Reed Smith Client Alerts

The Financial Crimes Enforcement Network (FinCEN) is again calling attention to distinctive patterns of illicit financial activity linked to the COVID-19 pandemic. In February, FinCEN issued two new COVID-19 advisories relating to health care fraud and financial crimes that target COVID-19 stimulus checks.1 FinCEN intends each advisory to alert financial institutions to the evolving risks presented by the pandemic. Financial institutions should incorporate into their compliance efforts the discrete typologies discussed in each advisory.

Health insurance and health care fraud

FinCEN’s February 2, 2021, health insurance and health care fraud advisory identifies 16 red flags to help financial institutions spot instances of fraud linked to COVID-19. The advisory also includes two case studies drawn from recent federal indictments. In the first case study, owners of several New York-area pharmacies were charged with claiming millions of dollars in Medicare funds by using COVID-19 emergency override billing codes, despite never purchasing or dispensing medications. The defendants then allegedly used the proceeds to engage in an international money laundering conspiracy. In the second case study, the president of a California-based medical technology company was charged with paying kickbacks and bribes for unnecessary allergy tests, later expanding the testing scheme to include lucrative COVID-19 testing. As part of the scheme, the defendant allegedly made false claims to health care investors regarding the company's ability to provide cheap and effective COVID-19 tests.

The 16 red flags fall into one of four categories, as follows:

1. Unnecessary medical services or billing fraud

The advisory notes that federal authorities have seen an uptick in unnecessary medical services since the beginning of the pandemic. Accordingly, financial institutions should be on high alert for medical providers with higher than expected payment volume during the pandemic period. Other red flags include unusual transaction activities in a health care provider’s business account or higher than expected reimbursement rates that do not match the provider’s business profile, such as a small medical facility with few personnel processing a high volume of COVID-19 tests.