As the effects of COVID-19 expand beyond individual health and welfare, government agencies are advising individuals and entities to be alert for bad actors seeking to profit from the pandemic.
The mission of the Financial Crimes Enforcement Network’s (FinCEN), a bureau of the Department of Treasury, is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities. Since the declaration of a National Emergency concerning COVID-19, FinCEN has issued two notices related to the pandemic. In both notices, FinCEN emphasized the importance of compliance with the Bank Secrecy Act (BSA) despite COVID-19 challenges and encouraged financial institutions to inform FinCEN or their regulator as their situations change.
FinCEN’s first notice advised financial institutions to remain alert for fraudulent transactions like those conducted in past natural disasters, and noted schemes where the bad actor, posing as a government official, tries to solicit donations, steal personal identification information or disrupt computer networks. As a result, FinCEN is monitoring public and BSA reports of potential coronavirus-related fraudulent conduct in the following emerging areas:
- Imposter Scams – Bad actors attempt to steal personal information or solicit contributions by impersonating government agencies (e.g., Centers for Disease Control and Prevention), international organizations (e.g., World Health Organization (WHO)), or other governmental and healthcare organizations.
- Investment Scams – The U.S. Securities and Exchange Commission (SEC) urged investors to be on alert for COVID-19-related investment scams, such as promotions that falsely claim that the products cure coronavirus.
- Product Scams – The U.S. Federal Trade Commission (FTC) and U.S. Food and Drug Administration (FDA) have issued public statements and warning letters to companies selling unapproved or misbranded products that make false health claims pertaining to COVID-19. FinCEN has also received reports regarding fraudulent marketing of COVID-19-related supplies.
- Insider Trading – FinCEN has received reports regarding suspected COVID-19-related insider trading.
On April 3rd, FinCEN issued a second notice providing additional information to assist financial institutions in complying with their BSA obligations during the pandemic by suspending certain filing deadlines and announcing a direct contact mechanism for urgent COVID-19-related issues.
FinCEN indicated that it expects financial institutions to continue utilizing a risked-based approach to maintain their BSA responsibilities in order to protect the nation’s financial system. However, in response to concerns regarding certain time requirements with regard to BSA filings, FinCEN suspended the implementation of the February 6, 2020 ruling (FIN-2020-R001) on CTR filing obligations when reporting transactions involving sole proprietorships and entities operating under a “doing business as” (DBA) name (the “2020 Ruling”) until further notice. Financial institutions should continue to report transactions involving sole proprietorships and DBAs under prior practice.
FinCEN urged financial institutions to consider and prudently apply innovative methods to comply with their BSA/anti-money laundering compliance obligations and to review information from other regulators.
FinCEN indicated that it will continue communicating with financial institutions and may make additional announcements. Flannery | Georgalis will provide additional insights as FinCEN issues further coronavirus-related notices. BSA and anti-money laundering inquiries should be directed to Perry Mastrocola at (704) 533-5753 or firstname.lastname@example.org.