Financial Crime World

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Rising Risks of Money Laundering and Terrorist Financing During the COVID-19 Pandemic

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The COVID-19 pandemic has brought about new challenges for financial institutions, making them more susceptible to money laundering (ML) and terrorist financing (TF) risks. This document highlights the key risks associated with these crimes during this time.

Key Risks

Phishing Emails and Mobile Messages

  • Criminals use links to fraudulent websites or malicious attachments to obtain personal payment information.
  • These types of scams can be very convincing, making it difficult for individuals to distinguish between legitimate and fake messages.

Ransomware Attacks

  • Cybercriminals use malicious websites and mobile applications that appear to share COVID-19-related information to gain access to victims’ devices, locking them until a ransom is paid.
  • These attacks can have severe consequences, including the loss of sensitive data and financial losses.

Changing Financial Behaviors

  • The pandemic has led to increased online banking activities, including customer onboarding and identity verification, making customers more susceptible to fraud.
  • As more people turn to digital channels for their financial needs, it’s essential for institutions to have robust security measures in place to prevent fraudulent activity.

Misdirection of Government Funds or International Financial Assistance

  • Criminals may try to fraudulently claim or misdirect stimulus funds or international financial aid.
  • This type of crime can have severe consequences, including the diversion of much-needed resources from those who need them most.

Increased Financial Volatility

  • Opportunistic criminals may shift their activities to exploit new vulnerabilities in the financial system.
  • As the pandemic continues to impact global economies, it’s essential for institutions to be vigilant and proactive in detecting and preventing ML/TF activity.

Compliance Requirements

Risk-Based Approach

  • Licensees should develop a comprehensive risk assessment to identify ML/TF risks associated with COVID-19 and implement sufficient control measures to mitigate them.
  • This approach will help ensure that institutions are taking a proactive and targeted approach to addressing these risks.

Transaction Monitoring

  • Increased ongoing account monitoring is essential to detect suspicious activity, and transaction monitoring rules and alert indicators should be reassessed to capture emerging typologies.
  • By staying on top of changes in customer behavior and transactions, institutions can identify potential ML/TF activity before it’s too late.

Suspicious Transaction Reporting (STRs)

  • Licensees should investigate transactions or customer conduct that appears unusual or suspicious and file an STR immediately in accordance with the requirements stipulated in the FC Module.
  • This process will help ensure that institutions are reporting suspicious activity in a timely and effective manner.

Digital Onboarding

  • Licensees may implement digital onboarding subject to CBB approval, but must conduct a thorough risk assessment and confirm that all requirements commensurate to the FC Module are comprehensively met.
  • By taking a careful and considered approach to digital onboarding, institutions can minimize the risk of ML/TF activity.

Awareness

  • FIs should engage with their customers to raise awareness on emerging fraudulent activities and cybercrimes, and ensure that staff members are adequately aware of rising COVID-19 ML/TF risks.
  • By educating customers and staff about these risks, institutions can help prevent ML/TF activity and promote a culture of vigilance.

Conclusion

Effective systems and controls must be put in place and maintained to prevent the abuse of the Kingdom’s financial system for money laundering or terrorist financing purposes. Licensees must ensure ongoing compliance with their AML/CFT obligations as set forth in the FC Module of the CBB Rulebook, even during times of crisis such as the COVID-19 outbreak.