COVID-19 impact on international money laundering

COVID-19 has had devastating health and economic impacts globally, and to make matters worse, criminals are exploiting the situation for financial gain. Scams include those directly related to the pandemic, such as medical and protective equipment fraud.

The Financial Action Task Force (FATF) sets international standards to combat global money laundering and terrorist financing, and is working to mitigate the impact of COVID-19 on these crime areas.

In a recent Plenary meeting held virtually in October 2020, the FATF underscored its commitment to proceeding with its work despite the challenges presented by the current circumstances.

 

Key threats

The FATF took advantage of the meeting to reiterate some of the key emerging threats identified in its COVID-19-related Money Laundering and Terrorist Financing Risks and Policy Responses report.

These threats are linked to changes resulting from the pandemic such as an increase in remote work, and an increase in online sales due to physical store closures.

 

Fraud

There has been an increase in fraud activities related to COVID-19 including:

  • Impersonation of government officials to obtain personal or financial information.
  • Counterfeiting, including of essential goods (such as medical supplies and medicines). Criminals are taking advantage of the increased demand for these products due to the pandemic. Products are either not delivered, or are delivered, but are counterfeit or ineffective.
  • Fundraising for fake charities, e.g. criminals posing as international charities requesting donations for COVID-19-related fundraising campaigns.
  • Fraudulent investment scams, e.g. criminals falsely claiming that products can prevent, detect or cure COVID-19.

 

Cybercrime

There has been a rise in:

  • Email and SMS phishing attacks. In one case, cybercriminals posed as the World Health Organization and sent email and mobile messages prompting individuals to click malicious links.
  • Business email compromise scams. For example, one company received fraudulent emails similar to those sent by their business partner to redirect payments to a scammers’ bank account, under the pretext of paying for large supplies of surgical masks and hand sanitiser.
  • Ransomware attacks. Malicious websites and apps appear to share COVID-19 related information, gaining and locking access to victims’ devices until payment is received.

 

Impact on other predicate crimes

The pandemic has also resulted in a rise of:

  • Human trafficking and worker exploitation, due to reduced physical inspections by government agencies responsible for investigating these crimes.
  • Online child exploitation, due to children spending more time online because of lockdowns.
  • Organised property crime, due to many properties currently uninhabited as a result of COVID-19.

 

FATF response

The FATF states that “the pandemic has severely impacted some authorities’ ability to implement measures to detect, prevent and investigate money laundering and terrorist financing.”

At the Plenary meeting, it highlighted how jurisdictions need to apply a risk-based approach to ensure that appropriate steps are taken to tackle the key threats.

The FATF has a global network of over 200 countries and jurisdictions, and a key priority is to facilitate collaboration to globally implement the FATF Recommendations.

 

Country-level monitoring

The FATF assesses the effective implementation of its Recommendations globally. This has been difficult to implement in recent months because of COVID-19, and discussions at the Plenary addressed potential solutions such as virtual on-site visits and flexible procedures to monitor jurisdictions.

For jurisdictions under increased monitoring to address strategic deficiencies in their AML/CTF regimes, an additional four months was granted to meet deadlines, due to the pandemic.

 

Countering the financing of proliferation

In June 2019, the FATF agreed to pursue further work to strengthen the FATF Standards on countering the financing of proliferation of weapons of mass destruction.

The revised Recommendations:

  • Require countries and private sector entities to identify, assess, manage and mitigate the risks of potential breaches, non-implementation, or evasion of the targeted financial sanctions related to proliferation financing.
  • Enhance domestic cooperation, coordination and information exchange among national authorities.

 

Conclusion

While COVID-19 has led to a surge in global money laundering and terrorism financing, it has also made the jobs of investigators and regulators more difficult.

The Financial Action Task Force is promoting awareness of the key global threats, and working with jurisdictions to close the gaps in their abilities to detect, prevent and investigate these crimes, despite the challenges presented by the pandemic.

Nyman Gibson Miralis provides expert advice and representation in matters involving cross-border investigations and global money laundering.

Contact us if you require assistance.