25 May 2020
Payment companies are ramping up their processes to combat fraud and scams as regulators warn financial institutions of illicit activities related to the coronavirus pandemic.
Compliance teams at companies such as PayPal Holdings Inc. and Western Union Co. have been closely monitoring early indicators of fraudulent activities and incorporating them into their investigation processes.
The Financial Crimes Enforcement Network, a U.S. Treasury Department bureau focusing on combating illicit finance, alerted financial institutions to an increase in Covid-19-related scams in an advisory this week. Among them are fraudulent offerings of cures, bogus vaccines and unauthorized tests, nondelivery scams of medical supplies or protective gear, price gouging and the hoarding of merchandise in high demand during the pandemic, such as hand sanitizers and toilet paper.
“Detecting, preventing and reporting Covid-19-related scams and illicit activity is critical to our national security, safeguarding legitimate relief efforts and protecting innocent people from harm,” FinCEN said in the advisory.
FinCEN said it detected the trends through anti-money-laundering data submitted by financial institutions, in public reports such as news announcements, and publications by international organizations and law enforcement agencies.
Other federal agencies, including the U.S. Justice Department and the U.S. Customs and Border Protection, also have spotted these trends, according to the notice.
A focus at PayPal has been to distinguish cybercriminals and scammers from legitimate customers, charities and fundraisers, according to Aaron Karczmer, the digital payment company’s chief risk officer. When tragedies or natural disasters happen, it tends to bring out the best in people who might be inclined to make donations to organizations or to support local businesses, he said. Scammers exploit scenarios like that.
“We’re able to set our systems in a way that can identify that incoming, very good type of commerce and enable it,” Mr. Karczmer said. “[It’s an] opportunity to enable good commerce and the opportunity to stop fraudsters from taking advantage.”
To identify possible swindlers, PayPal’s financial crime team picks up early tips from law enforcement, as well as from internal investigations and merchant reviews. The team then incorporates the information into algorithms that help PayPal identify possible suspicious transactions sent through the company’s platforms, Mr. Karczmer said. The company also uses a multistep verification process to ensure the payment is going to the right recipient.
By Mengqi Sun, The Wall Street Journal, 22 May 2020
Read more at The Wall Street Journal
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