Michael D'Ambrosio, Assistant Director, Office of Investigations, United States Secret Service — Prepared Testimony
Summary
Prepared testimony of Michael D’Ambrosio, Assistant Director, Office of Investigations, United States Secret Service, on COVID-19 fraud before the United States Senate Committee on the Judiciary, June 9, 2020. It describes frauds including phishing, non-delivery scams, sham testing sites, ransomware and business email compromise, and says that even at a very low fraud rate of just 1%, more than $30 billion of the nearly $3 trillion appropriated by Congress would end up in the hands of criminals. It reports that the Secret Service has initiated over one hundred criminal investigations and prevented approximately $1 billion in fraud losses. It also describes work with the Office of the Inspector General of the Small Business Administration to combat PPP-related fraud.
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“Michael D'Ambrosio, Assistant Director, Office of Investigations, United States Secret Service — Prepared Testimony.”
Original at www.judiciary.senate.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/057-2020-06-09-ppr-wave3-hv-3f04202bc49ec1d3-michael-d-ambrosio-testim-3f735bb1fc/
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Michael D’Ambrosio
Assistant Director
Office of Investigations
United States Secret Service
Prepared Testimony on
"COVID-19 Fraud: Law Enforcement’s Response to Those
Exploiting the Pandemic"
Before the
United States Senate
Committee on the Judiciary
June 9, 2020
Intro
Thank you Chairman Graham, Ranking Member Feinstein, and the Members of this
distinguished Committee for holding this important hearing, and for inviting me to speak about
the work of the U.S. Secret Service to counter cyber and financial crimes exploiting the
coronavirus pandemic.
As early as February of this year, the U.S. Secret Service identified individuals and groups
seeking to exploit the pandemic to further fraudulent schemes for their illicit profit. We
published our first alert on this subject, on March 4, 2020, which focused on phishing schemes.
As the pandemic continued and intensified, we have observed a proliferation and diversification
of criminal schemes, particularly an increase in targeting various economic relief programs, such
as those provided by the CARES Act. Countering this fraud has become a core focus of our
investigative work, and I expect our investigative efforts to recover stolen assets and hold
criminals accountable will continue for years.
The Secret Service, in addition to our protective mission, is responsible for the investigation of
criminal violations of U.S. law pertaining to the U.S. financial system, including traditional
financial crimes (such as wire fraud and money laundering), modern computer crimes (such as
crimes associated with digital currencies), as well as counterfeiting of currency and other
financial instruments.
As the Assistant Director of the Office of Investigations, I lead the over 160 field offices of the
Secret Service, which include our network of electronic and financial crimes task forces, which
conduct specialized investigations of computer and financial crimes. As a result of the pandemic,
the risks to our financial system have evolved and multiplied, and we have taken swift action to
adapt our work to continue safeguarding the integrity of financial systems from threats to our
national and economic security.
In my testimony today, I’d like to the take the opportunity to describe how these risks have
evolved, what the Secret Service is doing to combat them, and how we are working with partners
across the Nation, and around the globe, to safeguard the integrity of financial systems, and,
ultimately, to hold criminals accountable.
The Risk of Cyber-Enabled Fraud
Major disasters have long invited fraud. From the terrorist attacks on 9/11 to Hurricanes Katrina
and Maria – and indeed well before – criminals throughout history have exploited emergencies
for illicit gain. The more catastrophic the event, the more active the fraudsters.
However, the fraud associated with the current COVID-19 pandemic presents a scale and scope
of risks we have not seen before. While a hurricane may impact multiple states and thousands of
people, this global pandemic impacts everyone. Enabled by the Internet, criminals all over the
world are exploiting the fear and uncertainty of the moment for their own illicit gain. They are
defrauding anxious citizens, distressed businesses, and government stimulus programs alike. And
they will continue to do so throughout the course of this pandemic and the following recovery.
