The Federal Trade Commission’s (FTC) ongoing Covid-19 current fraud totals show 338,923 thousand reports of fraud and $319.96 million lost from January 1st 2020- February 1st 2021(Source). These high fraud totals can be partially attributed to the COVID-19 pandemic, where criminals have taken advantage of societal instability to target both businesses and citizens (Source). It is well-established that wherever there is an opportunity to make money, there will be fraud. However, an emerging trend is that this illicit financial activity is now becoming a security issue and governmental entities must begin to implement new systems to safeguard against this threat.
- Driver’s License
- Health Care
- Debit and Credit Card
- Bank Account Takeover
- Stolen Tax Refund
Recently, because of government actions taken in response to the pandemic, the U.S has also experienced a large number of fraud cases. While the most common of these has been demand deposit account (DDA) fraud, the CARES act has led to increases in unemployment-related fraud as well as illegal claims relating to the government stimulus programs such as the Paycheck Protection Program (PPP) and other low or no interest lending programs (Source).
With both the public and private sectors unprepared for the economic consequences of addressing a pandemic with a lockdown, government action was both swift and unsophisticated. Typical safeguards to reduce potential fraud were not implemented in order to facilitate the issuance of much-needed financial lifelines for both businesses and individuals. For example, it is estimated that the state of California has paid out a staggering $11 billion worth of fraudulent unemployment claims since the COVID-19 pandemic (Source).
Additionally, one of the elements of the PPP program, enacted in April 2020, through which more than $522 billion were distributed to more than five million companies, was the “safe harbor” provision which stated that no loans under $2,000,000 would be audited based upon an affidavit of good faith by the filing entity (Source). As an example of the abuse of this well-intended program, in September 2020 alone, some 2,495 cases of suspicious-activity reports relating to loans were reported to the Treasury Department (Source). The FBI has also noted that as a result of criminal exploitation of PPP loans, there have been numerous complaints from businesses that are unable to apply for loans because their information was stolen and already used for the program (Source).
Fraud against the government not only results in financial losses, but also creates a weakening of public confidence in businesses and government programs. Additionally, organized crime and terrorist groups have been able to increase their involvement in fraud-related operations because of the loopholes in government programs, the transition from in-person to remote, and civilian naivety for detecting fraud (Source). Both have developed schemes involving the impersonation of officials, counterfeiting essential goods, fundraising for fake charities, in addition to exploiting stimulus programs (Source) When discussing unemployment fraud, U.S. Officials in California stated that “billions of additional dollars have been siphoned off by organized cyber-crime rings operating out of Nigeria, Russia, and elsewhere” (Source). Furthermore, in August 2020 several U.S departments dismantled an ISIS fundraising scheme involving the sales of face masks (Source). These incidents not only serve to finance criminal groups, but also embolden them to continue their actions which threaten U.S security, citizens, and institutions. The FTC’s fraud totals should serve as an important message to the U.S government to increase it’s monitoring of fraud and funding of agencies and businesses to assist in combating this national security threat. The connection between organized crime and terrorist groups elevates these fraudulent activities beyond mere financial concerns.
Praescient is prepared to help governmental entities with this complex issue by providing investigative and technological expertise. Analyst’s at Praescient have supported issues of fraud investigations with the DOJ and other institutions, such as analyzing the indicators of fraud in the PPP provisions of the CARES Act (Source). Additionally, Praescient’s solutions are customized to support different initiatives and missions while also integrating insights from it’s 10 years of experience assisting over 40 organizations located both domestically and overseas.