COVID-19: Resources and Insights

As the regulatory, economic, and political landscape continues to evolve through the current COVID-19 pandemic, we are assembling resources and guides to help businesses, government, and individuals navigate our current environment.

Overview

Our experts are sharing their views and insights on developing compliance and fraud concerns, the CARES Act, and security risks in managing a remote workforce, among many other key issues.

The K2 Integrity risk management and compliance teams have also developed bespoke offerings to assist clients in this crisis. For organizations receiving stimulus funding, we are providing support to develop governance and oversight frameworks, investigate allegations of fraud, waste and abuse, as well as establishing auditing and testing systems to support compliance with disbursement requirements.

In addition, for the banks and financial institutions providing access to the stimulus funds, our compliance professionals are helping these organizations balance their respective BSA/AML obligations—including customer due diligence (CDD) and associated beneficial ownership identification and verification requirements—with the need to expeditiously get money into the hands of qualifying businesses and individuals.

If you have questions about how these issues affect your organization or would like to sign up to receive ongoing alerts and information as it becomes available, please click here.

For additional guidance, we have also put together several outside resources that may be helpful during this time.

Resources

U.S. Resources

Treasury Department CARES Act Overview: Information and guidance on the US $2 trillion economic relief package to protecting the American people from the public health and economic impacts of COVID-19.

Small Business Administration: Providing guidance on funding, loans and employee health and safety.

Center for Disease Control: Information page to plan, prepare, and respond to COVID-19.

American Bankers Association: Representing banks of all sizes as well as their employees, they are providing tools and supporting as their members prioritize the safety of the customers and communities they serve and assist those affected by COVID-19, the ABA is working to put the nation on the path to recovery.

UK Resources

Coronavirus (COVID-19): Guidance and support from the UK government.

Public Health England: Guidance to protect and improve the nation’s health and well-being, and reduce health inequalities.

NHS: Get the latest NHS information and advice about COVID-19.

Coronavirus Act 2020: An Act to make provision in connection with coronavirus; and for connected purposes.

Our plan to rebuild: The UK Government’s COVID-19 recovery strategy: The Government’s roadmap for how and when the UK will adjust its response to the COVID-19 crisis.

Stimulus Risk Management

With expectations high for federal oversight and enforcement in connection with the potential mismanagement of relief and stimulus funds, all recipients need to be conscious of the risks and what needs to be done to prevent or mitigate those risks. This will require the right governance frameworks, policies and procedures in place to ensure funds are used consistent with agreed upon terms. In addition, systems to detect, investigate and report allegations of fund misuse are critical to remaining free from regulatory scrutiny and potentially criminal culpability. Our professionals have extensive experience dealing with crises and supporting governments and businesses to manage the risks of government stimulus funding, including the American Reinvestment and Recovery Act, BP Gulf Oil spill, Hurricanes Rita and Katrina, Superstorm Sandy, and World Trade Center 9/11 Recovery. K2 Integrity has extensive experience supporting organizations with developing governance and oversight frameworks, detecting and investigating allegations of fraud, waste and abuse and establishing auditing and testing systems to support compliance with disbursement requirements.

Stimulus and Relief Funding
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law on 27 March 2020, marking the third phase of government aid to combat the COVID-19 pandemic.

This $2 trillion stimulus package, the third of what will likely be several such funding packages, will be distributed through a variety of state and local mechanisms where capabilities for oversight and fraud detection and investigation are disparate.

At the federal level, the $500 billion allocated to corporate relief will be overseen by a triumvirate of oversight authorities based largely on the successful Troubled Asset Relief Program (TARP), which includes: including a Special Inspector General for Pandemic Recovery (SIGPR) with far-reaching authority to monitor the corporate relief fund. The additional oversight entities include the Pandemic Response Accountability Committee, which is comprised of Inspectors General from several government agencies including the U.S. Department of Justice and the Department of the Treasury and the Congressional Oversight Commission, a bipartisan committee will oversee the implementation of the CARES Act program and report to Congress every 30 days on progress and impact of all aspects of the relief fund. Financial Institutions, corporations, individuals, and state and local governments should expect intense oversight of all relief fund spending and accountability to the various relief programs for years to come.

Government investigations into the $430 billion TARP program resulted in 300 defendants being sentenced to prison and $11 billion returned to the federal government for fraud, money laundering, mortgage fraud, conspiracy and other illegal activity, and 24 enforcement actions against financial institutions and other corporates.

