State and provincial securities regulators are stepping up the fight against the growing scourge of Covid-19 fraud, says the North American Securities Administrators Association (NASAA).
In testimony to a U.S. congressional subcommittee examining fraud and cybercrime, the chair of NASAA’s cybersecurity committee, Amanda Senn, chief deputy director of the Alabama Securities Commission, said that regulators are actively rooting out and shutting down frauds related to the pandemic.
Many of these schemes are targeting vulnerable senior investors, Senn noted.
“The pandemic coupled with dramatic volatility in the markets has brought loneliness due to social isolation and concerns for financial security,” Senn testified.
“This is likely the reason that my colleagues and I have seen a significant uptick in the number of financial exploitation cases over the past two months,” she said.
In her testimony, Senn detailed the efforts of state and provincial regulators to gather intelligence and conduct online investigations, including their ongoing international enforcement initiative (NASAA’s Covid-19 Enforcement Task Force) to crack down on fraudsters seeking to profit from the pandemic.
“We believe the task force’s efforts have prevented and will continue to prevent many from being victimized and from becoming another restitution statistic in our respective agencies,” Senn said.
Senn also called on Congress to pursue legislative efforts to help protect seniors against fraud, including an initiative to establish a fund at the U.S. Securities and Exchange Commission (SEC) to provide restitution to investors who lose money to pandemic-related fraud.
“Amid the Covid-19 pandemic, Congress should assist state regulators in securing resources to combat financial exploitation against those most vulnerable in this crisis,” Senn said.
Separately, NASAA reported that its Covid-19 task force has uncovered 91 investment schemes that are “potentially fraudulent.” There are 54 active ongoing investigations.
Task force investigators have uncovered a variety of schemes, many involving cryptocurrencies or private market offerings, said Joe Rotunda, director of enforcement for the Texas State Securities Board and vice chair of NASAA’s enforcement section.
“Based on the pitches investigators have seen, suspects appear to be targeting seniors and individuals with portfolios that are losing or have lost value due to current economic conditions,” Rotunda said.
Regulators are using online investigative techniques to identify websites and social media posts that may be offering or promoting fraudulent offerings, investment frauds and unregistered regulated activities, NASAA said.
“By deploying various open source intelligence technologies, electronic collaboration tools as well as novel web crawling and scraping approaches, we have been able to provide intelligence and resources to investigators to help them conduct online investigations, as well as share and aggregate information about this international enforcement initiative,” said Jake van der Laan, director of information technology and regulatory informatics at the New Brunswick Financial & Consumer Services Commission, and chair of NASAA’s enforcement technology project group.
Members of the task force have produced 15 cease and desist orders, eight caution letters and have made 26 referrals to other agencies, NASAA said.