FinCEN Advisory on COVID-19-Related Imposter Scams and Money Mule Schemes

on 9:21 AM

The Financial Crimes Enforcement Network (FinCEN) issued an advisory (FIN-2020-A003) to alert financial institutions to potential indicators of imposter scams and money mule schemes --  two forms of consumer fraud observed during the COVID-19 pandemic. The advisory contains descriptions of imposter scams and money mule schemes, financial red flag indicators for both, and information on reporting suspicious activity.

Imposter scams: criminals impersonate organizations such as government agencies, non-profit groups, universities, or charities to offer fraudulent services or otherwise defraud victims. Some examples of red flag indicators of imposter scams include:

  • Requests via phone/e-mail/text requesting verification of personal information in connection with COVID-19-related stimulus payments or benefits, including Economic Impact Payments (EIP).
  • Unsolicited communications from purported trusted sources or government programs related to COVID-19, instructing readers to open embedded links or files to provide personal or financial information, including account credentials.
  • Solicitations where the person, email, or social media advertisement seeks donations on behalf of a reputable organization, but the hyperlink points to an unaffiliated website.

Money mule schemes: involve “a person who transfers illegally acquired money on behalf of or at the direction of another.” During the COVID-19 pandemic, U.S. authorities have detected recruiters using money mule schemes, such as good-Samaritan, romance, and work from-home schemes. U.S. authorities also have identified criminals using money mules to exploit unemployment insurance programs during the COVID-19 pandemic. Some examples of red flag indicators of money mule schemes include the following:

  • A member who typically maintains a low account balance starts to receive transfers that do not fit his or her transactional history profile, including overseas transactions, purchases of large sums on convertible currency, etc.
  • A person opens a new account in the name of a business and, shortly thereafter, someone transfers the funds out of the account.
  • A person opens accounts at multiple institutions in order to receive money from various individuals and business, then moves the money to other accounts at the direction of the member’s purported employer.

SAR filing guidance: When reporting these schemes, FinCEN requests that financial institutions:

  • Reference this advisory by including the key term “COVID19 MM FIN-2020-A003” in SAR field 2 (Filing Institution Note to FinCEN) and the narrative to indicate a connection between the suspicious activity being reported and the activities highlighted in this advisory.
  • Select SAR field 34(z) (Fraud - other) as the associated suspicious activity type to indicate a connection between the suspicious activity being reported and COVID-19.
  • Include the type of fraud and/or name of the scam or product (e.g., imposter scam or money mule scheme) in SAR field 34(z).
  • Report certain types of imposter scams and money mule schemes using fields such as SAR field 34(l) (Fraud- Mass marketing), or SAR field 38(d) (Other Suspicious Activities- Elder Financial Exploitation)

NCUA, CFPB release updated rulemaking agendas

on 7:43 AM

The NCUA and Consumer Financial Protection Bureau (CFPB) released their Spring 2020 rulemaking agendas. The agendas cover regulatory issues the agencies expect to work on in the coming months, but are mostly predictions and can be amended at any time.

The CFPB’s list covers matters it expects to focus on between May 1, 2020 and April 30, 2021. It also includes updates on several major rulemakings, including:

  • In September the CFPB plans to take steps toward implementing Section 1071 of the Dodd-Frank Act, which amended the Equal Credit Opportunity Act (ECOA) to require a data collection on women-owned, minority-owned, and small businesses;
  • In the fall it plans to propose two new rules under the Home Mortgage Disclosure Act (HMDA):
  • The rule focuses on the data points that are reported under the 2015 HMDA rule and coverage of certain business or commercial purpose loans;
  • The second addresses the public disclosure of HMDA data, in light of consumer privacy interests.
  • In October the CFPB expects to take final action on its proposed rule governing the activities of “debt collectors,” as defined under the Fair Debt Collection Practices Act. The proposal would, among other things, address communications in connection with debt collection; and interpret and apply prohibitions on harassment or abuse, false or misleading representations, and unfair practices in debt collection; and
  • Later this year the CFPB is considering a proposed rule proposing a new “seasoning” definition of Qualified Mortgage (QM). This definition would create an alternative pathway to QM safe-harbor status for certain mortgages when the borrower has consistently made timely payments for a period.

