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UI Fraud On The Rise; Financial Institutions Advised To Be On The Lookout For Signs

Published: November 19, 2020 on our newsletter Security Fraud News & Alerts Newsletter.

Unfortunately, there are a lot of people still out of work. As a result, unemployment claims are on the rise. The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has issued an alert advising financial institutions to watch out for unemployment insurance (UI) fraud as a result of this. The organizations have also offered a rather lengthy list of indicators to watch for on the advisory.

FinCEN wrote in the alert, “Many illicit actors are engaged in fraudulent schemes that exploit vulnerabilities created by the pandemic.” The advisory notes some types of fraud related to COVID-19 and unemployment insurance, including Fictitious employer-employee fraud, employer-employee collusion, misrepresentation of income fraud, insider fraud, and identity-related fraud.

It also lists several helpful red flags for financial institutions to watch for that may be signs of UI fraud:

  • Funds are deposited into accounts from unmatching account holder names, from multiple states in the same UI disbursement period, and other suspicious indicators.

  • Funds are withdrawn in a lump sum using a cashiers’ check, getting a pre-paid debit card, or by transferring funds to an out-of-state account (or multiple accounts).

  • The UI payments are quickly sent away via wire transfer to foreign accounts.

  • The payments are sent or received using a peer-to-peer (P2P) application or app, then wired to an overseas account, or withdrawn in a manner inconsistent with normal behavior of the customer or member.

  • The funds are quickly withdrawn via online bill pay addressed to individuals rather than businesses, that are out of the norm or send multiple times over a very short timeframe.

  • IP addresses associated with logins for accounts suspected of being used for UI fraud don’t map back to the general area where the account holder is supposed to reside or from where the UI payment originated.

  • The payments are sent to UI-related EFTs or checks are deposited into suspected shell/front company accounts.

  • Multiple accounts that are receiving UI payments are associated with the same free, web-based email account.

  • A newly opened account or one that has been inactive for more than 30 days suddenly starts receiving UI deposits.

  • The recipient of the UI funds does not have a history of living at or being associated with an address to which the payments are being sent or is not within a geographical area registered to the debit card that is used with the associate account.

The advisory warns financial institutions that no single red flag indicator is a guarantee that illicit or illegal behavior is taking place, but all circumstances should be considered before making a determination about a suspicious transaction. Financial institutions are also encouraged to ask additional questions and do further investigations as appropriate.

For additional information, head to the FinCEN website and do a search for FIN-2020-A007.

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