May 21, 2020
To: Chief Executive Officers (or Equivalents) of New York Regulated Institutions
Re: Advisory on Medical Scams Related to COVID-19
The New York State Department of Financial Services (the Department) issues this letter to inform all New York regulated institutions of the Advisory on Medical Scams Related to the Coronavirus Disease (COVID-19) issued by the Financial Crimes Enforcement Network (FinCEN) on May 18, 2020 alerting financial institutions to rising medical scams related to the COVID-19 pandemic, including fraudulent cures, tests, vaccines, medical-related items, and services.
The Department understands that during this unsettling crisis, fraudsters see an opportunity to take advantage of the urgent and widespread need of our hard-hit communities to access medical and health-related supplies and launch their fraudulent schemes that would harm innocent people when they need most help, particularly those who have lost their jobs due to this pandemic.
FinCEN has identified the following red flag indicators to assist financial institutions in detecting, preventing, and reporting suspicious activities. The list below is not meant to be a comprehensive list of all red flag indicators, nor is a single red flag necessarily indicative of illicit activities. Therefore, financial institutions should consider additional information and facts, including customers’ historical financial activities, and consistency with customer business lines, in their determinations as to whether transactions are suspicious.
A. Medical-Related Frauds, Including Fraudulent Cures, Tests, Vaccines, and Services
- U.S. authorities, such as the Federal Trade Commission (FTC), the Food and Drug Administration (FDA), or the DOJ, have identified the company, merchant, or business owners as selling fraudulent products.
- A web-based search or review of advertisements indicates that a merchant is selling at-home COVID-19 tests, vaccines, treatments, or cures.
- The customer engages in transactions to or through personal accounts related to the sale of medical supplies, which could indicate that the selling merchant is an unregistered or unlicensed business or is conducting fraudulent medical-related transactions.
- The financial institution’s customer has a website with one or more indicia of suspicion, including a name/web address similar to real and well-known companies, a limited internet presence, a location outside of the United States, and/or the ability to purchase pharmaceuticals without a prescription when one is usually required.
- The product’s branding images found in an online marketplace appear to be slightly different from the legitimate product’s images, which may indicate a counterfeit product.
- The merchant is advertising the sale of highly sought-after goods related to the COVID-19 pandemic and responds to customer inquiries with either deeply discounted or highly inflated prices.
- The merchant is requesting payments that are unusual for the type of transaction or unusual for the industry’s pattern of behavior. For example, instead of a credit card payment, the merchant requires a pre-paid card, the use of a money services business, convertible virtual currency, or that the buyer send funds via an electronic funds transfer to a high-risk jurisdiction.
- Financial institutions might detect patterns of high chargebacks and return rates in their customer’s accounts. These patterns can be indicative of merchant fraud in general.
B. Non-Delivery Fraud of Medical-Related Goods Scams
- The merchant does not appear to have a lengthy corporate history (e.g., the business was established within the last few months), lacks physical presence or address, or lacks an Employer Identification Number. Additionally, if the merchant has an address, there are noticeable discrepancies between the address and a public record search for the company or the street address, multiple businesses at the same address, or the merchant is located in a high-risk jurisdiction or a region that is not usually associated with the merchandise they are selling.
- Searches in corporate databases reveal that the merchant’s listing contains a vague or inappropriate company name, multiple unrelated names, a suspicious number of name variations, multiple “doing business as” (DBA) names, or does not align with its business model.
- Merchants are reluctant to provide the customer or the financial institution that is processing the transactions with invoices or other documentation supporting the stated purpose of trade-related payments.
- The financial institution does not understand the merchant’s business model, and has difficulty determining the true nature of the company and its operations.
- The merchant cannot provide shipment-tracking numbers to the customer or proof of shipment to a financial institution so it may process related financial transactions.
- The merchant claims several last minute and suspicious delays in shipment or receipt of goods. For example, the merchant claims that the equipment was seized at port or by authorities, that customs has not released the shipment, or that the shipment is delayed on a vessel and cannot provide any additional information about the vessel to the customer or their financial institution.
- The merchant cannot explain the source of the goods or how the merchant acquired bulk supplies of highly sought-after goods related to the COVID-19 pandemic.
- Domestic or foreign governments have identified the merchant or its owners/incorporators as being associated with fraudulent and criminal activities.
- A newly-opened account receives a large wire transaction that the accountholder failed to mention during the account opening process.
C. Price Gouging and Hoarding of Medical-Related Items
- In addition to the use of personal accounts for business purposes (see indicator number 3 above), a customer begins using their personal accounts for business-related transactions after January 2020, and sets up a medical supply company or is selling highly sought-after COVID-19-related goods online, such as hand sanitizer, toilet paper, masks, and anti-viral or disinfectant cleaning supplies.
- The customer begins using their money services or bank account differently. For example, prior to January 2020, the customer never linked their account to the sale of goods on the internet. Since the COVID-19 pandemic began, however, the customer is receiving deposits with payment messages indicating that they are for the sale of medical goods, disinfectants, sanitizers, and paper products sold on the internet.
- The customer’s accounts are receiving or sending electronic funds transfers (EFT) to/from a newly established company that has no known physical or internet presence.
- The customer’s account is used in transactions for COVID-19-related goods, such as masks and gloves, with a company that is not a medical supply distributor, is involved in other non-medical-related industries, or is not known to have repurposed its manufacturing to create medical-related goods. For example, the company is currently selling medical and sanitary supplies, and prior to January 2020, the company was listed as an automotive shop, a lumberyard, or a restaurant.
- The customer makes unusually large deposits that are inconsistent with the customer’s profile or account history. Upon further investigation, the customer states, or open-source research indicates, that the customer was selling COVID-19-related goods not usually sold by the customer.
The Department recognizes all your efforts and the help you have been providing to our communities during these difficult times, and appreciates your support in protecting people from fraudulent schemes of criminals and bad actors that don’t miss any opportunity to prey on the innocent and, most often, on the most vulnerable when they need most protection.
Linda A. Lacewell, Superintendent
New York Department of Financial Services
 the Advisory and accompanying Notice:
https://www.fincen.gov/sites/default/files/advisory/2020-05-18/Advisory%20Medical%20Fraud%20Covid%2019%20FINAL%20508.pdf and https://www.fincen.gov/sites/default/files/shared/May_18_Notice_Related_to_COVID-19.pdf