NCUA’s agenda includes:

  • Proposals on automated valuation models, incentive-based compensation arrangements, investment on deposit activities; credit union service organizations, purchase, sale and pledge of loans, compensation in connections with members and lines of credit to members, transition to the current expected credit loss (CECL) methodology, golden parachute and indemnification payments, subordinated debt, joint ownership share accounts, complex credit union leverage ration and corporate credit unions;
  • Final rules on residential real estate appraisals, interagency guidance on credit union risk review systems, chartering and field of membership and combination transactions with non-credit unions.

CUNA backs NCUA’s joint ownership for share accounts proposal

on 7:39 AM

CUNA filed a comment letter on Monday in support of NCUA’s proposed rule on joint ownership for share accounts. The proposal addresses the requirement for separate joint account insurance that each co-owner of a joint account has personally signed a membership card or account signature card. In the event a credit union is unable to produce from its records such membership cards or account signature cards, the proposal would explicitly permit the use of other evidence contained in a credit union’s account records to satisfy the signature card requirement.

“We believe it is important to maintain parity with the regulations applicable to banks on joint account ownership,” the letter reads. “Further, we support the increased flexibility the proposed rule will provide, establishing an alternative method to satisfy the existing signature card requirement.”

The signature card requirement could be satisfied by information contained in the account records of the insured credit union establishing co-ownership of the share account, such as evidence that the credit union has issued a mechanism for accessing the account to each co-owner or evidence of usage of the share account by each co-owner.

Congress passes bill to extend PPP deadline to Aug. 8

on 8:08 AM

The House and Senate passed a bill that would extend the deadline for applying for Paycheck Protection Program (PPP) loans. The president is expected to sign it shortly.

The bill, introduced by Senate Small Business Committee Ranking Member Sen. Ben Cardin (D-Md.), would extend the deadline for applying for PPP loans to Aug. 8.

Though the PPP still has approximately $130 billion in unspent funds, the program expired June 30 at midnight.

Credit unions are strong supporters of the PPP, but CUNA has engaged with Congress, the Treasury and Small Business Association with concerns about the program, including on the need for guidance on several matters and lender liability protection.

PPP forgiveness bill would remove regulatory hurdles

CUNA wrote in support of the Paycheck Protection Program (PPP) Forgiveness Act Wednesday, a bill that would simplify forgiveness of PPP loans under $150,000. The bill was introduced earlier this week by Sens. Kevin Cramer (R-N.D.), Bob Menendez (D-N.J.), Thom Tillis (R-N.C.) and Kyrsten Sinema (D-Ariz.).

“This bill will allow America’s small business owners and Main Street financial institutions to remain focused on serving their communities rather than jumping through burdensome regulatory hurdles. Specifically, this bill would provide forgiveness for Paycheck Protection Program (PPP) loans of $150,000 or less if the borrower submits an attestation form to the lender. It also ensures that the lender will be held harmless from any enforcement action if the borrower’s attestation contained falsehoods.”

America’s credit unions have issued thousands of PPP loans, including more than 60,000 loans averaging $49,000 each from the smallest credit unions.

NEACH Seeks Nominations for Board

on 10:06 AM

The New England ACH Association (NEACH) is seeking qualified candidates to serve on its Board of Directors.  All candidates must hold an officer position at a NEACH-member financial institution. Board members are elected for two-year terms. The Board seeks gender, racial, and geographic
diversity and officers of member financial institutions committed to helping NEACH achieve its
mission of providing strategic and operational support to its members. Additionally, the Board
endeavors to expand the expertise and perspectives represented on the Board. Candidates
should have an understanding of NEACH’s mission and the work NEACH does to improve the
payments landscape.

Interested candidates are encouraged to review the Board Responsibilities and to complete the
nomination form and questionnaire. We also ask that interested candidates complete a short
skills assessment and demographic survey.  Nominations for positions on the NEACH Board of Directors will be accepted through July 31, 2020. Completed documentation can be sent to Nicole Beck-Dowd at .

