Statement for the Record — Calvin A. Shivers, FBI, Senate Committee on the Judiciary (June 9, 2020)
Summary
Statement for the record of Calvin A. Shivers, Assistant Director of the Federal Bureau of Investigations, U.S. Department of Justice, before the United States Senate Committee on the Judiciary, for a hearing entitled “COVID-19 Fraud: Law Enforcement’s Response to Those Exploiting the Pandemic,” June 9, 2020. It states that after the Attorney General issued a memorandum on March 16, 2020, the FBI established a COVID-19 Working Group. Under the heading Paycheck Protection Program, it states that the FBI formed a PPP Fraud Working Group and that nearly 100 investigations have been initiated, with over $42 million in potential fraud identified and over $900,000 recovered. Other headings cover child exploitation, money mules, virtual assets, personal protective equipment and health care fraud.
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“Statement for the Record — Calvin A. Shivers, FBI, Senate Committee on the Judiciary (June 9, 2020).”
Original at www.judiciary.senate.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/055-2020-06-09-ppr-wave3-hv-091d7cb1c74b73f7-calvin-a-shivers-testimon-a19c82332c/
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STATEMENT OF THE
U.S. DEPARTMENT OF JUSTICE
CALVIN A. SHIVERS
ASSISTANT DIRECTOR
FEDERAL BUREAU OF INVESTIGATIONS
BEFORE THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
FOR A HEARING ENTITLED
“COVID-19 FRAUD: LAW ENFORCEMENT’S RESPONSE TO THOSE
EXPLOITING THE PANDEMIC”
PRESENTED
JUNE 9, 2020
CALVIN A. SHIVERS
ASSISTANT DIRECTOR
FEDERAL BUREAU OF INVESTIGATIONS
U.S DEPARTMENT OF JUSTICE
STATEMENT FOR THE RECORD
BEFORE
THE UNITED STATES SENATE COMMITTEE ON THE JUDICIARY
WASHINGTON, D.C.
FOR A HEARING ENTITLED
“COVID-19 FRAUD: LAW ENFORCEMENT’S RESPONSE TO THOSE EXPLOITING
THE PANDEMIC.”
JUNE 9, 2020
Chairman, Ranking Member, and Members of the Committee, thank you for the
opportunity to appear before you today to discuss the rapidly evolving threats to the United
States homeland posed by the myriad of fraud schemes which seek to exploit the global COVID-
19 pandemic. The FBI has worked to counter the threats posed by fraud schemes and illicit
finance activities since its inception—these threats are pervasive and have become more frequent
and sophisticated over time. Moreover, they adversely affect the United States by destabilizing
our financial system and institutions and harming people at higher risk (including older adults
and people with underlying medical conditions).
On March 16, 2020, the Attorney General issued a memorandum on fraud in connection
with COVID-19. Within days, the FBI established a COVID-19 Working Group comprised of
representatives from all 56 FBI field offices and 500 total participants from the Department of
Justice (Department) and FBI to combat the criminals undermining our nation during this crisis.
The COVID-19 pandemic has only served to increase the number of stimulus, healthcare, bank,
elder, and government fraud schemes. As of May 28, 2020, the Internet Crime Complaint Center
(IC3) received nearly the same amount of complaints in 2020 (~320,000) as they had for the
entirety of 2019 (~400,000). Approximately 75% of these complaints are frauds and swindles,
presenting a challenge for the FBI’s criminal program given the sheer volume of submissions.
We have also seen the sale of counterfeit personal protective equipment (PPE), fraudulent
unemployment insurance claims, and even criminals who are engaging in online predatory
behavior targeting children who are continuing their education from home. Keeping pace with
these threats and their volume is a significant challenge for the Federal Bureau of Investigation
(FBI), but one we are tackling head on in conjunction with our many federal, state, local, private
sector, non-profit, and community partners.
INCREASED RISK OF CHILD EXPLOITATION
Online sexual exploitation comes in many forms. Individuals may coerce children into
providing sexually explicit images or videos of themselves and/or younger family members.
