Fighting Financial Crime during the Coronavirus Pandemic

Several countries have begun to ease the restrictions they have introduced to fight the spread of the Coronavirus. Only time will tell whether we are on the right track. But there is hope that these societies are taking small steps back into normality.

After the immediate fight to limit infections and focus on treating the ill, governments turn now too tackle the long-term consequences of the pandemic. The social and economic impact is likely to be severe and the word a different one.

Criminals have been faster to take advantage of the crisis. From the different scams that have popped up to hundreds of regulatory measures to contain the risk for financial institutions, investors and consumers, there is abundant evidence of criminal activity related to the Covid-19 pandemic.
In order to understand the mechanics of such undertakings it is worth reading a recent interview of the German newspaper FAZ with Catherine De Bolle. She is the executive director of Europol and to mark her second anniversary on the job, she has an excellent overview of what is going on in the world of crime.

The European Union Agency for Law Enforcement Cooperation – which is its full name – is the EU’s law enforcement agency and was set up in 1998 to handle criminal intelligence and combat serious international organised crime and terrorism through cooperation between competent authorities of EU member states. While Europol has no executive powers, i.e. its officials are not entitled to arrest suspects or act, but only in collaboration with national police, it employs more than a thousand people and as such has plenty of resources. Yet, as the interview shows, even with that kind of manpower, it is still fairly limited in its daily battle with crooks. Europol is closely monitoring how organized crime responds to the corona crisis and has to stamp out more fires than it has feet.

Its first priority, as De Bolle describes, is the support the EU member states and their agencies in this unprecedented crisis. Europol draws from the experience of previous crises and the understanding that criminal organizations are unfortunately very flexible and take advantage of all the opportunities they see in such a situation. She outlines how in the first phase immediately after the crisis started, Europol saw a large increase in cybercrime and product piracy. „Many people work from home, all feel a latent threat from the crisis, some are afraid. And there they make irrational decisions, perhaps clicking on a link, which they would not do under normal conditions. Criminals use these opportunities, these weaknesses. There was also a huge demand for protective gloves and masks. The counterfeiting industry is booming – and is always on the heel of the virus. We had the first cases in Italy. Then the virus spread to Spain, Belgium and other countries. The criminals are closely monitoring the situation and launching their counterfeit products where the demand is currently the highest“, she explains.

At the same time, these cyber attacks are mostly carried out by the same criminal groups as before that are actively recruiting employees to further increase their profits and many malware attacks are now faster though there are also many cases of criminals switching from, say, drug related crimes that clearly lack the expertise, which shows in poor execution resulting in more phishing attacks failing at the moment.

But traditional groups of organized crime adapt to the fact that their usual areas of expertise like extortion, drugs and prostitution are affected by the crisis, always following the logic of demand and supply. Europol sees an immense level of flexibility in such organisations, providing a “crime as a service” business model and are looking for specialists for their networks in order to be able to develop in the new fields.

With a seemingly endless supply of drugs available despite the restrictions, De Bolle describes the proverbial fight against windmills, but underlines that she and her colleagues are not going to give up. At the same time, she admits that more needs to be done and explains the European Financial and Economic Crime Center her organization is currently building. The rationale is that criminals must not only be prosecuted for their crimes; instead, la enforcement agencies need to look at the money in their pockets, too, as every normal investigation should include financial investigations to target criminals where it hurts the most. After all, it is the financial profit that drives organised crime.

It is for that reason that investigators in Italy as well as in other countries warn that criminal organizations like the mafia could benefit from the economic crisis that is associated with the pandemic. Taking advantage of liquidity shortage, they offer affected business people loans or buy companies in difficulty in order to undermine the legal economy and launder money from criminal transactions. Europol’s approach is to learn from the lessons of the past in order to be better prepared and therefore it is crucial to exchange of information between the individual countries as well as the private sector, and in particular financial institutions.

The global financial crisis of 2007/2008 thus was an important lesson as it recorded the highest numbers of financial offenses from 2010 to 2013, i.e. several years after the initial crisis, with a lot of corruption and fraudulent banking during this period, and did not reach normal levels until 2015.

Europe’s leading crime fighter also portrayed Europol’s fight against child pornography on the Internet and the agencies great concern regarding the increasing numbers. De Bolle explains that „the perpetrators are looking for more and more material online and are exchanging more and more with each other. And they are ready to take advantage of the crisis, the emergency situations of children who are now at home, with easy access to the Internet and little supervision from parents who have to work despite everything.“ For anyone with kids this gruesome stuff to read, but it is the overall dimension of criminal activity that concerns us all.

If there is any silver lining other than the enormous efforts of the organization, it is in the statement that there are at least no indications that terrorists could use the current exceptional situation for attacks, though that might be of limited comfort for an already distressed society.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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