Fraud in the time of COVID: Some of the common scams and how to help your clients avoid them
When the arrival of COVID-19 disrupted everyday life in early 2020, it not only changed the way we live, but it also opened the door for unscrupulous scammers to take advantage of the pandemic to trick people into giving up their money.
More than two years later, there are still a host of scams and frauds to be aware of. According to the Federal Trade Commission (FTC), since January 1, 2020, there have been more than 758,200 reports of fraud, identity theft, and other scams related to the pandemic, with total fraud losses eclipsing $838 million.
Erin Scheithe from the Consumer Financial Protection Bureau (CFPB) says there are two main reasons why the number of scams has ticked up since the start of the pandemic: people were isolated, meaning they were more likely to respond to a phishing text or email, and they were spending more time online, presenting more opportunities for fraudsters to gain access to personal info.
“We have indeed seen a rise in scams during the pandemic,” Scheithe said. “Sadly, scammers are using the economic consequences of a global pandemic to their advantage.”
Although the number of complaints to the FTC has dipped since its peak in mid-2021, fraudsters are still exploiting the ongoing pandemic to separate people from their money. Financial professionals should speak with their clients about the most commons scams and what they can do to help ensure their money is better secured, even during trying times.
There are a wide variety of scams to be on the lookout for. According to the CFPB, one of the most common frauds involves fake charities, when a thief poses as a real charity and asks for financial contributions. Of course, that is just one in a long list of potential schemes, and it’s important to be prepared to talk to clients about what is out there. Let’s take a closer look at common COVID-related scams and how to avoid them.
Stimulus check scams
Economic impact payments, more commonly referred to as stimulus checks, helped keep many people afloat during the early days of the pandemic. Unfortunately, it also provided an avenue for scammers. The scheme involves getting adults to hand over personal information, such as their Social Security or bank account number. According to the IRS, the scam typically featured people reaching out to taxpayers via text or email asking them to verify their financial information.
“The IRS isn't going to call you asking to verify or provide your financial information so you can get an economic impact payment or your refund faster," said IRS Commissioner Chuck Rettig. "That also applies to surprise emails that appear to be coming from the IRS. Remember, don't open them or click on attachments or links.”
There are several additional red flags that indicate any communication related to stimulus checks is fraudulent, according to the IRS. They include:
- An emphasis on the words “stimulus checks,” as the official term is “economic impact payment.”
- Any suggestion they could get a payment more quickly
- Any indication that more personal information is necessary to receive a payment
- A request to sign the check over to them
Victims’ family scams
Perhaps the most unethical scam involves the targeting of loved ones who have died from COVID. According to the FTC, one of the most common schemes involves impersonating a government official offering to cover all funeral expenses for victims of COVID.
This scam is particularly dangerous because there is a program – run by the Federal Emergency Management Agency (FEMA) – that paid up to $9,000 of funeral expenses. However, fraudsters will tip their hand by doing a few things that FEMA would never do, according to the FTC. This includes:
- FEMA will not initiate contact; you need to apply for the assistance before they reach out
- Government agencies will never ask for your Social Security, bank account, or credit card number
- The government will not ask for any payment from you to access this service
Testing has been an integral part of limiting the spread of COVID, especially through the rise of Delta and Omicron variants. There are many ways fraudsters can use COVID testing to collection financial information. The U.S. Department of Health and Human Services Office of Inspector General warned consumers to be especially vigilant about any testing site that offers a free test in exchange for personal medical or financial information.
Scammers targeting the testing infrastructure also may pose as contact tracers — people tasked with identifying who has been in close contact with a positive COVID case. Under the guise of contact tracing, they may ask unsuspecting victims for personal information. The HHS makes it clear: legitimate contract tracers will never for that information.
Prepare your clients
As a financial professional, you’re in a unique position to help your clients stay vigilant when it comes to avoiding scammers looking to take advantage of COVID-related uncertainty. It’s an important topic to bring up during your discussions, and it’s crucial for them to hear this critical information from a trusted source.
“Talking about scams is also very important,” the CFPB’s Scheithe says. “You may know about scams, but you probably know someone who doesn’t. So, it’s important to take your knowledge and pass it on. Tell your friends and families about scams to help them avoid them.”
There are some key pieces of advice you should impart to your clients, according to the FTC.
- Ignore offers for vaccinations and test kits that don’t come from reliable source (e.g., government agencies)
- Research any charity before you make any donations
- Hang up if you receive any robocalls
- Beware of anyone who asks you to send money by wire transfer or gift cards
- Be vigilant for phishing emails and text message related to the pandemic
Report any scams
Financial professionals also should be on the lookout for potential scams so they help can prevent their clients, and everyone, from falling victim to fraud. The CFPB recommends spreading the word by reporting it to the FTC via its website. If you’ve encountered a scam, you can let the organization know here.