How good intentions can raise fraud risk in a pandemic

Potential fraud threats for consumers and FIs to watch for

Amid the upheaval, we expect criminals to use all channels available to target victims — text messages, email, direct messages on social media, among others. These types of messages can look authentic, so it’s crucial to scrutinize them closely to verify whether they’re legitimate before responding. When in doubt, do not reply and delete the messages.

Criminals are also claiming to be from Health Canada and other agencies, which they use as a cover to request personal and financial information by lying about potential contact with an infected individual.

With so many Canadians receiving funds from the governments’ economic response measures, fraud artists will likely make false promises of issuing payments to collect individuals’ identitiy and banking data.

In other incidents, criminals may misrepresent themselves as claims agents confirming they have received payments so they can collect banking information when people are at their most vulnerable.

Many cons involve creating fake apps and websites providing COVID-19 information. These can be sophisticated and look legitimate to lure people into a false sense of security so they can compromise consumer devices.

Exploiting the CERB program

The Canada Emergency Response Benefit (CERB) is one of the most significant support measures of the federal government’s emergency response.

The CERB provides a recurring benefit payment to eligible employees and self-employed individuals who suffer income loss as a result of ceasing work or decreasing work hours for reasons related to COVID-19. The payments are $2,000 per month ($500 per week) for up to 16 weeks. Payments are made every four weeks and cover the period from March 15, 2020 to October 3, 2020. Individuals can apply for any four-week period and must re-apply for subsequent periods if their situation continues.

Criminals will likely focus on the following types of fraud targeting both the CERB program itself as well as recipients of CERB payments:

• Account takeover and identity theft: Criminals will target beneficiaries of payments, stealing their access credentials to gain access to their bank accounts and stealing the funds they’ve received. Benefits fraud is often combined with identity theft. It provides a strong economic incentive for thieves to steal identifying information for people who would qualify for economic response plan payments and then submit claims in their name.
• Synthetic identity fraud: Recipients of response plan payments may not have robust credit bureaus, allowing criminals with synthetic identities to use forged documents to apply for response plan payments. Organized criminal rings could create fake small businesses and employees, with all entities making claims.
• Opportunistic fraud: Rising unemployment and financial strain could lead to an upward trend in opportunistic fraud, where a customer makes a purchase and then claims fraud to avoid payment. Digitally delivered content is especially targeted, including software, entertainment and gambling.
• Lost and stolen fraud: The use of contactless card payment has increased in recent years, and in the COVID-19 environment this has been strongly encouraged, with limits being increased. This attracts the physical theft of cards to make purchases without the need for the customer’s PIN.

Considerations

FIs can plan ahead and focus on prevention strategies that provide much better return on investment by not only reducing the fraud losses and deterring future attempts but also reducing the cost and impact of an investigation.

Consider the following measures:

• Training and awareness: Ensure your customers and employees are aware of threats and what they should do if they are targeted.
• Monitor: Fraud evolves quickly in an emergency state. Ensure regular feedback for learning and adapting to changing threats, review fraud cases more frequently and prioritize government economic response plan recipients.
• Analytics: Predictive analytic models take time to adjust to large changes in consumer spending. Adjust thresholds and plan for reduced fraud detection in the short term.
• People: Predictive models work best when there is data and history to build models with. In an emergency situation, analytic models can create too many false positives. Ensure trained fraud investigators are included in the process of identifying new fraud scenarios on a more frequent basis.
• Consortium data: Sharing intelligence can significantly improve fraud detection, as identity theft impacts multiple market segments.
• Accelerate digital onboarding: Consumers are going to need new products and services. Enabling secure digital onboarding could be a differentiated service that attracts customers in need of banking solutions while in isolation and/or quarantine.
• Transaction urgency has changed: Online purchases are less urgent than card-present purchases. FIs have more time to verify purchases and customers are easier to contact; they can start to leverage more digital verification of online transactions after authorization. At the same time, emergency services that require physical payment are more urgent. Declining gas or grocery purchases could impact customers more in this environment.

Conclusion

The unprecedented speed and size of the CERB will attract criminals who will try to exploit the system and blend among legitimate claimants. Criminals are unscrupulous and will take advantage of consumers’ trust by attempting to steal identities and access information from them. When successful they will use the collected information to take over customers’ accounts, apply for new products and services in the customer’s name, and even fabricate identities to get access to CERB funding.

Financial institutions can stay ahead of criminals by adapting existing controls to strike a balance between providing access to those in need while protecting them from criminal attempts.