May 07, 2020 | Risk Management

Facing The Fraud Pandemic

Here’s how criminals are exploiting businesses during the crisis

By Alex Beavan, Head of Fraud Investigation, Western Union Business Solutions

As individuals and businesses alike continue to be affected by the COVID-19 pandemic, the true extent of associated fraud is becoming clearer, as well as the response by law enforcement and government authorities. Many jurisdictions are now working closely together to form a coordinated response and help mitigate the risks and money laundering associated with these scams.

Here are some key facts related to COVID-19 fraud:

  • Associated scams have cost more than 18,000 Americans a total of USD 13.4million since the beginning of 2019 [1]
  • UK Police has seen a sharp increase in COVID-19 related scams with almost GBP 1.6million being stolen from both businesses and individuals across 509 cases to date record by Action Fraud [2]
  • The US Department of Justice announced today that it has taken its first action in federal court to combat fraud related to the coronavirus (COVID-19) pandemic. [3]
  • Police in the UK arrest a man for making and selling online fake tests kits to allegedly treat COVID-19 [4]
  • The UK is receiving over 20% of global malicious spam emails with ‘coronavirus’ in the subject field [5]

At Western Union Business Solutions, we continue to collate differing typologies to assist with adapting techniques to prevent and mitigate such cases. For instance, whilst fraud associated with fake/counterfeit supplies of medical equipment, and scam emails, remain prevalent we have also noted an increase in instances of the following:

  • Use of malicious software applications such as alleged COVID-19 virus trackers.
  • Companies providing medical supplies which is substandard or with inappropriate/fake safety certificates.
  • Real companies are being cloned and proffered as selling medical supplies thereby providing an element of legitimacy although websites and emails remain fake.
  • Fraudulent companies purporting to offer business loans to assist during the pandemic.
  • Fraudsters continuing to change rules connected with cloud-based email accounts creating diverts to incoming mail.
  • Businesses involved in the purchase of medical supplies are being targeted in thefts and burglaries.

More specifically it has been noted that many companies are now diversifying and embracing a different business model often associated with the purchase and distribution of medical supplies. Unfortunately, this approach brings a much greater risk of fraud, as criminals, including organised crime groups and those active in cybercrime, have adapted and are very prepared for the current demand for items such as medical gowns and face masks. As the crisis develops and various governments around the world change their strategy and guidance around face covering, the demand for these will no doubt continue to surge, and given the dynamics of the situation and the scarcity of such products, associated fraud is very likely to increase with it.

The global examination of cases of COVID-19 related fraud has exposed the following issues:

  • Open source and social media searches are being conducted to locate prospective medical equipment distributors globally particularly in relation to N95 Respirators and surgical masks. In often cases, the appropriate level of due diligence may be not be applied to ascertain the legitimacy of suppliers.
  • Businesses are under pressure from the media, as well as their internal and external stakeholders to adopt suitable hygiene and social distancing measures to protect their employees and the public. This is creating an element of panic, and some companies may resort to desperate measure to acquire protective equipment. Fraudsters are taking advantage of this by citing demand and supply issues to rush victims into making purchases. Fraudsters might also cite government guidelines for the region where the business is based. If you are part of a business looking to acquire such goods, it is important to remain in control of the transaction and not be influenced unnecessarily by the supplier / fraudster.
  • Businesses who would have previously sought secondary approvals for new beneficiary changes or amendments are abandoning such authorisation processes due to the need to expedite the transactions.
  • Businesses are being discouraged by fraudsters from doing bank branch transfers due to the pandemic and instead asked to complete the transaction via wire transfer.
  • Fraudsters are avoiding telephone conversation citing line difficulties and requesting that all communication be done via WhatsApp or email. Telephone confirmation is one of the more prominent fraud prevention techniques for such offences.
  • It has also been noted that on many occasions the money in relation to fraudulent goods connected to COVID-19 is going in the first instance to Thailand. This is a departure from the model seen repeatedly concerning business email fraud with 25% of the time money going to China and/or Hong Kong. Businesses should bear this in mind with a new or change to the beneficiary.

The above issues are very specific and there are many ways to mitigate related risk. If you are a Western Union Business Solutions client, it is vitally important that, in circumstances mentioned above, you reach out to us for support and help if you are setting a transaction and adding a new beneficiary. By working together and applying extra due diligence during these troubling times it should be possible to stay one step ahead of the fraudsters.