FinCEN Advisory on Unemployment Insurance Fraud During Pandemic

On 10/13/2020, the Financial Crimes Enforcement Network (FinCEN) issued an advisory (FIN-2020-A007) to alert financial institutions to unemployment insurance fraud observed during the pandemic. The advisory contains descriptions of the different fraud types, associated red flag indicators, and information on reporting suspicious activity.

The following types of fraud are identified in the advisory:

• Fictitious employer-employee fraud: filers falsely claim they work for a legitimate company, or create a fictitious company and supply fictitious employee and wage records to apply for UI payments;

• Employer-employee collusion fraud: the employee receives UI payments while the employer continues to pay the employee reduced, unreported wages;

• Misrepresentation of income fraud: an individual returns to work and fails to report the income in order to continue receiving UI payments, or in an effort to receive higher UI payments, an applicant claims higher wages than he/she previously earned;

• Insider fraud: state employees use credentials to inappropriately access or change UI claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of UI funds to accounts that are not on the application; or

• Identity-related fraud: filers submit applications for UI payments using stolen or fake identification information to perpetrate an account takeover..

When reporting a SAR on related activity, financial institutions should reference the advisory by including the key term “COVID19 UNEMPLOYMENT INSURANCE FRAUD FIN-2020-A007” in SAR field 2 (Filing Institution Note to FinCEN) and the narrative to indicate a connection between the suspicious activity being reported and the activities highlighted in this advisory. Financial institutions also should select SAR field 34(z) (Fraud - other) as the associated suspicious activity type to indicate a connection between the suspicious activity being reported and COVID-19. When addressing unemployment fraud in a SAR, financial institutions should include the keywords “unemployment fraud” in SAR field 34(z).

The full advisory can be found here.