grugant@ballardspahr.com | 215.864.8320 | view full bio

Terence’s practice focuses on representing clients involved in criminal, regulatory, and administrative investigations and litigation, and in civil litigation matters involving the federal securities laws and other allegations of fraudulent business practices. He represents financial institution clients in matters implicating their practices under the BSA and related AML laws, including compliance program advice, internal investigations, regulatory examinations, and related civil litigation.

The Financial Crimes Enforcement Network (“FinCEN”) just issued another Advisory pertaining to two consumer fraud schemes exacerbated by the COVID-19 pandemic. This Advisory focuses on “imposter schemes” and “money mule schemes, ”which we discuss below.

This most recent Advisory is the latest in a string of pronouncements relating to the pandemic by FinCEN, which has stated that it regularly will issue such documents. As we have blogged, FinCEN issued an Advisory on May 18 regarding medical scams related to the pandemic, and issued a companion Notice that “provides detailed filing instructions for financial institutions, which will serve as a reference for future COVID-19 advisories.” On April 3, 2020, FinCEN also updated its March 16, 2020 COVID-19 Notice in order to assist “financial institutions in complying with their Bank Secrecy Act (“BSA”) obligations during the COVID-19 pandemic, and announc[ing] a direct contact mechanism for urgent COVID-19-related issues.”

The most recent Advisory again provides a list of potential red flags that FinCEN believes that financial institutions should be monitoring for, in order to detect, prevent, and report such suspicious activity. As we previously have commented: although such lists can be helpful to financial institutions, they ultimately may impose de facto heightened due diligence requirements. The risk is that, further in time, after memories of the stressors currently imposed by COVID-19 have faded, some regulators may focus only on perceived historical BSA/AML compliance failures and will invoke these lists not merely as efforts by FinCEN to assist financial institutions in deterring crime, but as instances in which FinCEN was putting financial institutions on notice.

Further, the most recent Advisory suffers from the fact that its list of red flags for imposter schemes is best directed at consumers themselves, rather than at financial institutions offering services to consumers: many of the red flags pertain to anomalies in the communications sent directly by fraudsters to targeted consumer victims – information that financial institutions rarely possess.
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