Page 2 of 5
Over the course of the past few months, the Secret Service has observed a clear evolution of the
types of frauds being perpetrated. Our first alert, on March 4, 2020, warned of increasing use of
COVID-19 themes in “phishing” campaigns. Phishing is the practice of sending emails,
purporting to be from reputable companies or organizations, in order to entice individuals to
reveal personal information, such as passwords and credit card numbers, or to unknowingly
download malicious software. Phishing is a longstanding criminal tactic online. However, as
people and organizations have adapted to teleworking, people have become increasingly
susceptible to fraudulent emails exploiting their concerns about this pandemic.
But phishing was just the beginning. Over the subsequent weeks, the crimes exploiting the
pandemic began to diversify and substantially increase.
As communities sought out legitimate medical equipment to treat and prevent the spread of
COVID-19, criminals began to peddle fraudulent medical equipment. Fraudsters engaged in
“non-delivery” scams, in which payment is sent for goods and/or services, but no goods or
services are ever delivered.
As anxious citizens sought out COVID-19 testing, criminals stood up sham testing sites, both to
collect “fees” for fraudulent testing and to collect personal information that could later be used in
identity theft and other frauds. They began peddling fake cures, substandard masks, and
fraudulent tests.
As workers across the country increasingly turned to telework to increase social distancing,
criminals began deploying ransomware, software designed to extort money by locking a
computer system until a ransom is paid.
And they engaged in business email compromise (BEC) scams, sophisticated frauds designed to
deceive businesses into sending large sums of money into the bank accounts of criminals. With
workers out of the office, many of the normal oversight mechanisms that have might otherwise
have prevented an organization from becoming a victim, such as in-person approval for wire
transfers, made organizations especially susceptible to BECs.
Finally, as the Federal Government began to dispense stimulus funds, primarily through CARES
Act programs, criminals launched a new wave of schemes aimed at defrauding U.S. and state
government agencies, financial institutions, businesses, and even individuals, out of taxpayer
dollars intended to support our fellow citizens, businesses, and communities in need.
The fraud related to the CARES Act is perhaps the most troubling development thus far.
Congress has appropriated nearly $3 trillion to support the American economy, the largest-ever
economic stimulus package in U.S. history. Even if we assume a very low rate of fraud, of just
1%, we should still expect more than $30 billion will end up in the hands of criminals. And that
is likely an underestimation of the risk, and just one portion of the full range of risks at play. This
is why countering criminal schemes seeking to exploit the COVID-19 pandemic has become a
primary investigative focus for the U.S. Secret Service, and will remain so over the coming
years.
Page 3 of 5
Strategy
The Office of Investigations is currently focusing on four broad categories of COVID-19-related
crime, and has numerous ongoing investigations related to each of these categories. These four
categories are:
1. COVID-19-related scams, including the sale of fraudulent medical equipment and non-
delivery scams;
2. Risks of cyber crime resulting from increased telework nationally, such as BECs;
3. Ransomware and other cyber-criminal activity that could disrupt the pandemic response;
and,
4. Defrauding of government and financial institutions associated with response and
recovery efforts.
It is this fourth category that I think is of particular interest to this Committee. It is an area the
Secret Service is devoting extraordinary investigative effort to addressing. It is despicable that
some seek to engage in fraud against U.S. government programs that aim to brunt COVID-19-
induced economic harms. This includes fraud against unemployment benefits, Economic Impact
Payments (EIPs), Paycheck Protection Program (PPP) funds, and other CARES Act initiatives.
These criminals aren’t just defrauding these programs directly, but also impeding the execution
of these programs, thus denying essential aid to intended recipients in dire need of assistance.
I am pleased to report that Secret Service has already seen tremendous success emerge from our
investigative efforts to date. We have initiated over one hundred criminal investigations and
prevented approximately $1 billion in fraud losses.
