Accuracy Accounts: Filing of Complete and Accurate DAS and Program-Specific Red flags related to criminal or fraudulent Covid-19 activity | Mitchell, Williams, Selig, Gates & Woodyard, PLLC

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On September 29, 2020, at the 19th Annual Anti-Money Laundering and Financial Crime Conference, the Director of the Financial Crimes Enforcement Network (“FinCEN”), Kenneth Blanco, reported that more than 91,000 Suspicious Activity Reports (“SAR”) had been filed in connection with the crime of Covid-19. and fraudulent activity. These 91,000 reports have resulted in the initiation of 57 lawsuits to date and leave over $ 100,000,000 in taxpayer dollars in question. The magnitude of this level of fraudulent activity indicates the fervor with which financial institutions must continue to approach this issue – especially in the precision of filling out a SAR story and recognizing the red flags that trigger the reports. Director Blanco has repeatedly reiterated the importance of correctly completing the SAR to ensure the report is directed to the appropriate government investigation team, as specialized teams have been established to examine fraudulent activity related to the various relief programs created in response to the pandemic.

SAR form reminders

As a reminder, using the information requested by FinCEN in the SAR form increases the speed at which your financial institution will receive assistance. Below are the following recommendations provided by FinCEN for completing the SARs.

  • Include the key term “COVID19 FIN-2020-A002” in the SAR 2 field and write the narrative in such a way that it indicates a link between the suspicious activity reported and the activities highlighted in FinCEN notices,
  • Select the SAR 34 (z) (Fraud – other) field as the associated suspicious activity type to indicate a link between the reported suspicious activity and COVID-19,
  • Include the type of fraud and / or the name of the scam or product (for example, Product fraud – nondelivery scam) in the SAR 34 (z) field, and
  • Refer to the FinCEN Notice of May 18, 2020 on Coronavirus Disease 2019 (COVID-19), which contains information regarding reporting COVID-19-related crimes and reminds financial institutions of certain BSA obligations.

Recognize the red flags

Coupled with a strong AML / OFAC / BSA policy, arming your direct customer contact staff with red flags related to various relief programs is the best way to help your financial institution detect fraud and reduce fraud. potential criminal fines and liability for non-compliance.

Economic Disaster Loans (“EIDL”)

Examples of suspicious activity related to COVID-19 EIDL include, but are not limited to, the following:

  • Use of stolen identities or EIN or SSN numbers to benefit from the EIDL advance or EIDL loan.
  • Suspected businesses, including shell or shell companies, with no evidence of presence or operating history, receiving EIDL advances or loans.
  • Applicants working with third parties to obtain EIDL advances or EIDL loans in exchange for keeping a percentage of the funds.
  • Account holders who are victims of social engineering and who may not be aware that the source of funds is an EIDL advance or an EIDL loan.
  • A client informs a financial institution that he received a COVID-19 EIDL ACH deposit from “SBAD TREAS 310” and “Origin # 10103615” on his account, but that he did not apply for a COVID-19 EIDL loan .
  • A customer receives a COVID-19 EIDL ACH deposit after the financial institution previously denied the customer’s Paycheck Protection Program (PPP) loan application, especially when the financial institution identified inaccurate information or incomplete in the client’s PPP loan application.

Paycheque Protection Program (“PPP”)

PPP fraud can happen at the request or forgiveness stage, and each step can present different red flags that your staff can identify.

Red flags of the application stage

  • Failure to provide appropriate documentation to support the employee’s background,
  • A client declares that he is unable to provide business documents or documents filed by the Secretary of State in support of the existence of an incorporated business,
  • An applicant can inflate the payroll to qualify for a higher loan amount (loan amounts are based on 2.5 times the cost of the payroll),
  • Multiple requests are submitted by eligible businesses using phishing information,
  • A client has never done business with the financial institution or has no online presence related to their business.

Red flags of the forgiveness stage

  • A business must provide proof of how loan funds are used to determine what portion of the loan will be eligible for a forgiveness and therefore failure to provide such documentation indicates that the funds have been misappropriated,
  • Loan funds were funneled into an account with a different name than the applicant or company (this can also be a red flag at the application stage),
  • A borrower may try to manipulate funds or documents to meet forgiveness eligibility.

As a reminder, financial institutions that have helped new clients apply for PPP loans should review those clients and ensure that they have collected the following information from all natural persons holding a 20% or more stake in the applicant company in order to meet the applicable BSA and FinCEN regulations. governing the collection of information on beneficial owners:

  • The name of the owner,
  • Title,
  • Ownership %,
  • TIN,
  • Address, and
  • Date of Birth

Unemployment benefit program

Examples of suspicious activity related to COVID-19-related unemployment include, but are not limited to, the following:

  • employees who return to work but continue to receive unemployment insurance benefits,
  • mass or batch downloads of employee pay slips,
  • fictitious employer plans or “two-sided” plans,
  • unemployment insurance benefits which are deposited into joint bank accounts,
  • claimants under synthetic or stolen identities,
  • asylum seekers for detainees, deceased persons or out of state applicants; Where,
  • shell companies that hire and then fire “employees” in order to file unemployment insurance claims.

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