Treasury's Crime Unit Issues Alert on COVID Unemployment Insurance Fraud

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an alert Tuesday on unemployment insurance fraud during the COVID-19 pandemic.

“Many illicit actors are engaged in fraudulent schemes that exploit vulnerabilities created by the pandemic,” FinCEN said in releasing the alert, which is based on FinCEN’s analysis of COVID-19 related information obtained from Bank Secrecy Act (BSA) data, open-source reporting and law enforcement partners.

The advisory describes COVID-19 related UI fraud, associated financial red flag indicators and information on reporting suspicious activity.

Types of fraud detected include:

• Fictitious employer-employee fraud: filers falsely claim they work for a legitimate company, or create a fictitious company and supply fictitious employee and wage records to apply for UI payments;
• Employer-employee collusion fraud: the employee receives UI payments while the employer continues to pay the employee reduced, unreported wages;
• Misrepresentation of income fraud: an individual returns to work and fails to report the income in order to continue receiving UI payments, or in an effort to receive higher UI payments, an applicant claims higher wages than he/she previously earned;
• Insider fraud: state employees use credentials to inappropriately access or change UI claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of UI funds to accounts that are not on the application; or
• Identity-related fraud: filers submit applications for UI payments using stolen or fake identification information to perpetrate an account takeover.

FinCEN also points to numerous financial red flag indicators to alert financial institutions to fraud schemes targeting UI programs, and to assist financial institutions in detecting, preventing and reporting suspicious transactions related to such fraud.