The Financial Crimes Enforcement Network (FinCEN) has released an advisory concerning Unemployment Insurance (UI) fraud related to the COVID-19 pandemic. Money Services Businesses (MSBs) must be aware of different types of potential fraud, red flags to look for and how to file a Suspicious Activity Report (SAR) accordingly.
During the COVID-19 pandemic, UI claims are at an all time high and so is fraud. Bank Secrecy Act (BSA) data has uncovered different types of illicit activity regarding UI claims.
Fictitious Employer-Employee Fraud – Filers claim they work for a legitimate/fake company and make up wages
Employer-Employee Collusion Fraud – Filer receives UI and wages from their current employer
Misrepresentation of Income Fraud – Filer fails to report earned wages
Insider Fraud – State employees access UI claims to approve inappropriate claims, payment amounts or alter the application
Identity-Related Fraud – Applications submitted with false identification
As an MSB, your business is vulnerable to fraud. It is pertinent to know what the red flags are so you can protect business.
- Accounts held at the financial institution receives multiple UI payments
- Filer is cashing UI benefits from a state they don’t reside or has previously worked
- Cashing multiple checks from different states
- Cashing checks with names that don’t match the filer’s ID
- The filer is cashing corporate check(s) and a UI check
- Cashing checks that are higher than normal
- The customer asks for the 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 jurisdictions under increased monitoring are defined as areas that are actively working with the Financial Action Task Force (FATF) to address strategic deficiencies in their regimes.
- 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.
It is crucial to file a Suspicious Activity Report (SAR) with FinCEN if a financial institution identifies any of the suspicious activity listed above. When filing a SAR related to UI fraud, follow these three steps:
- List “COVID19 UNEMPLOYMENT INSURANCE FRAUD FIN-2020-A007” in the notes field to indicate connection to COVID-19.
- In SAR field 34(z), (Fraud – other) and include keywords “unemployment fraud.”
- In addition to standard information, include any identifying information helpful to law enforcement.
Money services businesses are naturally vulnerable to risk, but the COVID-19 pandemic produces a new wave of fraud exposure. If you would like support combating fraud and money laundering, contact us today.Tags: Bank Secrecy Act, BSA, COVID-19, FATF, Financial Action Task Force, FinCEN, Fraud, Money Services Business, MSB, Red Flags, SAR, Suspicious Activity Report