Phishing attacks using coronavirus-led messaging are already on the rise, but scams focussed on panicked money movement, money laundering via cryptocurrencies, money muling and exploitation around business loans are just around the corner, warns leading regtech firm ComplyAdvantage.
Sweeping changes to the way we live, and work, have presented a huge opportunity for criminals to capitalise on the Covid-19 pandemic.
Criminals are currently targeting people looking to buy medical supplies online – sending emails offering fake medical support and scamming people who may be vulnerable or increasingly isolated at home.
But with many people now remote working, companies face a higher risk of being defrauded by people from outside their organisation.
Charles Delingpole, chief executive of ComplyAdvantage – a provider of real-time financial crime insight, told The Fintech Times: “It’s very much room 101, in that every major event will always provide scammers with a new way to exploit whatever situation exists and use the weapons in their arsenal to make it as bad as possible. Last year, it may have been the riots in Hong Kong, this year it is Covid-19.”
“We’ve already seen an increase in phishing attacks as everyone is working from home. At our company, we are into our third week of remote working now and I’ve already seen people reaching out to around 20 of my staff with an email that pretended to be from me, asking for their WhatsApp number while they work from home.”
“In our database we have lots of information about scammers and fraudsters and examples of companies where they have been selling fraudulent Covid-19 cures, scams or stockpiling. For example, we have a company that has been prosecuted in California for selling fake Covid-19 fraud solutions.”
However, money is moving differently thanks to the pandemic. Governments have pledged wide-ranging relief measures, including business loans and grants, and criminals are expected to exploit the environment of heightened concern to disguise their activity and capitalise on any gaps in the system. According to ComplyAdvantage, it is going to take a strong understanding of who your customers are and how transactional behaviour adapts across demographics during the pandemic, as well as a keen eye on money laundering behaviour.
The company, which uses data science and machine learning to neutralise the risk of financial crimes, has predicted that criminal enterprises could target individuals with a bank account and clean financial histories for money muling or ‘cuckoo smurfing’ as they seek access to money earmarked for corona-related economic losses. Money muling is a type of money laundering, where someone who receives money from a third party in their bank account transfers it to another one or takes it out in cash and gives it to someone else, obtaining a commission for it. Cuckoo smurfing involves criminals hiding transactions in the bank accounts of innocent individuals or businesses. The word smurf is used to describe a money launderer who seeks to avoid government scrutiny by breaking up large transactions and moving it around the globe completely under the radar.
“Governments have started talking about sending cheques to people impacted by the COVID-19 outbreak and I’ve seen a bank called Chime in the US is testing ways to send these cheques out to people,” says Delingpole.
“There is a concern that in 10 months’ time we will see another big scandal, on the same scale as the Grenfell relief fraud, with SME lending money going out. We’re giving away billions away in GDP, but how much of this will be fraud?”
“Governments don’t want to be embarrassed by giving away money to a fraudulent black hole and firms need to make sure that the money is received by those who legitimately need it.
“We need to think how criminals react in these times. So, if you’re a drug dealer, you’re going to stop selling ecstasy and party drugs right now and sell more marijuana and then you will also want to give bulk discounts and change your supply chain.”
“Monitoring this kind of behaviour is now anomalous and therefore every company that has this weird behaviour. We expect to see a huge uptake in cuckoo smurfing. People are being laid off and whereas previously you worked in the service industry but now you are at home, the easiest way to make money is to take it off money launderers and be a smurf. Receive £100,000 and then send out £10,000 payments to others.”
“The components of the supply chain for money laundering are now much cheaper. Everyone’s behaviour is going to change and in 10 months’ time we will see all kinds of scandals linked to that as well as government money being stolen. The opportunity for fraud and money laundering is massive in this environment.”
“It is fascinating that it’s the same virus, but it does impact devices, technologies and systems so very differently. Some countries, like the US, are going to see pure cash going out, making it more susceptible to exploitation. One thing we can do is see if there are multiple cheques going to the same address or check if this person has been linked with human trafficking, etc.”
Economic sanctions are an important part of the global fight against financial crime, including money laundering and the financing of terrorism.
With the US coming under increasing pressure to ease sanctions on countries fighting the disease, including Venezuela and Iran, and with the world focused on the containment of the coronavirus pandemic, ComplyAdvantage advises compliance professionals to keep a close watch on any changes as meeting the requirements of the various sanctions regimes is one of the great challenges for financial institutions.
Delingpole says: “As a geopolitical tool, sanctions are about being tough and harsh. But when countries like Venezuela are already getting crushed, is it fair and right to impose sanctions when they’re already like on their knees?”
“In times of crisis, everyone comes together and perhaps there will be a temporary cessation of hostilities which will then be reimposed once the pandemic passes.”