WASHINGTON–The Financial Crimes Enforcement Network (FinCEN) has issued an advisory to alert financial institutions to the types of unemployment insurance (UI) fraud that have emerged during the COVID-19 pandemic.
“Many illicit actors are engaged in fraudulent schemes that exploit vulnerabilities created by the pandemic,” FinCen said, sharing a list of red flag indicators of such fraud.
The advisory is based on FinCEN’s analysis of COVID-19- related information obtained from Bank Secrecy Act (BSA) data, open source reporting, and law enforcement partners.
According to FinCEN, the following are representative types of this illicit activity:
- Fictitious employer-employee fraud. Filers falsely claim they work for a legitimate company, or create a fictitious company and supply fictitious employee and wage records to apply for UI payments
- Employer-employee collusion fraud. The employee receives UI payments while the employer continues to pay the employee reduced, unreported wages
- Misrepresentation of income fraud. An individual returns to work and fails to report the income in order to continue receiving UI payments, or in an effort to receive higher UI payments, an applicant claims higher wages than he/she previously earned
- Insider fraud. State employees use credentials to inappropriately access or change UI claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of UI funds to accounts that are not on the application
- Identity-related fraud. Filers submit applications for UI payments using stolen or fake identification information to perpetrate an account takeover.
Red Flag Indicators
Other red flag indicators, according to FinCEN, include:
- 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 consumer 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 consumer’s UI payments are quickly diverted via wire transfer to foreign accounts, particularly to accounts in countries with weak anti-money laundering controls
- The consumer 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
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