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With the threat of posting the images publicly or sending them to the child’s friends and family if
the child does not continue sending the material, they are forced into an abusive cycle of
exploitation. Other offenders may make casual contact with children online, gain their trust, and
introduce sexual conversation that increases in egregiousness over time. This activity may
ultimately result in an online relationship that includes sexual conversation, the exchange of
illicit images, and physically meeting the child in-person for the purpose of engaging in illegal
sexual activities.
School closures as a result of COVID-19 have increased the presence of children online,
desensitizing them to being online and putting them in a position of increased risk. To
proactively counter these risks, we have worked to warn parents, educators, caregivers, and
children about the dangers of online sexual exploitation and signs of child abuse through public
service announcements (PSAs), billboards, and meetings with our private sector partners hosting
video communications platforms. In particular, we have emphasized parents’ and other
caregivers’ need to be mindful about children’s use of apps and platforms that feature end-to-end
encryption, direct messaging, video chats, file uploads, and user anonymity, which predators
often use to contact children directly and evade law enforcement.
During the last few months, the FBI has received more than 315 reports of incidents
throughout the United States and in other countries in which a Zoom participant was able to
broadcast a video depicting child sexual abuse material (CSAM). The FBI considers this activity
to be a violent crime. Every time child sexual abuse material is viewed, the depicted child is re-
victimized. Furthermore, anyone who is exposed to child sexual abuse material during a virtual
event may be traumatized by the experience. In the last 75 days, we have identified over 400
victims due to this activity.
PAYCHECK PROTECTION PROGRAM
With the passage of the CARES Act, the FBI has seen fraudsters shift their efforts
towards exploiting the various programs aimed at relieving the detrimental economic effects of
COVID-19. Of particular interest are criminals fraudulently applying for Paycheck Protection
Program (PPP) loans or targeting PPP funds once they have been disbursed.
The FBI's IC3 has received numerous complaints from business owners unable to
legitimately apply for a PPP loan because their Employer Identification Numbers (EINs) were
already used for fraudulent loan applications. There have also been reports of fraudulent
websites claiming to facilitate PPP loans, which gather all the personally identifiable information
necessary to apply for a PPP loan, only to not follow through with the assistance, but likely use
the information for their own nefarious purposes.
In order to effectively target this growing threat, the FBI has formed a PPP Fraud
Working Group in coordination with the Department’s Fraud Section and the Small Business
Administration Office of Inspector General. Through the efforts of our field offices and the PPP
Working Group, nearly 100 investigations have been initiated since the inception of the program,
with over $42 million in potential fraud identified and over $900,000 recovered. These
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investigations involve bank insiders, previously convicted felons, the use of dormant or cash
businesses, and identity theft.
ADVANCE FEE AND BUSINESS EMAIL COMPROMISE SCHEMES
In the current environment, demand for PPE and other goods far exceeds supply, and
businesses have had to alter standard practices to continue operations. Such an environment is
ripe for exploitation by fraudulent actors perpetrating advance fee and business email
compromise (BEC) schemes. In the advance fee schemes related to procurement: a victim pre-
pays a purported seller or a broker for goods such as ventilators, masks, sanitizer or other in-
demand products, and then receives little or nothing in return. BEC schemes often involve
fraudsters spoofing a legitimate email address known to the recipient or the use of an email
address that is nearly identical to one known and trusted by the victim to instruct them to redirect
legitimate payments to bank accounts controlled by the fraudsters.
Recent examples of COVID-19-related BEC attempts include a financial institution that
received an email, allegedly from the CEO of a company, who had previously scheduled a
transfer of $1 million, requesting that the transfer date be moved up and the recipient account be
changed “due to the Coronavirus outbreak and quarantine processes and precautions.” The email
address used by the fraudsters was almost identical to the CEO’s actual email address, with only
one letter altered.
In another instance, a fraudster spoofed the email address of a CEO who had been
approved for a PPP loan, contacted the financial institution facilitating the loan and requested
that the PPP funds be transferred to a new account at a different institution. The FBI is also
aware of multiple incidents in which state government agencies, attempting to procure
ventilators or PPE, wire transferred funds to fraudulent brokers and sellers in advance of
receiving the items. The brokers and sellers included both domestic and foreign entities. In one
case, an individual claimed to represent an entity with which the purchasing agency had an
existing business relationship. By the time the purchasing agencies became suspicious of the
transactions, much of the funds had been transferred outside the reach of U.S. law enforcement
and were unrecoverable.
