Coronavirus has had an impact on almost everyone worldwide, and criminals are no exception.
Some newspapers have reported that there has been as much as a 20% reduction in crime since the pandemic began, and it will perhaps come as no surprise that the reported number of burglaries, drink driving offences and incidents of drug and people smuggling have all decreased.
The ways in which criminals launder the proceeds of their illicit behaviour have also been affected by the virus. The dramatic change in the usage of money – partly because spending has fallen, but also because of concerns about the risk of transmitting coronavirus via bank notes, as well as the fact that the cash intensive businesses traditionally associated with money laundering have been adversely affected by the lockdown rules – has reduced the amount of illicit cash passing through financial systems.
So, what bearing does this have on the way that businesses assess risk?
How risk is assessed
In times of uncertainty, it is perhaps unsurprising that businesses may wish to increase their appetite to take risks, motivated by looking to ensure survival and seeking to adapt to changing circumstances without a large financial outlay.
When it comes to client onboarding and Customer Due Diligence (CDD) specifically, with the hope of assisting both customers and businesses through these times in mind, there has been a perceived relaxing in oversight from some supervisors, particularly with the deferral of many on-site visits.
The Financial Action Task Force (FATF) has also encouraged the greater use of simplified due diligence in lower risk matters, as well as recognising that isolating or ill customers may not be able to provide CDD or Know Your Customer (KYC) documentation.
‘Criminals are resourceful’
While this backdrop may mean businesses take a sigh of relief, it should not be forgotten that criminals are resourceful. As both businesses and individuals try to make sense of the changing landscape, they are eager to take advantage of the disruption caused by the pandemic, any any subsequent increase in risk appetite.
The rate of some offences, including fraud, cybercrime and counterfeiting, has risen significantly, as the pandemic has provided new opportunities for criminal behaviour. It is vital that businesses remain vigilant to new or emerging threats, because of both the risk of falling foul to these scams and the risk of inadvertently assisting in the laundering of the proceeds of criminal behaviour, or acting in breach of the regulations by failing to detect unscrupulous and dishonest clients.
The possibility of “furlough fraud” – criminals taking advantage of the government support schemes by making false or over inflated claims – has been fairly well publicised during the last few months. But some of the other new types of criminal behaviour we are seeing are perhaps lesser known.
- The selling of counterfeit goods, particularly PPE and testing kits
- Increasingly sophisticated phishing/scamming emails seeking to take advantage of lapses in IT systems and the move to remote working
- Targeting individuals who have recently lost their jobs with ‘large salary, working from home’ job advertisements designed to trick victims into using their personal bank accounts to funnel the proceeds of crime. Funds move through a series of bank transfers and cash transactions designed to complicate and disguise the money trail to avoid detection. Some mules are complicit, fuelled by desperation, whereas others are unknowingly recruited through romance or employment scams and believe their actions are work-related (such as processing charitable donations) or are helping a loved one in need
It is clear that the fallout from COVID-19 has not only brought changes in existing risks, but also new avenues that have the potential to impact hugely on businesses.
Now more than ever, we cannot underestimate the importance of businesses understanding that risk management is a continuing process, and taking a dynamic risk-based approach to money laundering and all types of financial crime so that they can adapt to the ever evolving landscape.