The cataclysmic rise of the COVID-19 pandemic made 2020 one of the more challenging years in world history from both a humanistic and economic perspective. But now, thanks to the heroic work of medical professionals and scientists working tirelessly to develop a potential solution to this historically unique problem, vaccinations have begun to be distributed and administered in wide numbers as we reach the new year. With more than 12 million doses delivered to over 30 countries as of January 2nd,5 there is hope that the threat of coronavirus infections can be significantly limited across the globe as the vaccination campaign continues. However, just as criminals took advantage of many of the economic developments seen in wake of the initial spread of the virus in the spring of 2020 (i.e. Paycheck Protection Program fraud, unemployment scams, and various other forms of sophisticated financial crime), they are also finding ways to do the same with the vaccines.
Several media outlets have chronicled new ploys launched by fraudsters seeking to take advantage of the anticipation (bordering on impatience) of citizens looking to reduce their risk in regards to the virus. Last week, the United States Treasury’s Financial Crimes Enforcement Network (FinCEN) – the body responsible for combatting domestic and international money laundering and terror financing – released a notice warning financial institutions in particular to stay alert for vaccine-related scams and cyberattacks moving forward. There are a number of fraudulent schemes that have already been tied to the release of the vaccines, including the sale of counterfeit or illegally marketed medications.4 Other scams have played on the emotions of potential victims, with bad actors offering the vaccine earlier than provided under official distribution guidelines, making them particularly appealing to high-risk individuals who are more desperate and will potentially overlook the sketchy nature of the dealing in and of itself. The most popular and effective method of vaccination scamming at the moment however involves the use of ransomware attacks that target vaccine delivery operations and supply chains. Ransomware is a type of malware that works by allowing a hacker to gain access to a computer system or at least some sensitive data and then encrypting it.6 At that point, the victim can no longer access their own data, rendering their systems almost unusable. In 2020, ransomware ploys most often proliferate through phishing emails or when one accesses and/or downloads files/programs from unsecure websites. While awareness and distrust of suspicious emails and websites should already be very high within the financial sector at this point, this is yet another reminder of why vigilance and proper due-diligence in all aspects of business (and life) remains essential. Put simply, if ransomware and phishing campaigns were not still successful, criminals would have adapted their practices accordingly by now. New ransomware schemes have been developed with fraudsters creating fraudulent websites masquerading as seemingly-legitimate vaccination sign-up sites that target email credentials and other personal information of unsuspecting citizens. In other cases, when ransomware emails are sent out to the masses, should a recipient click on the link provided to what’s purported to be a PDF sign-up form, they are redirected to a phishing landing page appearing to be a PDS online document manager, but instead is essentially a working document for criminals gaining access to potentially life-altering data.
This is just the latest evolution in a growing list of cybercrime related to the COVID-19 pandemic. As always, scammers constantly try to stay one step ahead of the trend, and as such, one step ahead of the proper authorities. When awareness is low and desperation (and fear) are high, both individuals and organizations are at their most vulnerable. While the financial industry has finally caught on to PPP fraud involving small businesses, with federal authorities seeing an increasing rate of convictions for this form of illicit activity, the next phase will apparently involve cracking down on vaccine distribution fraud. As always, global financial institutions will play a pivotal, frontline role in identifying suspicious trends and limiting their exposure, as well as that of their customers, to potential risks. As such, the FinCEN notice also provided specific instructions for filing Suspicious Activity Reports (SARs) regarding suspect activity in relation to COVID-19 vaccines and their distribution. FinCEN is looking to banks for more information on how scammers are contacting their victims and how payments are being made or attempted. The exact verbiage on FinCEN’s latest notice can be found here.
KYC Regulations on Horizon for Crypto Exchanges?
In late December, the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an advanced notice of proposed rulemaking seeking public comment on potential new regulations for banks and money service providers in relation to transactions involving convertible virtual currencies and other digitals assets. CoinDesk writes that under the notice, users who want to send cryptocurrencies from centralized exchanges to a private wallet would need to provide personal information about the owner of that wallet to the exchanges, if the amount sent is greater than $10,000 in one day.”2 Their article continues, noting that “exchanges would also need to submit and store records involving such transactions with a total value over $10,000 in a given reporting period, or just maintain records for transactions over $3,000”,2 effectively complementing existing BSA requirements. The Treasury believes that this regulation would help increase transparency into this still-developing market while closing loopholes that bad actors can exploit for personal gain, specifically with regard to transaction reporting. Others believe that this legislation is too stringent and will significantly limit future crypto-innovation, with investors clamoring for a regulatory framework that embraces technological developments and help grow virtual currencies, rather than fight such growth.
