Financial Crime Risk Management and the Current Pandemic

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Given the current situation worldwide, I thought it might be appropriate to discuss how the current coronavirus pandemic is affecting all financial institutions, whether international bank or community credit union. A few days ago, FinCEN posted a news release regarding the pandemic and its potential effects on financial crime. Within this news release, several key points are made.

 These key points highlight various trends that we can expect to see in the upcoming months, and a majority of these financial crime trends rely not only on the front line to report unusual activity, but for all back office functions to scrutinize the following:

  1. Imposter scams involving the impersonation of non-profit and government agencies; this is expected to be specific to healthcare and disaster outreach and recovery
  2. Investment activities involving the investment in companies in the healthcare and biosciences industries, such as those that may appear to conduct research on behalf of efforts involving the prevention, detection or the curing of the coronavirus
  3. Entities involved in the promotion or sale of products, services, or information involving the prevention, detection or the curing of the coronavirus
  4. Potential Insider trading due to stock market volatility and instability

 It is also important to be wary of fraudulent activities that may arise during widespread emergency situations. Several of these activities involve the illicit gain of disaster relief or emergency assistance benefits and payments, as well as rapid flows of fund involving the pooling of these funds followed by  subsequent transfers involving seemingly unrelated parties. Additionally, it may be necessary to conduct enhanced due diligence of small or newly established charitable organizations, or transactions involving charitable organizations that appear out of pattern, such as use of money orders, cashier’s checks and money transfer or remittance. For more information, please see FinCEN Advisory FIN-2017-A007.

 Lastly, please be aware of potential exploitation as easing of regulations involving compliance functions in other areas of the financial industry occur. Efforts involving a relaxing of Regulation D limits or Regulation CC holds on negotiable instruments carry their own risk. It is imperative that as a financial institution explores loosening these controls, it considers the situations for which these controls were establish originally. A loosening of controls can create a gap in risk. For more information, please see NCUA Letter 20-CU-02.

 

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