Payment Companies Increase Efforts to Combat Coronavirus-Related Frauds
May 22 2020 - 6:33PM
Dow Jones News
By Mengqi Sun
Payment companies are ramping up their processes to combat fraud
and scams as regulators warn financial institutions of illicit
activities related to the coronavirus pandemic.
Compliance teams at companies such as PayPal Holdings Inc. and
Western Union Co. have been closely monitoring early indicators of
fraudulent activities and incorporating them into their
investigation processes.
The Financial Crimes Enforcement Network, a U.S. Treasury
Department bureau focusing on combating illicit finance, alerted
financial institutions to an increase in Covid-19-related scams in
an advisory this week. Among them are fraudulent offerings of
cures, bogus vaccines and unauthorized tests, nondelivery scams of
medical supplies or protective gear, price gouging and the hoarding
of merchandise in high demand during the pandemic, such as hand
sanitizers and toilet paper.
"Detecting, preventing and reporting Covid-19-related scams and
illicit activity is critical to our national security, safeguarding
legitimate relief efforts and protecting innocent people from
harm," FinCEN said in the advisory.
FinCEN said it detected the trends through anti-money-laundering
data submitted by financial institutions, in public reports such as
news announcements, and publications by international organizations
and law enforcement agencies.
Other federal agencies, including the U.S. Justice Department
and the U.S. Customs and Border Protection, also have spotted these
trends, according to the notice.
A focus at PayPal has been to distinguish cybercriminals and
scammers from legitimate customers, charities and fundraisers,
according to Aaron Karczmer, the digital payment company's chief
risk officer. When tragedies or natural disasters happen, it tends
to bring out the best in people who might be inclined to make
donations to organizations or to support local businesses, he said.
Scammers exploit scenarios like that.
"We're able to set our systems in a way that can identify that
incoming, very good type of commerce and enable it," Mr. Karczmer
said. "[It's an] opportunity to enable good commerce and the
opportunity to stop fraudsters from taking advantage."
To identify possible swindlers, PayPal's financial crime team
picks up early tips from law enforcement, as well as from internal
investigations and merchant reviews. The team then incorporates the
information into algorithms that help PayPal identify possible
suspicious transactions sent through the company's platforms, Mr.
Karczmer said. The company also uses a multistep verification
process to ensure the payment is going to the right recipient.
Western Union has started to see internet-sale scams and romance
scams incorporate the pandemic, according to Tyler Hand, the
company's chief compliance officer. A possible internet-sale scam
might now promote masks or vaccination kits that never existed and
will never arrive, he said. A romance scam might involve an
impostor striking up an online relationship and asking for payments
to buy a coronavirus test to travel and finally meet, only to
pocket the cash and disappear.
Western Union's antifraud programs already were designed to
detect potentially suspicious activity based on where the money is
transferred and whether the locations historically are associated
with scams, Mr. Hand said. "Covid-19 is no different," he said.
The company updates its transaction monitoring system based on
information from internal and external sources and calls senders
who may unwittingly be involved in fraudulent activities based on
risk indicators such as a payment amount, according to Mr. Hand.
The company learns more about the types of possible scams through
those calls and uses the information to enhance its systems.
"It's really sort of a constant feedback loop," he said.
Write to Mengqi Sun at mengqi.sun@wsj.com
(END) Dow Jones Newswires
May 22, 2020 18:18 ET (22:18 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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