Financial Crime World

Coronavirus Pandemic Spawns New Wave of Financial Crimes

As the world grapples with the devastating impact of the coronavirus pandemic, financial regulators are sounding the alarm over a surge in money laundering and terrorist financing activities.

Increased Risk of Financial Crimes

Recent market volatility has led to an increase in individuals liquidating their portfolios and transferring large amounts of cash electronically. This trend is being exploited by criminals who use banknotes to mask illegal activities, including the purchase of safe haven assets such as gold.

  • “Cash-out” schemes: Criminals obtain access to an individual’s bank account and withdraw funds in banknotes from an ATM.
  • Suspicious transactions: Individuals are using the pandemic as a cover for suspicious transactions by referencing “COVID-19” as the transaction purpose.
  • Virtual asset laundering: An individual used virtual assets to launder profits earned from selling fraudulent COVID-19 medicine.

Growing Threat of Insider Trading and Fraud

Insider trading is another area of concern, with reporting indicating an increase in investor fraud due to increasingly volatile financial markets. Wholesale financial service providers are transferring or liquidating assets in securities markets in response to COVID-19-related uncertainties, which can potentially increase the risk of illicit financial market activities.

Terrorist Financing Opportunities

The United Nations has warned that terrorist groups may see opportunities for increased terrorist and terrorist financing activity while government attention is focused on COVID-19. The FATF noted that terrorist groups could use the pandemic as a cover to raise and move funds, and increase existing illicit activity to finance their operations.

AML/CFT Regimes Under Strain

The pandemic is also having a significant impact on anti-money laundering and combating the financing of terrorism (AML/CFT) regimes. Many AML/CFT government and private sector employees are now working remotely, have been redeployed to COVID-19 responses, or are not working at all.

Policy Response Needed

The FATF is urging governments and the private sector to take immediate action to address these emerging threats and vulnerabilities. This includes:

  • Implementing risk-based approaches to mitigate the risk of funds being diverted to support terrorists and terrorist groups.
  • Maintaining AML/CFT operations during the pandemic, despite challenges.

Conclusion

A coordinated policy response is needed to address the growing threat of money laundering and terrorist financing in the context of the COVID-19 pandemic.