Advisory boosts scrutiny of suspected unemployment insurance fraud

Unemployment insurance fraud related to the coronavirus crisis has earned the attention of the Treasury’s financial law enforcement arm, as the agency Tuesday issued an advisory urging financial institutions to be on the alert for the practice.

“Many illicit actors are engaged in fraudulent schemes that exploit vulnerabilities created by the pandemic,” the advisory issued by Treasury’s Financial Crimes Enforcement Network (FinCEN) stated. “This advisory contains descriptions of COVID-19-related UI fraud, associated financial red flag indicators, and information on reporting suspicious activity.”

The agency said the advisory is based on its analysis of information related to the coronavirus pandemic gleaned from Bank Secrecy Act (BSA) data, open source reporting, and law enforcement partners. It addresses representative types of illicit activity related to unemployment insurance fraud, including: fictitious employer-employee fraud, employer-employee collusion fraud, misrepresentation of income fraud, insider fraud, and identity-related fraud.

“As no single financial red flag indicator is necessarily indicative of illicit or suspicious activity, financial institutions should consider all surrounding facts and circumstances before determining if a transaction is suspicious or otherwise indicative of potentially fraudulent activities related to COVID-19,” the advisory notes.

The advisory also lists 10 “red-flag” indicators meant to alert financial institutions to fraud schemes targeting unemployment insurance programs, and to help the institutions detect, prevent, and report “suspicious transactions related to such fraud.”

The advisory also directs financial institutions to specially tag any suspicious activity reports (SARs) filed in conjunction with suspected unemployment insurance fraud to include the term “COVID19 UNEMPLOYMENT INSURANCE FRAUD FIN-2020-A007” in SAR field 2 on the form.

Advisory on Unemployment Insurance Fraud During the Coronavirus Disease 2019 (COVID-19) Pandemic