The last few weeks have seen a sharp rise in the number of reported cases of coronavirus related fraud. As of 20 March the UK’s national reporting centre for fraud and cybercrime, Action Fraud, had recorded at least 105 reports with total losses reaching almost £970,000. These figures will undoubtedly continue to grow given the likely timescale of the pandemic and the impact of COVID-19 on the economy.
Examples of the alleged fraudulent behaviour include:
- The online sale of counterfeit coronavirus testing kits, face masks, hand sanitiser and other products much in demand but in short supply. These websites purport to sell products that either do not exist or are sold at inflated prices, and account for the vast majority of the reported incidents of fraud to date.
- Phishing emails purporting to be from the Centers for Disease Control and Prevention (CDC) and the World Health Organisation (WHO) containing malicious attachments or links which allows the installation of malware or theft or personal sensitive information.
- Fraudulent messages promising tax refunds or financial support from HM Revenue & Customs and which encourage the sharing of contact details and bank card numbers.
- A free meals email scam requiring parents to provide bank details in order for their children to be eligible for school meals in light of the school closures.
The UK response to date
A government press release issued on 30 March has set out some of the steps being taken to counter misinformation about coronavirus including tackling phishing emails and scams. This includes the work of the Rapid Response Unit which was originally launched in April 2018 to monitor news and information online to identify emerging issues. The release states this unit will co-ordinate with departments across Whitehall to deploy the appropriate response, which can include a direct rebuttal on social media, working with platforms to remove harmful content and ensuring public health campaigns are promoted through reliable sources.
Prosecutors are prepared for any potential increase in fraud-related files
The various law enforcement agencies have also now issued statements acknowledging the increase in fraud and scams during the pandemic, with emphasis on collaboration between their agencies, the government and the private sector, as well as the need for the public to be more vigilant against fraud. The Minister for Security James Brokenshire stated ‘the Government is committed to working with the NCA and all law enforcement partners to tackle this and protect the public,’ with the Head of the Specialist Fraud Division at the CPS, Andrew Penhale, noting ‘the CPS continues to evolve its response’ and that ‘our prosecutors are prepared for any potential increase in fraud-related files for us to consider.'
The government has also published guidance for leaders and fraud experts in government bodies and local authorities that are administering emergency programmes as it acknowledges the fraud threat posed during emergency situations is higher than at other times. The guidance envisages the imminent threats as being:
- First party application fraud (where an applicant misrepresents their circumstances to qualify for a government grant or scheme).
- Third party impersonation fraud (where a third party impersonates a business to obtain funding).
This guidance refers to the formation of a COVID-19 Fraud Response Team by the Cabinet Office, although how it will operate is not yet clear.
The US response to date - Prioritising the investigation and prosecution of coronavirus related schemes
In the US, the Attorney General William Barr has taken an unequivocal stance, warning ‘the pandemic is dangerous enough without wrongdoers seeking to profit from public panic and this sort of conduct cannot be tolerated.’ US Attorneys have been told to prioritise the investigation and prosecution of coronavirus related schemes and to appoint a Coronavirus Fraud Coordinator in each judicial district. These coordinators will serve as legal counsel on matters relating to the coronavirus, will direct the prosecution of coronavirus related crime, and will conduct outreach and awareness. The public have also been urged to report suspected fraud schemes related to COVID-19 to the National Center for Disaster Fraud hotline.
There are a number of criminal investigations and prosecutions already underway in the US, including:
- The Department of Justice filed its first enforcement action on 22 March against operators of a fraudulent website in Austin, Texas. The website claimed to offer consumers access to WHO vaccine kits in exchange for a shipping charge of $4.95 (paid by entering credit card details). The website has now been made the subject of a temporary restraining order whilst an investigation by the FBI continues.
- The DOJ filed the first federal criminal charges for coronavirus related fraud on 25 March, with an individual being charged in California with one count of wire fraud (which carries a maximum sentence of imprisonment of 20 years) for allegedly soliciting investments in a cure for coronavirus claimed to have been personally developed.
- On 30 March the U.S. Attorney for the District of New Jersey announced the arrest and charge of an individual for conspiracy to commit healthcare fraud and conspiracy to violate the Anti-Kickback Statute (which carry maximum sentences of imprisonment of 10 years and five years respectively).
UK law enforcement agencies will no doubt want to react quickly and vociferously to the phenomenon of coronavirus related fraud, notwithstanding the practical difficulties the current country-wide lock down presents. Interim protocol released by the CPS identifies coronavirus related fraud as falling within the category of immediate cases where charging decisions will be sought and prioritisation of these cases will take into account the need to protect vulnerable victims and deter future offending. There is already a clear appetite to improve the UK’s response to fraud, and the coronavirus pandemic may act as an additional catalyst in this regard.
For further information on the issues raised in this blog post, please contact a member of our criminal team.
About the authors
Caroline Day is a Partner in our Criminal Litigation team. Caroline specialises in complex fraud and financial crime. She acts in cases of serious fraud, money laundering, corruption and cartels and has advised individuals and companies subject of investigations and prosecutions by various agencies including the Serious Fraud Office (SFO), the Financial Conduct Authority (FCA), HM Revenue and Customs (HMRC) and the Competition and Markets Authority (CMA) (formerly the OFT).
Gemma Tombs is a Practice Development Lawyer in our Criminal Litigation team. She is a practising solicitor with extensive experience in all areas of criminal and regulatory litigation. Gemma was previously a partner and consultant at Corker Binning, where she acted for individuals and corporate clients in high profile investigations and prosecutions.