Among other law enforcement actions, the Secret Service has successfully disrupted hundreds of
online COVID-19-related scams,1 halted the alleged illicit sale of stolen COVID-19 test kits
online,2 and is participating in a nation-wide effort to counter a vast international scheme3 to
defraud U.S. state unemployment systems. We have also released regular threat intelligence and
alerts4 to provide industry, consumers and our law enforcement partners with best practices5 to
defend themselves from the latest criminal threats.
The immediate investigative focus of the Secret Service is to disrupt and deter criminal activity
that could hinder an effective response to the pandemic, to assist organizations at risk of crime,
and to recover any funds stolen from Americans. Longer term, we will work to ensure that those
who have criminally exploited this crisis are arrested and successfully prosecuted.
1
https://www.justice.gov/opa/pr/department-justice-announces-disruption-hundreds-online-covid-19-related-scams
2
https://www.justice.gov/usao-wdpa/pr/new-york-city-man-arrested-fraud-charges-selling-stolen-covid-19-testing-
services
3
https://www.nytimes.com/2020/05/16/us/coronavirus-unemployment-fraud-secret-service-washington.html
4
https://www.secretservice.gov/data/press/releases/2020/20-APR/Check-Security-Features-for-Economic-Impact-
Payments.pdf
5
https://www.secretservice.gov/data/press/releases/2020/20-MAR/Secret_Service_Coronavirus_Phishing_Alert.pdf
Page 4 of 5
Partnerships
Yet the Secret Service never operates alone. We work with a range of government and industry
partners in executing our mission. In particular, the various agencies of the Department of the
Treasury, including the Financial Crimes Enforcement Network (FinCEN), the Internal Revenue
Service (IRS), the Treasury Inspector General for Tax Administration (TIGTA), and the various
Offices of Inspectors General, including from the Department of Labor, are all critical partners in
safeguarding the integrity of U.S. financial systems.
In addition, given the importance of the PPP, we are partnering with the Office of the Inspector
General (OIG) of the Small Business Administration (SBA) to combat fraud against business
loans. The Secret Service and SBA OIG have brought together the combined authorities,
capabilities, tools, and human resources of our respective agencies in order to combat PPP-
related fraud at both the national and local levels.
And, of course, to effectively coordinate across the whole of the U.S. government, we are
actively engaging with the Department of Justice’s COVID-19 task forces, the Federal Bureau of
Investigation, Homeland Security Investigations, the Cybersecurity and Infrastructure Security
Agency (CISA), and other law enforcement agencies at the state, local, and federal levels, both
in the United States and abroad.
Lastly, we have dramatically expanded our outreach to industry, particularly America’s financial
institutions, which are responsible for distributing much of the CARES Act funds to the public.
With the financial institutions, we have expanded our information sharing and other cooperation
to rapidly detect fraud, freeze assets, and return money to government agencies and others who
have been defrauded. This cooperation is absolutely essential, given the ability of the financial
institutions to intercede quickly in the event of fraud.
Conclusion
The ongoing spate of COVID-19-related crime is in many ways a culmination of years of
mounting risk within the financial sector, driven in large part by the growth of transnational
cyber-crime. COVID-19-related frauds are made possible by the persistent effort by cyber-
criminals to breach computer systems to steal personal information, which can subsequently be
used to fraudulently apply for loans and benefits payments. Recent data breaches have allowed
criminals to buy and sell this information, such as social security numbers and account
passwords, which can later be used in an extensive range of frauds.
But the insecurity of the digital realm is not solely a matter of economics. These same criminals
are also assisting nation-states in activities that present a very real threat to America’s national
security. Over the past twenty years, there has been a steady growth in transnational cyber-crime,
and cooperation between these transnational criminal organizations and some foreign states.
What we are seeing now with this pandemic is an acceleration of this trend, which is coinciding
with a vulnerable moment for our nation and our economy. I am committed to countering this
sort of criminal activity and look forward to answering your questions on how we can work
together to address this threat.
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