US authorities have witnessed an increase in unemployment insurance (UI) claims as a result of the COVID-19 pandemic. At the same time, authorities have found many cases of UI fraud linked to the pandemic. To counter this increase in COVID-19-related UI fraud, the Financial Crimes Enforcement Network (FinCEN) has published an advisory for all financial institutions.
This advisory discusses the ways in which fraudsters are misusing the UI system and how financial institutions should go about identifying and reporting such instances of fraud. FinCEN says that fraudulent filers often incorrectly show that they were working for a legitimate company so they can claim UI. They could also forge employer and self-identifying information to get UI. In some cases, employees collude with employers to commit UI fraud. The employee claims UI while agreeing to receive lower and unreported income from the employer. UI fraud could also involve workers not reporting their income even after having returned to work so they can keep receiving UI payments. FinCEN has listed many other such means in which people are committing UI fraud.
FinCEN has also identified several red flag indicators so financial institutions can be vigilant about UI-related fraud schemes and promptly detect and report any related suspicious transactions. Such indicators include inter-state UI payments, UI payments towards an individual other than the accountholder, rapid transfer of UI payments to foreign accounts in countries vulnerable to ML fraud, etc. FinCEN advises that even if a financial institution identifies a red flag, all information related to the suspicious transactions must be considered before making a decision.
Source name: FinCEN