MONEY MULES
With the U.S. unemployment rate soaring and large numbers of people being secluded at
home, fraudsters are increasingly targeting individuals through “work from home” opportunities
or dating websites to use as money mules. Criminals who obtain money illegally need to find a
way to move and hide the illicit funds. They frequently scam other people, known as money
mules, into moving this illicit money for them. These money mules are asked to receive funds in
their personal bank account and then “process” or “transfer” funds via wire transfer, ACH, mail,
or money service businesses, such as Western Union or MoneyGram.
Acting as a money mule—allowing others to use one’s bank account or conducting
financial transactions on behalf of others—not only jeopardizes the mule’s financial security and
compromises their personally identifiable information but is also a crime. Over the last several
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years, the FBI has dedicated significant resources to educating the public on common red flags
that they may be acting as a money mule and has continued to reinforce this messaging to
address the rise of COVID-19-related money mule schemes. The FBI encourages individuals to
protect themselves by refusing to send or receive money on behalf of individuals and businesses
for which they are not personally or professionally responsible, and to watch out for online job
postings and emails from individuals promising easy money for little to no effort.
VIRTUAL ASSETS
With the rise in the use of virtual assets and encrypted devices and applications, the
interconnectivity of communication platforms, and the ever-changing landscape of emerging
payment systems, the world is more connected today than ever. This also means it has becoming
increasingly difficult to track illicit finance flows and identify the criminal actors behind them.
Fraudsters are leveraging increased fear and uncertainty during the COVID-19 pandemic to steal
Americans’ money and launder it through the complex virtual asset ecosystem. Some criminals
use virtual assets to conduct illicit transactions because these currencies offer potential
anonymity. Furthermore, these transactions are often not tied to a real-world identity and enable
criminals to quickly move criminal proceeds among countries.
People of all ages, including older adults, are being victimized by criminals through
virtual asset-related fraud schemes. Developments in virtual asset technology and an increasing
number of businesses accepting virtual assets as payment have driven their growing popularity
and accessibility. There are not only numerous virtual asset service providers online, but also
thousands of virtual asset kiosks located throughout the world which are vulnerable to
exploitation by criminals to facilitate their schemes. Many traditional fraud and money
laundering schemes are now orchestrated via virtual assets. The FBI has published a PSA about
an increase in virtual asset fraud schemes related to COVID-19, including blackmail attempts,
work from home scams, paying for non-existent treatments/equipment, and investment scams. It
should be stressed that there are legitimate charities, investment platforms, and e-commerce sites
that accept payment in virtual assets. However, unsolicited requests for donations via virtual
assets or pressure to use virtual currency should be approached with caution.
PERSONAL PROTECTIVE EQUIPMENT
Scammers are taking advantage of the COVID-19 pandemic to steal money through a
variety of means. The FBI is working to educate the health care industry, financial institutions,
other private sector partners, and the American public of an increased potential for fraudulent
activity dealing with the purchase of COVID-19-related medical equipment. Furthermore, we
have worked through the Department to coordinate with the Federal Emergency Management
Agency (FEMA) and the U.S. Department of Health and Human Services (HHS) to allocate for
purchase by the government at fair market value certain designated supplies that have been
stockpiled in excess of an individual’s need and/or for the purpose of selling it in excess of
prevailing market prices. This is all being done in alignment with the Defense Production Act
(DPA).
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In price gouging and hoarding investigations in Jackson, Los Angeles, Newark, and New
York, the FBI seized the PPE in an effort to stop criminal violations of the DPA and get the PPE
to first responders and medical professionals. To date we have acquired millions of units of PPE
from the aforementioned jurisdictions, to include surgical masks, gloves, respirators, shoe
covers, protective gowns, lab coats/overall, and face shields/goggles. We are working closely
with the Department to determine the next steps for the redistribution, purchase, and/or sale of
these items.
