Fraud, money laundering and cybercrime: how Covid-19 has changed the threat to banks
16 Jul 2020

In early May, border force officers at the UK’s bustling Dover port intercepted a shipment described as “medical supplies”, apparently addressed to a London hospital.

However, concealed under medical dry ice, police found more than a quarter of a tonne of cocaine, carrying a street value of as much as £10mn.

The country’s National Crime Agency (NCA) says it is continuing to seize “significant quantities of drugs at the border”, as well as illegal weapons including semi-automatic firearms and an AK47 assault rifle.

Criminals appear to be working under the assumption that efforts to contain the pandemic have left authorities distracted, particularly at ports, and so think there is an opportunity to import larger quantities, the NCA suggests.

But regulators and law enforcement authorities around the world have been vigilant in warning that the virus is quickly changing the ways criminals seek to move illicit goods and funds across international borders.

Reports of counterfeit medical equipment sales, in some cases in large international shipments, have been prominent as unprecedented demand for medicines and protective equipment creates new avenues for fraud.

At the same time, criminals have sought to target staff working remotely through impersonation fraud, phishing and cyberattacks.

That creates both primary risks for banks – as they may unwittingly process payments or even provide financing on behalf of fraudulent traders – and secondary risks, as perpetrators attempt to launder the proceeds of crime through the financial system.

The Financial Action Task Force (FATF), an influential global organisation that sets standards for fighting economic crime, issued a detailed report in May stating that the pandemic “is creating new sources of proceeds for illicit actors”.

Drawing on evidence supplied by 48 jurisdictions around the world, the task force says: “Measures to contain Covid-19 are impacting on the criminal economy and changing criminal behaviour so that profit-driven criminals may move to other forms of illegal conduct.”

It identifies the increased misuse of digital financial services such as cryptocurrency, efforts to bypass remote customer due diligence measures, and attempts to misappropriate emergency financial aid being supplied at government level as threats to banks.

The FATF adds that criminal groups are likely to “move into new cash-intensive and high-liquidity lines of business in developing countries”.

Business at OECD – a membership group that advises the Organisation for Economic Co-operation and Development (OECD) on private sector matters – has warned that supply chain disruptions for certain goods has “resulted in unprecedented opportunities for criminals to increase their already significant illicit activities in areas such as the life science and healthcare sectors, fast-moving consumer goods, excisable products, frauds, and cybercrimes”.

Within the EU, the European Banking Authority (EBA) has singled out international trade as a risk area. Following the publication of a report on the subject in March, a spokesperson for the EBA told GTR that this is due to restrictive measures put in place by governments to manage the spread of Covid-19.

“This means that financial flows from many companies that are involved in international trade will be expected to reduce,” the regulator explained.

“Where against expectations they do not, the statement makes clear that institutions should examine the background and purpose of those unexpected – unusual – transactions to determine if they give rise to suspicion or if instead an economic reason or lawful explanation can be found.”

By John Basquill, Global Trade Review, 14 July 2020

Read more at Global Trade Review

Photo (cropped and edited): Tim Dennell [CC BY-SA 2.0] via Flickr

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