Financial fraud still happens. How can it be overcome?
The Financial Action Task Force has identified common problems and has suggested solutions.
By LEON HARRIS‘IT CAN be off-putting and cumbersome to be asked for money in various social settings, even if it is for an objectively good cause.’(photo credit: PXHERE)
The Financial Action Task Force (FATF) has issued a paper warning that fraud hasn’t gone away. It still happens, especially while attention is diverted to dealing with the coronavirus crisis.What is happening?The primary fraudulent activities around the world include:• Impersonation of officials: In such cases, criminals contact individuals (in person, by email or telephone) and impersonate government officials with the intent of obtaining personal banking information or physical cash.In some cases, criminals impersonate hospital officials who claim a relative who is sick requires payment for treatment, or the make as if they are government officials requesting personal banking information for tax-relief purposes.Cases involving government impersonation are likely to increase as governments around the world disburse grants and tax-relief payments to their citizens, with criminals attempting to profit from these payments.• Counterfeiting, including of essential goods (such as medical supplies and medicines): Given the high demand, there is a significant increase in online scams involving certain medical supplies, personal protective equipment and pharmaceutical products. Sometimes items are ordered and paid for but fail to arrive. In other cases, the goods are delivered to the consumer but are counterfeit or ineffective. FATF members are also seeing an increase in false and misleading COVID-19 treatment claims, and vendors selling illegal products marketed as “miracle” cures.• Fundraising for fake charities: FATF members highlight an increase in fundraising scams. In such cases, criminals posing as international organizations or charities circulate emails requesting donations for COVID-19-related purposes.Recipients of these emails are then directed to provide credit card information or make payments through the suspect’s secure digital wallet.• Fraudulent investment scams: The economic crisis resulting from COVID-19 has led to an increase in investment scams, such as promotions falsely claiming that products or services of publicly traded companies can prevent, detect or cure COVID-19.• Cybercrime: There has been a sharp rise in social-engineering attacks, specifically phishing email and mobile messages through spam campaigns. These attacks use links to fraudulent websites or malicious attachments to obtain personal payment information.• Email and SMS phishing attacks: Criminals are exploiting concerns about COVID-19 to insert malware on personal computers or mobile devices. In one example, cybercriminals posed as the World Health Organization (WHO) and sent email and mobile messages to lure individuals into clicking malicious links, or to open attachments which subsequently reveal the individual’s user name and password.• Business email compromise scams: Amid a sharp rise in global remote working, cybercriminals are also exploiting weaknesses in businesses’ network security to gain access to customer contact and transaction information.In one example, a company received spoofed emails similar to those sent by their business partner to redirect payment transfers to scammers’ controlled bank accounts, under the pretext of paying for large supplies of surgical masks and hand sanitizer.• Ransomware attacks: Reports also indicate that cybercriminals are using different methods to insert ransomware on personal computers and mobile devices. For example, some FATF members report that cybercriminals are using malicious websites and mobile applications that appear to share COVID-19-related information to gain and lock access to victims’ devices until payment is received. Specifically, hospitals and other medical institutions have increasingly become targets of cybercriminals for ransomware attacks.• Human trafficking and exploitation of workers: The suspension or reduced activity of government agencies regularly engaged in detecting human trafficking cases and identifying victims of trafficking (including workplace inspectors and social and healthcare workers) means that cases may go undetected.• Online child exploitation: With the closure of schools, children are increasingly using the Internet during lockdown periods, which could lead to an increase in online child exploitation.• Organized property crime: With many properties currently uninhabited due to COVID-19, there are reports of an increase in organized property crime/theft.So what’s needed?The FATF encourages governments to work with financial institutions and other businesses to use the flexibility built into the FATF’s risk-based approach to address the challenges posed by COVID-19 while remaining alert to new risks.The FATF paper provides examples of such responses, which include:• Domestic coordination to assess the impact of COVID-19 on AML/CFT risks and systems,• Strengthened communication with the private sector,• Encouraging the full use of a risk-based approach to customer due diligence, and• Supporting electronic and digital payment options. In practice, this risk assessment approach might mean even tougher anti-money laundering procedures and delays at banks and businesses. It’s a price many don’t like paying, unless it happens to them!As always, be careful and consult experienced advisors at an early stage in specific cases. The writer is a certified public accountant and tax specialist at Harris Horoviz Consulting & Tax Ltd. leon@h2cat.com
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