Payment companies are ramping up their processes to combat fraud and scams as regulators warn financial institutions of illicit activities related to the coronavirus pandemic.
Compliance teams at companies such as
PayPal Holdings Inc.
Western Union Co.
have been closely monitoring early indicators of fraudulent activities and incorporating them into their investigation processes.
The Financial Crimes Enforcement Network, a U.S. Treasury Department bureau focusing on combating illicit finance, alerted financial institutions to an increase in Covid-19-related scams in an advisory this week. Among them are fraudulent offerings of cures, bogus vaccines and unauthorized tests, nondelivery scams of medical supplies or protective gear, price gouging and the hoarding of merchandise in high demand during the pandemic, such as hand sanitizers and toilet paper.
“Detecting, preventing and reporting Covid-19-related scams and illicit activity is critical to our national security, safeguarding legitimate relief efforts and protecting innocent people from harm,” FinCEN said in the advisory.
FinCEN said it detected the trends through anti-money-laundering data submitted by financial institutions, in public reports such as news announcements, and publications by international organizations and law enforcement agencies.
Other federal agencies, including the U.S. Justice Department and the U.S. Customs and Border Protection, also have spotted these trends, according to the notice.
A focus at PayPal has been to distinguish cybercriminals and scammers from legitimate customers, charities and fundraisers, according to Aaron Karczmer, the digital payment company’s chief risk officer. When tragedies or natural disasters happen, it tends to bring out the best in people who might be inclined to make donations to organizations or to support local businesses, he said. Scammers exploit scenarios like that.
“We’re able to set our systems in a way that can identify that incoming, very good type of commerce and enable it,” Mr. Karczmer said. “[It’s an] opportunity to enable good commerce and the opportunity to stop fraudsters from taking advantage.”
To identify possible swindlers, PayPal’s financial crime team picks up early tips from law enforcement, as well as from internal investigations and merchant reviews. The team then incorporates the information into algorithms that help PayPal identify possible suspicious transactions sent through the company’s platforms, Mr. Karczmer said. The company also uses a multistep verification process to ensure the payment is going to the right recipient.
Western Union has started to see internet-sale scams and romance scams incorporate the pandemic, according to Tyler Hand, the company’s chief compliance officer. A possible internet-sale scam might now promote masks or vaccination kits that never existed and will never arrive, he said. A romance scam might involve an impostor striking up an online relationship and asking for payments to buy a coronavirus test to travel and finally meet, only to pocket the cash and disappear.
Western Union’s antifraud programs already were designed to detect potentially suspicious activity based on where the money is transferred and whether the locations historically are associated with scams, Mr. Hand said. “Covid-19 is no different,” he said.
The company updates its transaction monitoring system based on information from internal and external sources and calls senders who may unwittingly be involved in fraudulent activities based on risk indicators such as a payment amount, according to Mr. Hand. The company learns more about the types of possible scams through those calls and uses the information to enhance its systems.
“It’s really sort of a constant feedback loop,” he said.
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