The economic and social impacts of COVID-19 pandemic have changed how society and organisations operate, including criminal organisations. The pandemic has created the perfect storm for money laundering in the current period where a high volume of financial transactions is occurring simultaneously with an enormous number of AML professionals working from home. FIAU warns subject persons to stay up to date on the increasing risks of money laundering and terrorism financing by referring to reports published by reputable international bodies including but not limited to Europol, the FATF, INTERPOL.
Across Europe, criminals are exploiting the current situation to find new moneymaking ventures, including selling counterfeit medical products, fraud and cybercrime. Information shared between authorities and agencies indicates that the following factors, which could have a significant impact on crime during and after the pandemic, are to be noted:
- Online activities – as people spend more time online, they are increasingly at risk of cyberattacks and fraud schemes;
- Supply and demand – scarcity of certain goods, especially in healthcare products, is driving criminal organisations to strengthen counterfeiting and sale of substandard or fraudulent goods;
- Payment methods – with a shift toward online commerce, cashless transactions are increasing in number, volume and frequency;
- Economic downturn – economic disparity is making organised crime more socially acceptable as these groups will increasingly infiltrate economically weak communities to portray themselves as providers of work and services;
- Rising unemployment – job loss presents opportunities for criminal groups to recruit members.
On the 30th April, the European Union’s law enforcement agency, released a new report that assessed the impact of the pandemic on organised crime in three phases: current, mid-term and long term outlook.
Phase 1 – Currently crime trends have fluctuated with some of the largest jumps focused in digital crimes, fraud and counterfeiting. Criminals frequently look at crises as an opportunity and COVID-19 is no different.
Phase 2 – The Agency forecasts that lifting restrictions and lockdown measures will see criminal activities return to pre-pandemic levels in the mid-term, but the crisis has created new opportunities. An increase in money-laundering, particularly in the real estate and construction sector, is to be expected.
Phase 3 – In the long term, vulnerable groups and communities will become more susceptible to organised crime threats, and criminals will take advantage of economic adversity and uncertainty to run their businesses.
The rise of fraudulent schemes and the new remote methods of working are hurting the ability of governments and the private sector to fulfil their AML/CFT obligations. Bypassing customer due diligence measures could create new risks which allow criminals to use the financial sector to launder illicit funds.
Moreover, the Authority notes that financial institutions are not left without resources for combating illicit transactions even during these unprecedent circumstances. With the newly issued guidance, the FIAU reminds subject persons of methods for dealing with customers and continuing to apply due diligence measures and other AML obligations at a time when face-to-face procedure are not always available.
The AML/CFT rules contained in the Implementing Procedures, Part I support flexible KYC processes and various ways to verify the customers’ identity and fulfil due diligence requirements which include the use of digital copies or scans of documents in lower scenarios. In higher risk cases subject persons should consider further measures which may all be carried out remotely; these include the possibility to request additional identification documents to verify the information through different sources; the use of video conferencing tools and commercial electronic data providers, or holding a welcome call with the customer via verified telephone number to confirm certain information. The possibility to choose among these options does not prevent from the application of the risk-based approach.
Finally, subject persons are encouraged to take advantage of non-face-to-face verification measures to protect the health of their employees and customers.