Episode 104 of Fraud Talk is the ACFE's latest Facebook Live recording during which ACFE President and CEO Bruce Dorris, J.D., CFE, CPA, ACFE Communications Manager Mandy Moody, CFE, and ACFE Senior Research Specialist Mason Wilder, CFE, unveiled the five most scandalous fraud schemes of 2020. The article is available now on Fraud-Magazine.com.

In this excerpt from the full transcript, Bruce, Mason and Mandy discuss COVID-19 frauds and how they’ve shaped the fraud landscape over the past year. Download the full transcript of “The 5 Most Scandalous Fraud Cases of 2020” in PDF form or listen to the episode at the bottom of this post.

Mandy: It's no surprise that one of the top cases that we're going to be discussing — really, many cases — are the frauds related to COVID-19. As all of us know that when there is a new pandemic or a new something, there's going to be a lot of fraud associated with it because that's where the fraudsters see vulnerability.

Bruce, kick us off and tell us about some of the scams that we saw and what made them so scandalous this past year.

Bruce: Well, again, thanks, everyone, for being a part of this and thanks to our Advisory Council at the ACFE. For those of you who are members of the ACFE not familiar with that, I really encourage you to go to ACFE.com, log in and become a member of that, because that is how we got to this point.

There are so many frauds that occur, despite a pandemic or because of it. This first one, that we were able to through that council, and through the internal committee here at ACFE and staff, in looking at all of the submissions from around the world.

As Mandy mentioned, this first one touches everyone, whether you are here in the United States, where we are, or in Europe, Asia. It doesn't matter. COVID-19 impacted you and what you do as a fraud fighter. As Mason will talk about as well, this is something that has many, many tentacles, depending on where you are.

The first one, probably one of the largest, is related to, at least in the United States, with what's called the CARES Act, and the European Central Bank and others with stimulus money that was used in order to keep the economies going around the world.

There was basically a shutdown in the beginning in late December, depending on where you are, and into March and April. This obviously impacts the economies and the ability for people to work and to earn. Central banks had to come in and give those monies in order to stimulate and keep economies afloat.

Now, with that said, fraudsters are also going to take complete advantage of that because we have to get that money out quickly. No one has seen a pandemic like this before, and so in trying to keep people safe and alive for that matter, governments are putting money into place.

A lot of times when you move that quickly, a lot of the typical controls that we as fraud examiners are used to aren't front and center as they normally would be and fraudsters are there to take advantage of that. You've got that perfect storm for fraud, that you've got less controls, but you've got large amounts of money. In the case of the United States, you had over $2 trillion U.S. flooding into an economy at one time, with limited safeguards along the way.

What we're seeing now here in January of 2021 as we record this, and even through the summer and fall, fraud related to that, the Small Business Administration (SBA) within the United States and dealing with loan fraud related to the CARES Act, unemployment fraud, so many different things that are coming to light.

In the U.S., there is a new stimulus package out that was just signed into law last week. But there are more safeguards in place now because a little bit more time and learning from some of the issues that had taken place before. In fact, Mike Ware, who is the newly elected regent for the ACFE, also the appointed Inspector General for the SBA in the U.S., has talked about that. He and I have talked about that personally about a lot of the safeguards that they're trying to put in place now to prevent this continuation of fraud.

COVID-19 impacted everyone. I'll give Mason a little bit of time here to also talk about some different aspects as well.

Mason: Thanks, Bruce. Of course, there are some of the bigger price tag items were hit very hard by fraud and that's some of the loan programs or unemployment insurance. For example, here in the United States, there were major schemes in Washington State and California that had similarities but were also very different.

It was more systematic in Washington, and there's hundreds of millions of dollars in fraud losses from just unemployment benefits. Luckily, they were able to figure out what was going on and how people were exploiting the application system and shut that down relatively quickly. They recovered several $100 million worth of the losses. That was a positive aspect to that.

Aside from just the government benefit programs, this was just practically unprecedented explosion of consumer fraud-related one topic here with the Covid-19 pandemic. It was an evolution and it's still going and still evolving and will continue to do so as long as this is the major news story that affects everybody.

Using anything COVID-related as a phishing lure or the kind of prompts for a social engineering scheme, or just the topic of some other fraud scheme is something that's going to resonate with literally everyone on the planet, which is really rare.

Things that we saw at the beginning, it was really heavy on personal protective equipment (PPE) scams, hospitals and other agencies scrambling to find this PPE. There would be fake product listings or companies that were set up to try and get some government contracts, even though they just didn't know what they were doing and there was a lot of fraud there.

There were so many different phishing lures or phishing emails, phone calls related to coronavirus tests, coronavirus cures, coronavirus vaccines now and also PPE products. Then as everybody's sitting at home and shopping online, there were a ton of fake product listings and e-commerce scams. I mean, it just goes on and on and on.

Some of the latest statistics put out by the Federal Trade Commission (FTC) regarding coronavirus or COVID fraud, they indicate that there are more than $300 million in fraud losses reported just in the United States alone, and almost 320,000 individual reports of fraud related to COVID with the average loss being about $300, and online shopping was the top category of complaints by a pretty significant margin.

Every disaster produces disaster fraud, and this was just a whole different level with the variety of schemes targeting different industries, services, so many different cons and they're still going to continue evolving and affecting people.

Once COVID is hopefully in the rearview mirror, I think some fraudsters will adapt their tactics based on what they learned during the pandemic, whenever the next crisis or a disaster comes around. We're still not through the worst of it yet, and we're going to continue to see a wide variety of fraud scams ripped from the headlines, just so that they really resonate with everybody.

Bruce: I just want him to elaborate on what he had just said there. I mean, we have had to completely adapt where we had been before in terms of our investigations, our fraud prevention, because we're now all working remotely, depending on where you are and in some areas of the world coming back slowly but still. It changed our way and how we're able to go in and fight fraud.

With all of that, knowing that this — as Mason said — this will continue for a while. I look back about ten plus years ago here in the U,S., after the financial crisis in '08 and in 2009, with the amount of money of course, it was just a pittance of what it is now. We think about $800 billion U.S. going into an economy related to the financial crisis. That seems small almost, in comparison.

But with the SIGTARP (Special Inspector General for Troubled Asset Relief), the inspector general for all of these monies coming in, and in terms, that group is still alive and working. It's not as robust and large as it was ten years ago, but it's still around. When you start thinking about the amount of monies coming into the economies to help and fraudsters going after that, this is going to take a while to unwind.

Mandy: No, that's exactly what I was going to ask you about. You answered my question.

Mason: There are going to bea lot of fraud examiners that are going to have careers pretty much solely focused on investigating fraud related to COVID and benefit programs for the next decade.