Members of NEACH's 17 member board include Steve Roy, President of Tricorp FCU, and the lone Vermont board member is Caroline Carpenter, President of National Bank of Middlebury.

FinCEN Guidance on Hemp-Related Businesses

on 9:14 AM

Recently released FinCEN guidance offers clarification as to how financial institutions should address due diligence concerns, as well as information collection and reporting requirements when offering financial services to hemp-related businesses.

The guidance only covers Bank Secrecy Act risk considerations for hemp-related businesses and not marijuana-related businesses.  If the business is marijuana-related, institutions must follow the guidance issued by FinCEN in 2014 (FIN-2014-G001: BSA Expectations Regarding Marijuana-Related Businesses).

FinCEN expects credit unions to tailor their BSA/AML programs to reflect the risks associated with the members' risk profile and file reports as required under the BSA – and clearly this doesn't change with hemp-related businesses. While the guidance follows due diligence procedures likely already in place at your credit union for meeting BSA/AML expectations, SAR reporting, and CTR filings there are few clarifications.   

Expectations under BSA/AML

  • Clearly CDD (customer due diligence) for hemp-related businesses is required and appropriate risk-based procedures need to be in place for ongoing CDD.
  • Credit unions need to confirm that the hemp-related business is complying with state, tribal government or USDA requirements. Obtaining a copy of the business license is way to confirm compliance.  If unable to obtain a copy of the business license, an alternative is an attestation from the hemp business that it has a valid license.
  • Information regarding beneficial owners must be included. There may be additional information to obtain based on the assessment of the hemp-business' risk profile.  This information may include such items as: 
    • Crop inspection reports
    • Crop testing reports
    • License renewals
    • Updated attestations from the business
    • Correspondence from with the state, tribal governments or USDA

Suspicious Activity Reporting

Are SARs required?  The guidance clarifies that having a hemp-related business as a member doesn't automatically equate to a SAR filing.   Standard SAR procedures should already be in place, so file a SAR as is normally done when if in the normal course of business there is suspicious activity.  For hemp-related businesses, the guidance provides the following examples:

  • A customer appears to be engaged in hemp production in a state or jurisdiction in which hemp production remains illegal.
  • A customer appears to be using a state-licensed hemp business as a front or pretext to launder money derived from other criminal activity or derived from marijuana-related activity that may not be permitted under applicable law.
  • A customer engaged in hemp production seeks to conceal or disguise involvement in marijuana-related business activity.
  • The customer is unable or unwilling to certify or provide sufficient information to demonstrate that it is duly licensed and operating consistent with applicable law, or the financial institution becomes aware that the customer continues to operate (i) after a license revocation, or (ii) inconsistently with applicable law.

As like with your other members, you should monitor the transactions of hemp-related businesses for signs of suspicious unlawful activities.

Now, where it may get a little complicated, is when transactions are comingled between hemp-related businesses and marijuana-related activities.  In those instances, follow the 2014 FinCEN Marijuana guidance on how to file SARs on marijuana activities.  What happens if the hemp-business is also involved in marijuana-related activities/business? Well, if the proceeds from each business can be separated from each business or if the proceeds can accurately be identified as from one versus the other, then only those proceeds accurately identified as marijuana-related are subject to the SAR filing guidance in the 2014 FinCEN marijuana guidance. The proceeds accurately identified as hemp-related would then follow the standard SAR procedures in place at the credit union.

CTRs and FinCEN Form 8300

As with any other member, currency transactions above $10,000 in any single business day must be reported – so the same requirement for CTRs stands if it is a hemp-related business.  As for Form 8300 (Report on Cash Payments over $10,000 Received in Trade or Business) the same applies here too as if it were any other member.   So, any entity engaged in a non-financial trade or business would need to report transactions in which the person receives more than $10,000 in cash or other monetary instruments from a hemp-related business for the purchase of goods or services using Form 8300.

FInCEN's guidance on due diligence requirements under the BSA for hemp-related businesses can be downloaded from the following link, FIN-2020-G001.