FinCEN alerted financial institutions to fraudulent activity involving unemployment insurance ("UI") that the agency observed during the COVID-19 pandemic. In its advisory, FinCEN outlined five types of illicit activities connected to COVID-19 UI relief:
- Fictitious employer-employee fraud. Filers pretending to work for a legitimate company, or creating a fictitious company and supplying fictitious employee and wage records to apply for UI payments.
- Employer-employee collusion fraud. Employers paying employees a reduced, unreported wage, enabling an employee to receive UI payments.
- Misrepresentation of income fraud. An employee, after returning to work, failing to report his income in order to continue receiving UI payments, or an applicant claiming higher wages than she previously earned in order to receive higher UI payments.
- Insider fraud. State employees utilizing their credentials to access or alter UI claims to their benefit (e.g., approving unqualified UI applications, inappropriate payment amounts or payments to an account other than the account reported on a UI application).
- Identity-related fraud. Submitting false or stolen identification in an application for UI payments.
FinCEN detailed 10 specific red flags that may assist financial institutions in preventing, detecting and reporting UI fraud in suspicious activity reports.
Commentary - Steven Lofchie
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