Coronavirus Crisis Response Programs Ripe for Fraud: NCUA

The coronavirus crisis is presenting fraudsters with unique opportunities to ply their trade, the National Credit Union Administration warned credit unions last week.

New account fraud, identity theft and cybersecurity risks deserve heightened attention, as more business is conducted virtually, NCUA Chairman Rodney Hood warned in a letter to credit union officials.

“Fraudsters are particularly motivated to attempt these schemes because of the predominately virtual environment, and the significant shift towards remote access,” Hood wrote. “Fraudsters are increasingly seeking opportunities to exploit vulnerabilities in financial institutions’ remote access systems and customer-facing processes.”

Hood warned credit union officials that Small Business Administration loan programs created in response to the pandemic may be ripe for fraud. He cited several “red flags” that might indicate fraud, including:

  • Fake businesses that do not have an internet presence and have minor differences between names on the application and public business registration documents.
  • Existing accounts that have a consistently low balance, with no history of business payroll expenses.
  • New accounts created for the sole purpose of applying for or receiving SBA loans.
  • After loan proceeds are deposited into an account, funds are immediately withdrawn, wired out, transferred to an investment account, or are used to purchase luxury items.

He also warned credit unions to be particularly diligent in reviewing funds that are advanced for employee retention tax credits created in response to the pandemic. He reminded credit union officials that businesses may apply for loans under the Paycheck Protection Program or use the employee retention tax credit, but not both.

Related:

NCUA Information from Chairman Rodney Hood: COVID-19 Fraud Schemes

GAO Blasts Trump Administration Implementation of PPP, Says Potential for Fraud is Huge

SBA Inspector General Roasts Agency for Poor Oversight of Economic Injury Disaster Loan Program

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