Persistence Pays as Fraud Continues Under COVID-19

CARES program remains a popular target for criminals

July 12, 2021 by Verafin

Earlier this year, FinCEN issued an advisory to “alert financial institutions to health insurance and health care frauds related to the COVID-19 pandemic.” Fraudsters have been targeting multiple sources of funds, including Medicare, the Medicaid/Children’s Health Insurance Program (CHIP), TRICARE, health care programs offered by the Departments of Labor and Veterans Affairs, private health insurance companies, as well as payments provided through the Coronavirus Aid, Relief and Economic Security (CARES) Act.

“Law enforcement and financial institutions have detected numerous instances of potential frauds related to health care benefit programs, health insurance, and COVID-19 health care relief funds.”

Advisory on COVID-19 Health Insurance- and Health Care-Related Fraud, FinCEN

CARES Act Provider Relief Fund

The U.S. government announced the CARES Provider Relief Fund (PRF) to support health care providers in the battle against the COVID-19 pandemic. Through the Paycheck Protection Program and Health Care Enhancement Act (PPP-HCEA), the federal government allocated $178 billion in payments to be distributed through the PRF. This entitled qualified providers of health care, services, and support to apply for health care-related expenses or lost revenue due to COVID-19.

The U.S. Department of Health and Human Services was quick to warn the public to initial fraud schemes related to COVID-19 funding early on and continues to highlight evolving fraud tactics. Scammers continue to perpetrate COVID-19-related scams, often stealing personal identities to illegally obtain health care benefits.

Remain Diligent

The FinCEN advisory offers seven representative types of illicit activity where “criminals are adapting known health insurance and health care fraud to take advantage of the pandemic,” along with 16 financial red flag indicators of such activities. Suspicious activities range from:

  • Unnecessary services
  • Billing schemes
  • Kickbacks
  • Health care technology schemes
  • Telefraud and telehealth schemes
  • Fraudulently obtaining COVID-19 health care relief funds
  • Identity theft leading to additional fraud

FinCEN has encouraged financial institutions to complete thorough investigations into potentially fraudulent activities related to COVID-19: “In line with a risk-based approach to compliance with the BSA, financial institutions also are encouraged to perform additional inquiries and investigations where appropriate.”

Agent Development to Assist

In response to FinCEN’s Advisory Verafin developed our Health Care Benefits Fraud agent to help financial institutions detect, prevent and report fraud associated directly to health care benefit programs and health insurance as well as unemployment insurance benefit payments. The new agent focuses on Red Flags 14, 15 and 16, related to fraudulently obtaining COVID-19-relief funds:

  • Flag 14 – An account with no previous known association with providing health care services receives an unexpected or excessive COVID-19-related payment that appears to be the CARES Act’s PRF or the PPP-HCEA payments. Shortly after the account receives the deposit, an individual(s) withdraws the funds via large cash withdrawals, cashier’s checks, wires to an overseas account, transfers to personal accounts, or payments for non-business expenses.
  • Flag 15 – An account previously associated with providing health care services but that has not been recently active or appears to be defunct, receives an unexpected or excessive COVID-19-related payment that appears to be the CARES Act’s PRF or the PPP-HCEA payments.
  • Flag 16 – An account holder receives a substantial amount of reimbursements from health care benefit programs or health insurance companies for services rendered at the same time that the account holder receives COVID-19-related unemployment insurance payments.

Through continuous collaboration with our customer partners, Verafin was able to develop a new targeted agent to help detect anomalous financial activity related to COVID-19 Health Care Benefits Fraud.

As world adjusts to the new normal created by the COVID-19 pandemic, stimulus packages continue to be rolled out. Financial institutions need to remain vigilant to potentially fraudulent activity related to COVID-19. Verafin will continue to collaborate with our customer partners to develop targeted analytical agents and solutions to help financial institutions combat criminal activity.

Verafin is the industry leader in enterprise Financial Crime Management solutions, providing a cloud-based, secure software platform for Fraud Detection and Management, BSA/AML Compliance and Management, High-Risk Customer Management and Information Sharing. Over 3800 banks and credit unions use Verafin to effectively fight financial crime and comply with regulations. Leveraging its unique big data intelligence, visual storytelling and collaborative investigation capabilities, Verafin significantly reduces false positive alerts, delivers context-rich insights and streamlines the daunting BSA/AML compliance processes that financial institutions face today.

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