Regardless of one’s stand on the issue, the move would undoubtedly lead to a notable uptick in the amount of work that both individuals and the various platforms will have to put in to pushing transfers through as part of a grater move to align crypto-exchanges with the traditional American banking system. While the main target of the rule appears to be domestic self-hosted wallets, the Treasury is also expected to apply the novel reporting rules to foreign wallets with links to jurisdictions found on FinCEN’s money laundering watch list. The public has until January 4th, 2021 to speak their piece on the legislation.
Iraq Probing Central Bank for Alleged Money Laundering
The Supreme Judicial Council of Iraq, the administrative authority responsible for the affairs of the judiciary in Iraq, is currently investigating the Iraqi central bank (CBI) and 13 additional (and unnamed) financial institutions with alleged ties to money laundering and terrorism financing activities. Among the alleged transgressions of the aforementioned group are cases of customs and tax evasion, as well as potential fraud in connection with the foreign exchange auction run by the CBI and the 13 private firms.1 While extensive details have yet to be released, the Council reportedly found enough information to warrant calling in the respective directors of the banks for violations of the country’s Anti-Money Laundering and Terrorism Financing Law.
Some have speculated that the suspect operations involve the creation of fake invoices for non-existent goods by the private banks, which the CBI has failed to properly investigate and subsequently penalize to date. Some have argued that the Central Bank has failed to do so deliberately, likely secondary to their receipt of bribes or other lucrative benefits from these groups. Global RADAR will provide an update on the findings of the Judicial Council’s investigation as additional information is made available.
U.S. Levies More Sanctions Against Venezuela
Last week, the United States sanctioned two Venezuelan judicial officials over their roles in a trial that saw six former executives of United States oil and gasoline refiner Citgo sentenced to prison on charges of corruption in November. The U.S. Treasury Department released a statement on Wednesday announcing the imposition of sanctions against Venezuelan Supreme Court judge Lorena Cornielles who presided over the trial, and government-appointed prosecutor Ramon Torres. In the Treasury’s statement, acting Secretary Steven Mnuchin proclaimed “the unjust detention and sentencing of these six U.S. persons further demonstrates how corruption and abuse of power are deeply embedded in Venezuela’s institutions.”7
The former officials (now known as the “Citgo 6”) for the Houston-based oil conglomerate were originally arrested in November of 2017 after being accused of money laundering and embezzlement, among other unfounded claims. Five of the men, Gustavo Cárdenas, Jorge Toledo, Jose Luis Zambrano and Alirio Zambrano, and Tomeu Vadell, all U.S. citizens, were sentenced to eight years and 10 months. Jose Pereira, a permanent resident of the U.S., received 13 years.3
- al-Salhy, Suadad. “Iraq’s Central Bank under Investigation for Alleged Money Laundering.”Middle East Eye, 26 Dec. 2020.
- De, Nikhilesh, and Danny Nelson. “FinCEN Proposes KYC Rules for Crypto Wallets.”CoinDesk, CoinDesk, 19 Dec. 2020.
- Diaz, Jaclyn. “6 U.S. Citgo Executives Convicted And Sentenced In Venezuela.” NPR, NPR, 27 Nov. 2020.
- Hagel, Jack. “Treasury Warns Banks of Covid-19 Vaccine Fraud.” The Wall Street Journal, Dow Jones & Company, 28 Dec. 2020.
- “More Than 12 Million Shots Given: Covid-19 Vaccine Tracker.” com, Bloomberg, 2 Jan. 2021.
- “Ransomware Guidance and Resources.” Cybersecurity and Infrastructure Security Agency CISA.
- “U.S. Blacklists Two Venezuelan Officials over Former Citgo Executives’ Trial.” Reuters, Thomson Reuters, 30 Dec. 2020.