Special Bulletin on COVID-19: Trends in Money Laundering and Fraud

Special Bulletin on COVID-19: Trends in Money Laundering and Fraud (PDF version, 1.1MB)

Reference number: 20/21-SIRA-006
July 2020

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is committed to supporting reporting entities in managing their money laundering and terrorism financing risks during these unprecedented times. In addition to the guidance and temporary flexibility communicated by FINTRAC since March 25, 2020 (https://www.fintrac-canafe.gc.ca/covid19/covid19-eng), reporting entities should be aware of COVID-19 related money laundering trends and observations.

This special bulletin is based primarily on FINTRAC's analysis of COVID-19-related transaction reporting and the Canadian Anti-Fraud Centre's (CAFC) analysis of fraud reporting, and it highlights areas that may pose an increased money laundering risk associated with the exploitation of the pandemic situation.

Trends in COVID-19 Transaction Reporting

Volume of Reporting

While the COVID-19 pandemic has not had a significant impact on the overall volume of suspicious transaction reporting (STR) and electronic funds transfer reports (EFTRs) received by FINTRAC, the volume of casino disbursement reports (CDR) and large cash transaction reports (LCTR) has significantly decreased beginning in March 2020.

Figure 1: Report volume by month (March 2019 to May 2020)

The overall decrease in large cash transaction reporting is likely a result of the physical distancing and public health measures implemented in response to the COVID-19 pandemic, which has resulted in a general decline in cash transactions and business closures. While large cash transaction reporting in most activity sectors decreased, there was an increase (86%) associated with reporting from dealers in precious metals and stones in March 2020, when compared to the average volume over the last 12 months.

Given the closures of casinos and community gaming centres across Canada, there has been a very significant decrease in casino disbursement reports submitted to the Centre from March until the end of May 2020.

Observations in Suspicious Transaction Reporting

FINTRAC's analysis of suspicious transaction reports containing a reference to COVID-19 primarily highlights general suspicions of money laundering based on the nature of transactions conducted, as well as suspicions of the laundering of fraud proceeds. Financial intelligence units in other jurisdictions have reported similar findings.

The COVID-19 pandemic represents an unprecedented situation that may lead to unusual transaction activities. While many atypical patterns may reflect legitimate needs to access financial services during this challenging time, some individuals may attempt to profit from the current situation to undertake or facilitate money laundering. The COVID-19 pandemic, and associated closures and physical distancing measures, has disrupted some money laundering methods—particularly those that rely on the placement of illicit cash into cash-intensive businesses—and may expose criminal actors seeking alternate venues to integrate illicit proceeds into the financial system.

The characteristics of suspicious transaction reports related to COVID-19 highlighted below may not necessarily be indicative of money laundering, and must be examined in conjunction with additional risk indicators.

COVID-19 Fraud Trends

FINTRAC's analysis of COVID-19 related transaction reporting and fraud reporting to the CAFC has revealed general COVID-19 related trends in money laundering and fraud, which are consistent with those identified as prevalent by international bodies and financial intelligence units in other jurisdictions.

The COVID-19 pandemic is having a significant impact on the global economy. Although it is still too early to determine if (or how) this pandemic will alter the money laundering landscape, the COVID-19 crisis has important implications for organized crime by creating significant new or expanded opportunities for the perpetration of fraud.

For example, it has created new opportunities for criminals in the virtual currency space in Canada and internationally. Counterfeiters have focused on selling fake COVID-19 home test kits and pharmaceuticals, and offering unconfirmed and often false advice on the treatment of COVID-19 on the Internet and the darknet, with transactions conducted using virtual currencies.

The increased use of online services during the pandemic also enhances the risk of cybercrime. Cyber criminals are exploiting the current situation to target individuals, businesses and entities with COVID-19 variants of popular phishing and blackmail scams, which are increasingly directing victims to send virtual currency for donations and ransom payments.

General trends observed in money laundering and fraud—including the increasing use of virtual currencies, the leveraging of mules (often the victims themselves) and the use of product and services offered by financial institutions—will likely continue for the laundering of COVID-19 fraud proceeds.

Summary of COVID-19 Fraud Reporting

COVID-19 has led to an increase in specific categories of fraud, which criminals have adapted from existing schemes. Reporting to the CAFC indicates an increased reliance on virtual currencies and traditional payment methods offered by financial institutions (i.e., credit card payments, eTransfers and wire transfers). Reports related to phishing schemes, identity fraud and merchandise scams, which account for 80% of the COVID-19 related fraud reported to the CAFC, are described below.

COVID-19 Merchandise Scams include offers for the supply of facemasks and other personal protective equipment (PPE) and COVID-19 test kits, unproven cures and treatments. Of the merchandise scams reported by victims to the CAFC, 62% relate to individuals buying facemasks and not receiving the product or receiving an inferior or counterfeit product; 18% relate to vendors selling all types of personal protective equipment (e.g., gowns, masks, gloves, sanitizers, etc.) and people not receiving anything at all or receiving inferior or counterfeit goods.

Indicators of COVID-19 Merchandise Fraud

Phishing scams include phone calls, emails and text messages from criminals pretending to be linked to Employment Insurance benefits, Canada Emergency Response Benefit (CERB), the Public Health Agency of Canada or other businesses. Victims are directed to click on a link or open an attachment, which may contain malware or may direct them to spoofed websites soliciting personal and financial information. The majority of the reports submitted to the CAFC tied to the identity fraud category relates to the victim's personal information being used to apply for the CERB payments.

Indicators of COVID-19 Identity and Emergency Benefits Fraud

As the pandemic continues, the CAFC expects that it is likely that the financial hardship faced by Canadian citizens and businesses will result in more victimization. Loan scams, debt consolidation frauds, and investment fraud will likely increase. Additionally, cyber dependent frauds such as spear phishing, ransomware and phishing campaigns that are taking advantage of the increased online activities (e.g. working from home) of Canadians, are also likely to increase.

Reporting to FINTRAC

For guidance on submitting suspicious transaction reports to FINTRAC, see Reporting suspicious transactions to FINTRAC.

Reporting to the Canadian Anti-Fraud Centre

www.antifraudcentre-centreantifraude.ca

Contact FINTRAC

FINTRAC Operational Alerts and Bulletins provide up-to-date indicators of suspicious financial transactions and high-risk factors related to new, re-emerging or particularly topical methods of money laundering and terrorist activity financing. However, this should not be considered legal advice. Please refer to the PCMLTFA and its associated Regulations for the full description of the obligations.

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