Interview with the FBI on financial fraud and crime threats

The Paypers sat with an FBI representative to find out what are the latest financial fraud and crime threats coming out of investment firms/crypto and learn how to tackle them

No one can deny that the COVID-19 has intensified consumers’ use of digital services, especially when it comes to financial services. Who is behind these services and how do digital services in general affect the security of payments?

As the marketplace and demand for digital financial services grow, various legitimate and illegitimate entrepreneurs and opportunists are entering this space. Many entrants may not be aware of the US compliance requirements mandated by regulatory agencies, thus full compliance exists on a spectrum. The lack of robust compliance programs to combat money laundering has allowed criminal actors to further their activity. 

What trends have you spotted since the beginning of the pandemic when it comes to fraud in financial services? 

Fraudsters took the opportunity to exploit the pandemic to target both business and individuals. In 2020, the FBI received over 28,500 complaints related to COVID-19. Fraudsters targeted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which included provisions to help small businesses during the pandemic. The FBI received thousands of complaints reporting emerging financial crime revolving around CARES Act stimulus funds, specifically targeting unemployment insurance, Paycheck Protection Program (PPP) loans, and Small Business Economic Injury Disaster Loans, as well as other COVID-related fraud. Complaints have been received from citizens in every state regarding these frauds. 

Strictly referring to investment firms and crypto businesses, to what extent can these pose a threat to the financial landscape? 

Any financial entity, which fails to ensure its clients’ funds do not stem from criminal activity, intentionally or through substandard oversight, can contribute to the degradation of trust in, and reputation of, the financial industry as a whole.

What is the impact of financial fraud and crime on the US economy and consumers?

The damaging effects of financial frauds and crimes on the citizens and the US economy are vast. These impacts include causing instability of capital markets, degrading confidence in the financial system, and forcing the implementation of compliance and regulatory measures.  

How about financial crime activities in the US, have these intensified since March 2020? Please give some examples of such tactics.

While the overall presence of financial crimes in the United States is relatively consistent, the types and trends do vary over periods, with the period since March 2020 serving as an example. Fraudsters exploited government-backed funding programs meant to relieve the economic impact of the pandemic, resulting in increased cases of fraud through the submission of false information and documentation.

How will the AML Act of 2020 (AMLA) enable better information sharing between FIs and legal authorities and support the fight against financial crime?

The AMLA of 2020, with its enhanced focus and newly mandated reporting requirements, will help advance and streamline investigations into money laundering and other crimes. It is anticipated that this act will also increase the number of disclosures and leads to the US government, containing singular information about money laundering schemes and actors, leading to government investigations and prosecutions, collection of fines, civil penalties, and forfeitures.

How can businesses and customers be educated on criminal tactics?

Individuals and business can stay current on official informational releases by the FBI, DOJ, and other law enforcement agencies, as well as in various associations and groups with whom law enforcement interacts and collaborates. FBI Headquarters and each FBI Field Office conducts public outreach efforts, such as presentations and associations with the public overall. In terms of consumers protecting themselves, one should conduct their own due diligence in deciding to financially enter this burgeoning digital space. Some digital services place security at a higher priority than others when offering convenient apps or portals.

About the Federal Bureau of Investigation (FBI)

The Federal Bureau of Investigation (FBI) is an intelligence-driven and threat-focused national security organisation with both intelligence and law enforcement responsibilities that is staffed by a dedicated cadre of more than 30,000 agents, analysts, and other professionals who work around the clock and across the globe to protect the US from terrorism, espionage, cyber-attacks, and major criminal threats, and to provide its many partners with services, support, training, and leadership.