inconsistent with the spending patterns of similarly situated customers.
- Individuals quickly withdraw disbursed UI funds via online bill payments addressed to an individual(s), as opposed to businesses, as payee(s), with some individual payees receiving multiple online bill paychecks over a short time period.
- The IP address associated with logins for an account conducting suspected UI-fraud activities does not map to the general location of stated address in identity documentation for the customer or where the UI payment originated.
- Individuals direct UI-related EFTs, or deposit UI checks into suspected shell/front company accounts, which may be indicative of money mules transferring these funds in and out of the accounts.
- Multiple accounts receiving UI payments at one or more financial institutions are associated with the same free, web-based email account that may appear in more than one UI application.
- A newly opened account, or an account that has been inactive for more than thirty days, starts to receive numerous UI deposits. After a financial institution suspects UI fraud and requests additional identification documentation to verify the identity(ies) of the customer(s), queried individuals provide documents that are incorrect or forged, which may be an indicator of an account takeover or identity theft.
- After a financial institution suspects UI fraud and conducts due diligence, it determines that the customer does not have a history of living at, or being associated with, the address to which the UI check or UI debit card is sent, or within the geographical area in which the registered debit card is being used.
FinCEN requests that “COVID19 UNEMPLOYMENT INSURANCE FRAUD FIN-2020-A007” is entered in SAR field 2.
The advisory should be shared with all front- and back-line staff.
Please be advised that CSG provides financial services compliance audit and consulting services to our clients. The services that we provide include certain tasks that may be characterized as “law-related services” under Rule 5.7 of the Rules of Professional Conduct governing lawyers. Since some of our employees are lawyers with an active bar license but are NOT engaged in the private practice of law, that Rule requires us to make disclosures clarifying that the services we perform may be law-related services, but they are not legal services. Because they are not legal services, those services and our relationship will not be governed by the Rules of Professional Conduct that guide the client-lawyer relationship, such as rules applicable to privileged communications and prohibitions of conflicts of interest. Notwithstanding this disclaimer, we will continue to govern our relationship with you using reasonable ethical and professional standards that are expected to meet your expectations.