The Financial Crimes Enforcement Network (FinCEN) issued an advisory (FIN-2021-A002) on Feb. 24, 2021, alerting financial institutions to fraud and financial crime typologies associated with Economic Impact Payments (EIP) issued by the U.S. government, as authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and the Coronavirus Response and Relief Supplemental Appropriations Act of 2021. In addition to describing the variety of crimes associated with EIP, the alert provides red flags intended to aid the banking industry in identifying suspicious activity in customer transactions and accounts, as well as instructions on completing Suspicious Activity Reports (SARs) in a manner that identifies them to FinCEN as EIP-related. Financial institutions are well advised to pay close attention to FinCEN alerts highlighting regulators' expectations in detecting and reporting activity related to all forms of suspected fraud related to the COVID-19 pandemic.
By analyzing Bank Secrecy Act (BSA) data, monitoring public reporting and sharing information with its law enforcement partners, FinCEN has identified a number of crime typologies associated with EIP fraud, including deposit of altered, stolen, counterfeit or otherwise fraudulent U.S. Department of the Treasury EIP checks; phishing schemes seeking Personally Identifiable Information (PII) premised upon purported EIP payments; and inappropriate seizure of EIP by representative payees and debt collectors. FinCEN's alert also provides "financial red flag indicators," which it asserts will assist financial institutions in "detecting, preventing, and reporting suspicious transactions" associated with EIP fraud, such as the following:
- indicators that a customer's account is being used as a "funnel account" to negotiate multiple illicit EIP checks by a fraudster, or on behalf of a fraudster, such as a "money mule"
- customer opens a new account with an EIP check, but the name of the potential account holder is different from the depositor or EIP payee
- same IP address used to transfer funds from several EIP debit cards to a bank account, particularly if IP address is located outside the United States
- multiple EIP deposits made into the accounts of a nursing home or assisted living facility, and those payments are not returned to the residents
Finally, the alert also provides instruction on preparing SARs related to EIP. For example, FinCEN requests that filers include the FinCEN EIP alert identifier ("FIN-2021-A002") in SAR field 2 and the SAR narrative in order to associate it with suspicious activity that may indicate EIP crime. In addition, FinCEN requests that financial institutions reference the term "economic impact payment" in the SAR narrative and discourages financial institutions from using more generic references, such as "stimulus check."
With the addition of this latest advisory, FinCEN has now published 11 different combinations of keywords and SAR field 2 notes that it expects financial institutions to use when filing SARs associated with the many forms of suspected pandemic-related schemes. In FinCEN's view, following such instructions is crucial to "assist FinCEN, law enforcement, financial regulators, and other relevant government agencies in identifying and utilizing the information submitted in COVID-19-related SARs." Disrupting and detecting pandemic-related fraud, and punishing wrongdoers associated with such crimes, will be a government priority for years to come. As such, financial institutions can expect regulators to look favorably upon those that diligently categorize SARs in conformance with FinCEN's regime, especially when assessing compliance with BSA/anti-money laundering obligations.
A consolidated list of COVID-19 key terms and filing instructions for COVID-related SARs is provided on FinCEN's website.
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