HEALTH CARE FRAUD SCHEMES
Legitimate medical professionals and scientists throughout the U.S. are working hard to
find a cure, approved treatment, and vaccine for COVID-19. Unfortunately, bad actors are
selling fraudulent COVID-19 test kits and unapproved treatments through telemarketing calls,
social media platforms, and door-to-door visits at the same time. Many scammers are promising
free care and free COVID-19 testing to patients in order to gain access to their personal and health
insurance information, including their dates of birth, Social Security numbers, and financial data.
While the methods are ones we have seen before, the current atmosphere of fear and
urgency aids criminals in taking advantage of the American public, particularly at-risk
populations like older adults and people with underlying health conditions. Prior health care
fraud investigations have shown that once scammers obtain an individual’s personal information,
they use it to bill federal health care programs and/or private health insurance plans for tests and
procedures the individual did not receive and pocket the proceeds. Some bad actors are selling
fraudulent at-home test kits while others are even going door-to-door and performing fake tests
for money.
ACTIVE RESPONSE AND LOOKING FORWARD
While these frauds prove difficult to address, they are not impossible, and the FBI is
making every effort to investigate them. First, we have relied heavily on public education and
awareness—only when the general public knows about schemes like BEC and counterfeit goods
can it report them. The FBI needs solid leads that we can aggregate in databases and systems
like IC3 for analysis. From there, we can identify the perpetrators and follow illicit money to its
source.
The repercussions of the COVID-19 pandemic have not and will not end any time soon.
While we reflect on our actions thus far to counter specific threats to U.S. national security, we
must also anticipate and prepare to address emerging criminal schemes of an even larger scale.
Initially, PPE-related hoarding/gauging schemes, investment and consumer fraud schemes
promoting fake COVID-19 cures/treatments/tests, BEC schemes, and advance fee schemes were
the most prevalent fraud schemes related to COVID-19. While these continue, the FBI has seen
the fraud landscape shifting over the past month as criminals continue to attempt to fraudulently
obtain funds made available through the CARES Act stimulus. In response, the FBI is working
with DOJ and relevant federal agency inspectors general to actively address substantial numbers
of fraudulent PPP loans and Economic Injury Disaster Loan Emergency Advances.
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As a result of the COVID-19 pandemic, the FBI has also identified an increase in health
care fraud. As the number of people seeking treatment for the virus has increased, so too have
the number of criminal actors seeking to profit from the crisis by exploiting vulnerabilities in the
delivery of medical services. The FBI, together with our law enforcement and regulatory
partners, as well as our partners in the private sector, has identified a variety of fraudulent
schemes targeting both government sponsored health care programs, particularly Medicare and
Medicaid, and private health insurance plans, including overbilling for services, billing for
services not rendered, and billing for medically unnecessary services. We have seen many of
these schemes before, and we are aggressively working to stop them.
The FBI is also pursuing criminals who file fraudulent claims for unemployment
insurance payments, often using stolen identities, and routing the funds to themselves. We
continue to engage heavily with private sector partners, particularly financial institutions and
health insurance companies, to communicate the fraud trends we are seeing, gain valuable
insights from the institutions on what they have seen, and share intelligence related to
investigations. We have received countless valuable referrals from financial institutions in the
form of Financial Crimes Enforcement Network (FinCEN) Suspicious Activity Reports that
relate to already open investigations or have led to the initiation of new investigations. These
relationships with the private sector have allowed us to more efficiently and effectively address
many of the fraud schemes that have emerged since the beginning of the COVID-19 pandemic,
and we continue to rely on these relationships as schemes change and evolve.
The FBI is engaged in myriad efforts to combat COVID-19 threats, from improving
threat identification and information sharing inside and outside of the government to examining
the way we operate to disrupt and defeat these threats. All facets of the FBI are working to
counter these threats and head off those that are just emerging. We are proud to work alongside
our federal law enforcement and private sector partners to protect the American public from
COVID-19 related scams during these difficult times. These collaborative efforts are the key to
quickly reducing the threat from COVID-19 related criminal activity, so the American public can
focus on protecting themselves and their families during these trying times.
Thank you, Chairman Graham and Ranking Member Feinstein, for bringing attention to
these issues. I would be happy to answer any questions you might have.
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