Pandemic-related fraud: A crisis within a crisis

When the going gets tough, the tough crooks get going—with more scams, cons and other types of fraud than ever. A wide variety of new and emerging scams prey on those who have been hit hard financially by the economic effects of the pandemic, as well as on those who want to be charitable in this time of crisis.

John M. McVoy, director of financial crimes risk management for Heartland Financial, says his company has seen increased fraud across the board—“ so much so that we’ve had to double our staff associated with fraud mitigation.” Fraudsters are targeting retail customers and businesses with common scams such as email compromise, robocall data collection and phishing, as well as new variants related to the pandemic.

For example, remote employees struggling with computing or teleconferencing have been tricked by sly scam-artists posing as their corporate IT department, says McVoy, whose company owns 11 U.S. community banks with combined assets of nearly $18 billion. Another common scam, targeting the unemployed, involved fraudsters posing as employment services and gaining access to account information.

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And this is to say nothing of the more sophisticated cyber criminals, who are still plying their trade with the typical phishing, ransomware and other virus schemes—now with a recently widened field of potential victims, thanks to the booming number of people working, shopping, communicating and banking online and via their mobile phones.

“People are desperate,” McVoy says. “And fraudsters are sharks seeing blood in the water.”

Chris McCulloch, corporate security officer and senior vice president for $5 billion-asset Enterprise Bank & Trust of Clayton, Missouri, points out that “any time there is a drastic event or change in the economy, people will fall for more scams.” Financial institutions like Enterprise Bank reported increases of between 30 percent and 300 percent in the number of fraud attempts reported by retail and business customers alike.

“Unfortunately, those hardest hit are often the unemployed or senior citizens,” McCulloch says, adding that many reports show that the elderly (among most susceptible to serious illness because of COVID-19) lose on average double the amount that others lose, “so it hits them especially hard.”

With more people than ever working from home, electronic fraud has become the most common fraud type, McCulloch says. But, she agrees this recent pandemic-era fraud goes well beyond run-of-the-mill scams to incorporate themes that are particularly painful right now: romance, jobs and politics.

Continuing the ongoing trend that began well before 2020, “fraudsters are continually getting better,” says McVoy. Phishing emails, for example, used to land in inboxes full of typos and jumbled grammar, so they and were easy to spot by bankers and customers. Now, they’re slicker and more believable, and playing to the fears and needs of the recently homebound populace. “Fraudsters have definitely upped their game. They are getting more sophisticated in their spoofing, and [in some cases] attacking on a larger scale.”

Like many banks, Heartland Financial has put together a resources section on its website regarding the recent rise in fraud, and it has sent out emails to customers explaining how to spot and mitigate potential fraud in their personal and professional financial lives. “We’ve put up information on social media too, and we’ve put on security-related seminars for our commercial customers,” says McVoy, adding that they have also promoted Positive Pay, a business-related fraud prevention system to decrease fraud risk for commercial customers.

Heartland is working with its banks and their vendors on added authentication technologies and protocols for employees and customers alike, as well as improving early detection technologies for the back office. “As the fear is becoming more widespread, there is also a risk of oversaturating customers with all these concerns and precautions,” McVoy cautions.

Despite all these added pressures, community banks remain hopeful that they can warn customers how to avoid these potential scams.

On a positive note, McVoy observes anecdotally that he does not see fraudsters actually succeeding at a vastly greater rate than before the pandemic. The problem is there are so many more fraud attempts and variants taking place that “it can overwhelm the normal [fraud mitigation] mechanisms.” This is especially true for community banks, which often lack the IT security resources of their larger counterparts.

Karen Epper Hoffman is a BAI contributing writer.

Learn more about how to prevent fraud in the BAI Executive Report “Taking the fight to the fraudsters”