How the pandemic affects money laundering: New circumstances, new types of crime

Medical crime, corruption, cybercrime and money laundering are the most common types of abuse used as new ways of money laundering by criminals during the health and economic crisis. The corona pandemic has caused human suffering, economic disruption and challenges unprecedented in recent history. In an effort to reduce shocks and stabilize the situation, states are taking steps to help citizens and the economy. However, new circumstances and the reactions of the states inevitably create conditions for abuses, which crime uses as new ways of money laundering.

According to a study by MONEYVAL, the Council of Europe’s permanent body assessing anti-money laundering and anti-terrorist financing measures, the main challenges associated with the pandemic are fraud, medical crime, corruption, cybercrime and money laundering.

The three most common forms of fraud related to the current health crisis have been identified. The first is fraud with medical equipment. Due to the lack of medical and protective equipment, the demand increased, and with it the abuses, such as the non-delivery of the goods, the delivered products of dubious quality, and even the delivery of counterfeit goods.

It has been noted that crime is increasingly abusing social assistance measures by countries for vulnerable populations, such as tax breaks for the economy, financial assistance to companies to retain employees, moratoriums on loan payments, laundering money.

Also, some of the more common forms of fraud refer to public procurement, when invoices for the procurement of medical equipment are “inflated”.

Where is the system most vulnerable?

Emergencies affect the demand for medical equipment, but at the same time slow down the procurement process, which also encourages medical crime. Cases of procurement of counterfeit health equipment or cases when the criteria for procurement of tenders were reduced, so that the delivered equipment met the required quality, but still did not have the necessary certificates and as such was unusable. And because the ordered equipment is paid in advance, such purchases meant irreversible lost money.

There are also examples of corruption in the world in which companies that were not registered for this type of trade or changed their activity immediately before the tender, in order to meet the tender conditions, applied for tenders for procurement of medical equipment. Investigations have shown that these companies were often owned or controlled by public servants or government officials.

With the increase of electronic communication in conditions of pandemic, the number of false representations in order to steal data is growing. Cybercriminals have often emailed themselves to individuals or companies as representatives of a state or international health institution, leading them to open attachments with allegedly the latest coronavirus-related guidelines. In this way, they manage to obtain the required data and confidential information from their victim through computer programs (malware).

Temporary closures or more difficult border crossings have also reduced the cross-border movement of cash used by criminals to finance their activities, but this has not stopped them from continuing to transfer illegally obtained money.

An intergovernmental body known as the FATF (Financial Action Task Force), which sets international standards in the fight against terrorist financing and money laundering, has warned that crime is finding ways to circumvent so-called customer due diligence. to operate online in order to cover up what they own or launder money. The volume of abuses of online financial services and virtual property for transfer of ownership and concealment of illegally obtained money has increased, for which the economic incentives provided in the state aid packages and insolvency schemes are most often used.

Due to the current trend, citizens, fearing possible instability of the financial system, to withdraw their savings from banks, is expected to increase the offer of services offered by unregulated financial institutions, which opens the possibility for criminals to launder money. The abuses of domestic and foreign financial assistance, which are followed by increased corruption, are on the rise. Developing countries in times of crisis seek to increase their liquidity, and crime uses it to launder money, to finance business operations, and to make online appeals for fraudulent fundraising for humanitarian purposes.

Respond to threats

MONEYVAL recommends that, in response to threats, all countries fully align their legislation with the FATF recommendations and implement them consistently, while assisting the private sector with relevant and timely information. The proposal of this international body is to adapt the current matrices for risk assessment of money laundering and terrorist financing to the new forms of threats, and the competent institutions to use new technologies such as video conferencing or to exchange information through direct supervision. cloud service to overcome the constraints imposed by the pandemic. The new circumstances call for better international cooperation to facilitate obtaining relevant information about legal entities and their real owners, as well as more intensive cooperation of state bodies with relevant anti-money laundering departments by sharing information on operational cases, typologies and new threats. from money laundering.

And since it is already clear that the crisis caused by the coronavirus pandemic will last, it is also clear that crime will constantly find new ways of financial abuse. Therefore, the task of all participants in the system for prevention of money laundering at national and international level is to react in a timely manner to timely recognize the abuses, to understand the way they take place and to take appropriate measures.

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