Meeting Fraudsters on the Battlefield: The Impact of Fraud Post-Pandemic

As government agencies emerge from the global pandemic, they aim to recover some of the billions of dollars lost to fraud during this time.

How much money has been lost due to fraud committed during the COVID-19 pandemic? While the totals continue to fluctuate depending on the source, the official word from the US Department of Labor’s inspector general is a staggering $163 billion – the money taken from pandemic relief programs put in place to help businesses and people who have lost their jobs get back on their feet.

Global fraud rings have used numerous scam techniques to drain federal relief programs and defraud unsuspecting victims through phishing emails and text messages, fake social media posts, robocalls, impostor schemes – all highly effective in stealing personal identifying information and pandemic relief funds.

Now, more than two years into the pandemic, law enforcement is looking for ways to recoup some of those funds for victims and improve communication between the public and private sectors to prepare for the pandemic. next pandemic. They look at how fraud has evolved over the past two years and identify key takeaways to protect yourself for the future.

At the start of the pandemic, criminals focused on fraud related to personal protective equipment (PPP) such as N-95 masks and fake test kits. But as the U.S. government began funding stimulus programs through the Coronavirus Aid, Relief and Economic Security Act (CARES), individuals and organized criminal networks around the world pivoted their criminal agendas.

This led to a focus on recovering pandemic-related relief and became an investigative priority for the Secret Service in partnership with government agencies and financial institutions. “Law enforcement is prioritizing the operation of pandemic relief as federal funding through the CARES Act has drawn the attention of individuals and organized criminal networks around the world” says Roy Dotson Jr., deputy special agent in charge of the Jacksonville Secret Service Field Office. and the National Pandemic Enforcement Coordinator.

Partnership is the way forward

Part of Dotson’s job is to act as a resource person, addressing criminal activity related to the ongoing COVID-19 pandemic through prevention, mitigation and investigation. He works collaboratively with his office’s Cyber ​​Fraud Task Forces and with federal, state, local, tribal, and territorial partners, as well as foreign law enforcement, academia, and private sector partners, especially financial institutions.

“I work with law enforcement partners to provide pandemic fund recovery information and training, whether through seizure warrants or administrative seizures,” Dotson says.

While investigating pandemic-related crimes over the past two years and speaking to agencies across the country, Dotson has seen a huge increase in cyber crime, i.e. crimes digital in nature. Whether it’s business email compromise scams, ransomware attacks, data breaches, or the sale of personally identifiable information on the dark web, financially motivated cybercrime is on the rise. And we’ve seen it in some of the biggest fraudulent scams of the pandemic era, including unemployment fraud and PPP loan theft.

Two scams Dotson specifically highlights aren’t all that new — identity theft and money mule rings, in which victims, often without their knowledge, launder or move illicit funds for criminals. Dotson has worked hard to share his expertise and resources, and disseminate best practices to law enforcement and financial institutions regarding their primary investigations.

Roy Dotson Jr.

Unfortunately, money mule scams are difficult because the victims are often members of vulnerable populations or come from low-income communities. Financial mule scams can occur through fraudulent employment schemes or online dating or relationship scams. Dotson says criminals recruit financial mules to help launder proceeds from online scams and fraud or crimes like human trafficking and drug trafficking. Since financial mules add layers of distance between crime victims and criminals, it is more difficult for law enforcement to accurately trace money trails.

“I speak with seniors who respond to a job posting online,” says Dotson. “They don’t really understand that they are being manipulated.” The victim will accept a job offer from the criminal, then the criminal will ask the unsuspecting victim to open a bank account in his name to receive and transfer money.

As an “employee” of the criminal gang, the victim will be asked to receive funds into their bank account and then “process” or “transfer” funds via wire transfer, Western Union or MoneyGram, ACH or even mail American. In some scenarios, victims are even prompted to send funds through a bitcoin ATM.

The problem is compounded by the fact that the criminals are often international syndicates, including West African groups. “These aren’t just random lone criminals on the internet. Scammers are a full time operation. It is their priority 24/7. They are much more sophisticated than we think,” he says.

Better communication leads to better results

While that may seem daunting, Dotson is optimistic that frauds such as unemployment scams will stop, should another pandemic-like disaster occur. State agencies, which have administered much of the COVID-19 pandemic relief funds, have improved their platforms and modernized their process. There is also greater inter-agency communication. “States are communicating much better with the Department of Labor,” Dotson says. “At the start of the pandemic, we basically had 54 statewide agencies operating independently of each other.” While not the fault of any particular agency, it presented a huge opportunity for criminal organizations to exploit this vulnerability.

In today’s environment, cybercrime investigations require cyber and financial skills, technologies and strategic partnerships. Dotson says investigators can no longer effectively conduct a financial or cybercrime investigation without understanding both the financial and internet sectors, as well as the technologies and institutions that power each industry.

However, Dotson’s office is here to help. “I want to continue to develop excellent relationships with financial institutions and agencies,” he says. “I can share any fraud trends I see that might be new to their bank – or, if something big happens, we can get that information out to the community very quickly.”

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