Fraud in the Time of COVID

Fraud has grown “phenomenally” during the COVID-19 pandemic says the Director of Financial Intelligence Unit (FIU), the agency charged with receiving reports, conducting research and investigations, and supporting law enforcement on matters related to financial crime.

Appearing as part of a panel on Barbados’ Anti-Money-Laundering and Combatting the Financing of Terrorism (AML/CFT) efforts at the Central Bank of Barbados and Financial Services Commission’s August Domestic Financial Institutions Conference, Kirk Taitt said that fraud has always been a concern in Barbados, but revealed that the increase in e-banking and e-commerce during the pandemic has contributed to an uptick:

“Prior to the lockdown, we had seen fraud emerging as a serious issue. With the lockdown, we saw it even more, because as companies introduced the digital portals to submit documents on, we saw a lot of documentation that was fictitious, that was false, be it job letters, be it pay slips and so on. These documents were deemed to be fraudulent.”

This trend continued post lockdown as some people who were unemployed used these forged documents in an attempt to attain funds illicitly.

The FIU director also disclosed some of the other types of suspicious activity that has been detected in recent months, identifying romance scams and phishing, where people send emails to people in an attempt to get them to reveal sensitive information or to complete an action (such a click on a link) which will then allow them to hack that person’s computer system.

“We had cases where a client’s identity is assumed by a hacker, and that hacker instructs the company to send funds to an account overseas. In the absence of any call-back procedures in the company, we have found that some persons have been susceptible to that kind of activity.”

Monitoring is one way that financial institutions are able to mitigate this threat, as it allows them to “be aware of any aberration or excess activity on accounts.” He offered an example of the type of activity that can raise red flags when banks conduct careful monitoring:

“We had reports where clients, even in the lockdown period – and these were non-essential businesses – would make large deposits over a period of time, and over several days, below certain amounts of money – but cumulatively it is a lot of money – to avoid discovery by the bank’s mechanisms.”

Being aware of what is usual or unusual for clients based on the documentation they submit and patterns in their transaction behaviour makes it possible for financial institutions to recognise and report potentially fraudulent activity, which is then investigated by the FIU and potentially law enforcement.

It also, says Taitt, helps the average accountholder. Knowing their customers and their typical financial behaviour can allow financial institutions to recognise when a client has been targeted by fraudsters. He believes that explaining this to accountholders, rather than casting due diligence as simply something they are mandated to do, can lead to increased compliance with requests for documentation.

“We still keep hearing, unfortunately, that it is a regulatory requirement. It tells me that companies have not yet figured out the way to integrate compliance requirements with customer experience.”

He suggests that by casting due diligence in a new light, financial institutions can more easily get the information they need to meet regulatory standards and protect their clients, something that will continue to be critical in this time of elevated fraud.