Announcement

NCUA Issues COVID-19 Fraud Alerts

Massive Expansion Of Government Aid Attracts Fiscal Miscreants

Keith Griffin

August 12, 2020

NCUA logo

The National Credit Union Administration is out with its advisory on fraud alerts related to the ongoing pandemic. A lot of the potential fraud involves government assistance programs, according to NCUA.

Here are highlights from the report.

Financial Institution Fraud

New account fraud, identity theft, cybersecurity risks, imposter and money mule schemes, and mobile banking application fraud are on the rise as a result of the opportunities related to the ongoing COVID-19 pandemic. Fraudsters are particularly motivated to attempt these schemes because of the predominately virtual environment, and the significant shift towards remote access. Fraudsters are increasingly seeking opportunities to exploit vulnerabilities in financial institutions’ remote access systems and customer-facing processes.

Small Business Administration Loan Fraud

The Small Business Administration (SBA) is currently providing relief to small businesses through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans.

The most common red flags in these SBA programs include:

  • PPP applications with manipulated or fraudulent supporting documentation.
  • PPP applications in different names that contain nearly identical application information and supporting documentation, and originate from the same Internet Protocol (IP) address.
  • Fake businesses established during the pandemic that do not have an internet presence, and have minor differences between names on the application documents and public business registration documents.

Business Tax Credits Fraud

The CARES Act allows businesses to take an Employee Retention Credit though business tax credits from the IRS. This credit is designed to encourage employers to keep employees on payroll through a refundable tax credit of 50 percent for up to $10,000 in qualified wages, which is paid to an employee by an eligible employer experiencing economic hardship related to the COVID-19 pandemic. The CARES Act also authorizes an additional Credit for Sick and Family Leave for employers that pay these wage types.

The most common red flags associated with these tax credits include:

  • U.S. Treasury check deposits while receiving loan proceeds from SBA programs. Businesses are only allowed to take advantage of the Employee Retention Credit or the PPP program. They may not take advantage of both programs.
  • Inflated wages or numbers of employees to increase the amount of tax credits or advances received through a U.S. Treasury check.
  • U.S. Treasury check deposits into accounts with no indication of business or payroll activity.

Unemployment Insurance Fraud

The CARES Act provides additional unemployment insurance funding for eligible individuals through the Pandemic Unemployment Assistance (PUA) program, the Federal Pandemic Unemployment Compensation program (FPUC), and the Pandemic Emergency Unemployment Compensation (PEUC) program.

The most common red flags associated with these programs include:

  • An account receiving unemployment insurance benefits from another state without a reasonable explanation, or from multiple other states other than where the individual resides.
  • An account receiving unemployment insurance benefits on behalf of multiple individuals.
  • New or established accounts are opened, but they lack transactional activity. Then they are suddenly used to collect unemployment insurance benefits.

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