How financial crime thrives in global pandemics
Daniel Nisman is the Head of Financial Investigations at Cobwebs Technologies, an Israeli-based IT company specializing in artificial intelligence.
In February 2020, at the peak of the initial Coronavirus outbreak in Wuhan, the Chinese Central Bank announced it had begun literally cleaning hard currency as one of the methods to prevent the virus from spreading. But while China and other nations take to literally launder their ‘dirty’ cash for the better, COVID19 as a global pandemic is already making a profound impact on financial crime and the global economy as a whole. Some of these trends are already beginning to take shape, and others should be anticipated in the long term. Here are a few we’ve seen already:
Happening now: Spike in fraud schemes
The emotional impact worldwide of the virus has created panic among many populations and in doing so, has created new vulnerabilities for fraudsters and cyber criminals. To name a few, the new global thirst for information on the spread of COVID19 has enabled phishing scams in the form virus news updates and monitoring websites to target huge numbers of new potential victims for identity theft using modified URLs and even entirely mimicked websites. In a case reported by American Banker, the Johns Hopkins University’s virus-tracking page was copied with the link “Corona-Virus-Map.com,” and boobytrapped with malware called corona.exe, which is a variant of AzorUlt, a type of spyware that steals usernames, passwords, credit card numbers and other data stored on the victims’ browser. Meanwhile, tech-savvy criminals have created professional looking websites in a matter of hours, posing as Coronavirus victim help centers, but in actuality are serving as fronts to recruit ‘mules’ to launder crime proceeds under the guise of new employment opportunities. One such website, vastyhealthcarefoundation[.]com, has sufficient content and data to suggest that it is a charity operating for decades.
Other scams are less technical, but nonetheless lucrative. Criminals are taking advantage of supply shortage panic, including for items such as fake hand-sanitizer and overcharging for other related hygiene supplies to accumulate quick illicit revenues. One darknet marketplace has offered facemasks of questionable quality for upwards of EUR 6,000 per package.
Short term: Illicit offshore financial flows and willing money mules
Revolutions, natural disasters, and armed conflict around the world typically send jitters through the local economic elite, alongside criminal networks and corrupt politicians and businesspersons, fearing their assets could be frozen or compromised. As seen in recently in Venezuela, China, Hong Kong, Saudi Arabia, and elsewhere, major instability causes a wealth exodus to offshore centers, requiring enhancement of due diligence and vigilance among accepting financial institutions. While it’s still too early to gauge the long term impact of the pandemic, money launderers could already be hard at work plotting new routes to secure illicit funds in stable offshore centers. Available to them are an increasingly large pool of desperate, unemployed associates willing to take part in opening bank accounts in their name to mask their source of funds.
Long term: Is this the end of the face-to-face meeting?
In the eventual post-COVID19 economy, every business will have a remote service provision alternative, from banks to restaurants to retail. But long before the Coronavirus made social-distancing a household practice, digital financial transfers by paytech firms were already set to overtake traditional financial services in terms of global volume.
The face-to-face meeting has always been a surefire way of shielding a financial institution from fraudsters and money launderers. But with restrictions in place against close interactions, banks, insurance companies, corporate services firms, and others will have no choice but to implement the sort of remote onboarding solutions which can be exploited.
The blockchain world hasn’t been spared by the coronavirus either, with bitcoin and other leading cryptocurrencies taking a huge dive in value. But Cryptocurrency advocates will argue that moves by central banks to intervene on currency fluctuations only prove the need for a new, decentralized and secure currency system, with bitcoin and other digital assets as sound alternatives. The debate surrounding this alternative currency system is surely likely to resurge in the coming weeks and months in a profound manner.
Much like the virus itself, it is still too early to grasp the long term impact of COVID 19 on financial crime trends. But the changes brought about this pandemic will be profound in all aspects of global business, and the criminal activity trying to thrive among it. One thing is certain: Financial institutions must be on guard more than ever before, particularly to put a stop to schemes targeting those made most vulnerable during these difficult times. Intelligence on evolving threats and analysis on money laundering trends is crucial to preserve the integrity and credibility of the world’s financial institutions — which we all depend on to preserve the global economy.