FATF – COVID-19 Related ML/FT Risks – Coronavirus (COVID-19) – Isle of Man – Mondaq News Alerts

This month (May 2020), the Financial Action Task Force (FATF)
published a paper entitled “COVID-19 Related Money Laundering
and Terrorist Financing – Risks and Policy Responses”. The
paper details recent FATF findings regarding money laundering (ML)
and/or terrorist financing (TF) risks arising from COVID-19. The
paper also usefully details other findings regarding cybercrime
risks due to COVID-19.   

The key findings within the paper to be aware of are:

• An increase in COVID-19 related crimes, such as fraud, is
  creating a new source of illicit proceeds as criminals exploit
  temporary measures caused by remote working; 
• Pandemic measures are changing criminal behaviour, driving
  criminals to other firms of illegal conduct including new forms of
  cyberattacks; And 
• There are emerging money laundering and terrorist financing
  risks that could result in –
  • Criminals finding ways to bypass customer due diligence
    measures; 
  • Increased misuse of online financial services and virtual
    assets to move and conceal illicit funds; 
  • Exploitation of economic stimulus measures and insolvency
    schemes as a means for natural and legal persons to conceal and
    launder illicit proceeds; 
  • Increased use of the unregulated financial sector, creating
    additional opportunities for criminals to launder illicit
    funds; 
  • Misuse and misappropriation of domestic and international
    financial aid and emergency funding; and
  • Criminals and terrorists exploiting COVID-19 and the associated
    economic downturn to move into new cash-intensive and
    high-liquidity lines of business in developing countries.

It is also reported that there is a risk of increased fraud. The
primary fraudulent activities are listed as:

• Impersonation of officials. This may include
  impersonated officials seeking personal or banking
  information. 
• Counterfeiting (including essential goods). There is an
  increase in online scams involving medical supplies and PPE given
  the increased demand. 
• Fundraising for fake charities. An increase in
  fundraising scams where criminals pose as international
  organisations asking for COVID-19 related donations.
• Fraudulent investment scams. There have been
  fraudulent scams relating to products or services that can prevent,
  detect or cure COVID-19. 

The paper also details increased cybercrime risks. These risks
are listed as: 

• Email and SMS phishing attacks. FATF has found that
  criminals are exploiting concerns about COVID-19 to insert malware
  on devices. One example of this style of attack was a criminal
  posing as the WHO and then sent emails with malicious
  links.
• Business email compromise scams. Amid the rise
  in remote working, criminals are exploiting weaknesses in
  business’ network security information to gain access to
  customer data. 
• Ransomware attacks. FATF also indicates that
  different methods are being used to insert ransomware onto devices.
  One example is malicious websites or apps that appear to share
  COVID-19 information to gain and lock access to the device until
  payment is received. 

In addition to the above, FATF also outlines other ML
vulnerabilities. The increase of remote transactions and
unfamiliarity with online platforms represent significant changes
in financial behaviour that inherently provide ML vulnerabilities.
In addition, TF risks may be increased as terrorists seek to take
advantage of the focus on COVID-19. 

FATF emphasises that caution should be exercised at all times.
When making a payment or transaction, it is recommended that the
details and parties involved are subject to due diligence so that
an entity can be satisfied that the transaction is not fraudulent.
FATF advises that it may also be beneficial to undertake refresher
fraud training to ensure staff are up to date and aware of fraud
risk and how to detect potential fraud. The risks outlined above
should be. 

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.