On February 24, 2021, the Financial Crimes Enforcement Network (FinCEN) issued an advisory alerting financial institutions to the potential for fraud and other financial crimes related to Economic Impact Payments (EIPs) and a Notice on COVID-19 Suspicious Activity Report Key Terms and Filing Instructions. The EIP was authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act1 and the Coronavirus Response and Relief Supplemental Appropriations Act of 2021.2 The new advisory provides descriptions of EIP fraud, red flag indicators, and other information on reporting suspicious activity. This advisory describes the major fraudulent and criminal activity companies should watch.
In the advisory, FinCEN provides a non-exhaustive list of EIP-related fraud and criminal activity:
The FinCEN advisory also discusses “red flag” indicators of financial crimes related to EIPs and provided exemplars of such crimes. The categories outlined are:
The advisory further provides information on how to report suspicious activity (suspicious activity reports, or “SAR”). FinCEN requests that financial institutions reference this advisory by the key term “FIN-2021-A002,” to alert FinCEN to a possible connection between the suspicious activity and the activities outlined in the advisory. When reporting on behavior that includes counterfeit checks, money mule activity, or identity theft, FinCEN requests that the report include the terms “economic impact payment” and other program-specific terms. By selecting SAR field 34(z) (Fraud-other), financial institutions are indicating to FinCEN that this is related to COVID-19. FinCEN also asks that the name of the potential victim of an EIP fraud be included in the narrative portion, not the subject of the SAR.
Additionally, as noted above, on February 24, 2021, FinCEN released a Notice on Consolidated COVID-19 Suspicious Activity Report Key Terms and Filing Instructions. By issuing this Notice, FinCEN consolidates the filing instructions and key terms for fraudulent activities, crimes, and cyber and ransomware attacks related to COVID-19, and to remind financial institutions of the recent updates to Section 314(b). Table 1 of the Notice defines key terms and instructions regarding or relating to government programs, where Table 2 defines the key terms and instructions not tied to a specific government program. Table 3 provides a list of FinCEN’s COVID-19-related publications.
Banks and other financial institutions should be on high alert to potential abuse of EIPs and other related financial crimes. Companies may consider implementing new compliance policies around these transactions and engaging in regular system checks to make sure red flag transactions are caught. If any reporting issue arises, we recommend you consult with legal counsel and draft such a report with FinCEN’s recommended reporting words.
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1 Pub. L. 116-136.
2 Pub. L. 116-260.