MESSAGE
| DATE | 2020-10-15 |
| FROM | Ruben Safir
|
| SUBJECT | Subject: [Hangout - NYLXS] Unemployement Insurance Fraud through the roof..
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wsj.com
Treasury Unit Warns Banks of Unemployment Fraud
Jack Hagel
4-5 minutes
U.S. unemployment claims, which have surged during the coronavirus
pandemic, are amplifying a compliance risk for financial institutions:
unemployment insurance fraud.
The Treasury Department’s Financial Crimes Enforcement Network issued an
advisory Tuesday, alerting banks to red flags that could indicate
illicit activity, including emerging schemes exploiting vulnerabilities
created by the pandemic. In particular, U.S. authorities and financial
institutions have spotted instances of fraud related to unemployment
payments, according to FinCEN.
Unemployment insurance is a prime target for fraudsters, given the high
volume of people who have lost their jobs due to the pandemic, according
to Raymond Dookhie, a managing director at compliance advisory firm K2
Intelligence LLC.
“The financial systems that are set up to monitor fraud in this current
environment are being overloaded,” he said.
Smaller financial institutions, which often have less sophisticated
monitoring systems or fewer resources to investigate suspicious
activity, are particularly vulnerable, Mr. Dookhie said.
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Pandemic-related unemployment fraud could include the use of fake or
stolen identities, misrepresentation of income, false claims of having
worked for a legitimate company or, in some cases, for a fictitious one,
using falsified employee and wage records, FinCEN said.
Schemes also could involve collusion between employers and employees, in
which a worker receives unemployment payments as the employer continues
to pay the person a reduced wage under the table, according to FinCEN.
The Treasury’s financial crime unit encouraged financial institutions to
conduct additional investigations when appropriate and highlighted
possible indicators of illicit activity, such as customers who receive
unemployment insurance payments from a state other than the one where
the customer claims to reside or have previously worked.
Other indicators of fraud could include unemployment insurance payments
from multiple states within the same disbursement time frame and
payments that are quickly sent via wire transfer to foreign accounts,
particularly in countries with weak anti-money-laundering controls,
FinCEN said.
FinCEN also warned of customers who send unemployment insurance payments
to a peer-to-peer application or app, then wire the funds to overseas
accounts or deposit checks in accounts held by a suspected front company.
Financial institutions are required to file reports that identify
suspicious transactions. Such suspicious activity reports, or SARs, are
intended to help federal authorities disrupt the flow of money to
terrorists, drug traffickers, arms proliferators and other bad actors.
“Financial institutions are effectively at the front lines against the
fight against fraud,” Mr. Dookhie said, adding that the guidance would
help banks update monitoring systems as fraudsters’ methods evolve.
“For any surveillance program to be effective, it needs to be
periodically updated to reflect the current environment,” he said.
“Given the pandemic, it’s important for those financial institutions to
consider all of the types of fraud schemes that can occur.”
Write to Jack Hagel at jack.hagel-at-wsj.com
--
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