October 14, 2020

FinCEN advises FIs on unemployment insurance fraud

moneyThe Financial Crimes Enforcement Network (FinCEN) Tuesday issued a new advisory alerting financial institutions to the rise of unemployment insurance fraud amid the coronavirus pandemic. According to the Department of Labor's most recent data, 840,000 claims were submitted for the week ending Oct. 3 and insured unemployment's four-week rolling average was over 12 million.

In FinCEN's alert, the agency outlines types of unemployment fraud, including:

  • fictitious employer-employee fraud, where filers falsely claim they work for a legitimate company, or create a fictitious company and supply fictitious employee and wage records to apply for unemployment insurance payments;
  • employer-employee collusion fraud, where the employee receives unemployment insurance payments while the employer continues to pay the employee reduced, unreported wages;
  • misrepresentation of income fraud, where an individual returns to work and fails to report the income in order to continue receiving unemployment insurance payments or, in an effort to receive higher unemployment insurance payments, an applicant claims higher wages than they previously earned;
  • insider fraud, where state employees use credentials to inappropriately access or change unemployment insurance claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of unemployment insurance funds to accounts that are not on the application; or
  • identity-related fraud, where filers submit applications for unemployment insurance payments using stolen or fake identification information to perpetrate an account takeover.

It also includes 10 financial red flag indicators of unemployment insurance fraud, ranging from withdrawing disbursed funds in a lump sum by cashier's check or by purchasing a prepaid debit card, to quickly diverting payments via wire transfer to foreign accounts, to receiving or sending payments to a peer-to-peer app, and more.

FinCEN provides suspicious activity report (SAR) filing instructions for financial institutions that identify potential unemployment insurance fraud.

Review the advisory here.

The NCUA in August warned credit unions in a Risk Alert of fraud risks associated with the pandemic, which included unemployment fraud. FinCEN has issued several advisories amid the crisis to keep financial institutions informed of increased risks, including medical scams and consumer fraud.