How We Assist

Compliance and Governance
K2 Integrity works with clients to ensure they have the proper governance, controls and compliance framework in place to mitigate the risks of managing stimulus and relief proceeds. Our work includes developing all facets of a compliance framework, including the preparation of policies and procedures, establishing the appropriate governance structure, assessing resource requirements, assuring transparency and “tone at the top” approach.

K2 Integrity also supports clients by designing and implementing effective anti-fraud programs and internal controls to support the detection of noncompliant activity. Our teams also have the ability to test and audit the efficacy of fraud prevention programs and compliance and governance frameworks, identifying weaknesses and making recommendations for improvement.

Third-Party Risk Management
K2 Integrity services leading corporations, governments, financial institutions and investment funds with the management of risks related to third parties.

From assisting with the design, improvement and evaluation of their third-party risk management frameworks; to conducting risk assessments across a wide range of third-party risk areas; to evaluating internal processes and controls for third-party risk management; to providing due diligence and background checks solutions; to ongoing risk monitoring; to providing investigative services into allegations or suspicions of misconduct, K2 Integrity is a one-stop resource for all third-party risk mitigation services.

Our business intelligence capabilities are perfectly suited to vetting potential vendors and suppliers where the highest risks of fraud and abuse exists.

K2 Integrity handles a combined hundreds of thousands of screens and due diligence investigations per year, involving both companies and individuals as subjects in the United States and around the world.

Utilizing a risk-based approach, we work with our clients to scope assignments and assist in identifying the appropriate depth of investigation taking into account their need, the report’s use and the risk presented by the subject or transaction.

Oversight and Independent Monitoring
Our experts have deep expertise helping states, local governments and private businesses by providing independent oversight in a variety of contexts, including the oversight, auditing and ongoing monitoring of the use of emergency relief and stimulus funds.

Our work has occurred at both the program level—overseeing disbursements programs—as well as at the recipient level, including oversight of agencies and business.

K2 Integrity’s multidisciplinary approach aligns our subject-matter expertise with our seasoned monitoring professionals composed of former federal prosecutors, computer forensics and technology experts, data analytics professionals, and forensic accountants to provide a cohesive unit to oversee the activities of the host.

Assisting with Government Investigations and Enforcement
K2 Integrity has developed a reputation for undertaking independent, credible and ethical investigations for corporations and their counsel.

Our teams of professionals possess the hands-on experience, technical skills, and the situational awareness necessary to conduct efficient and effective investigations.

Our capabilities include a range of proven investigative procedures, which include reviewing and analyzing business and accounting records, tracing questionable financial transactions, performing in-depth interviews of key personnel, conducting data analyses on volumes of disparate data to identify red flags and anomalies, collecting and analyzing electronic data and integrating it into a comprehensive review effort, and calculating the amount of damages or disgorgement.

We are experts in uncovering key facts that help clients formulate the right strategy to address regulatory issues.

In situations where we identify questionable activities, we work with counsel and company management to gain a complete understanding of the issues and recommend corrective actions to prevent future recurrences.

Our Experts

Richard H. Girgenti
[email protected]

Robert Brenner
[email protected]

Juan Zarate
[email protected]

Stimulus Funding Compliance

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law on 27 March 2020.

This $2 trillion stimulus package—the third of what will likely be several such funding and stimulus packages designed to combat the effects of the COVID-19 pandemic—is currently being distributed through a variety of state and local mechanisms, including two lending programs of importance to participating financial institutions.

Under the CARES Act, the Paycheck Protection Program (PPP) authorizes up to $350 billion in lending to small businesses meeting certain eligibility requirements administered by the Small Business Administration (SBA).

The CARES Act also authorizes the U.S. Department of the Treasury to make up to $500 billion in loans, loan guarantees, and other investments in support of certain businesses, states, and municipalities.

The SBA, in consultation with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), has been issuing FAQs regarding implementation of the PPP, and FinCEN has issued additional guidance alerting financial institutions to disaster-related fraud and other potential illicit conduct associated with COVID-19.

Financial regulators at the federal and state levels anticipate that all financial institutions will continue to take a risk-based approach to meeting their Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulatory requirements, which will mean the need for increased compliance capacity and capabilities.

With expectations high for the potential for money laundering, fraud, cyber, and other compliance risks in connection with the application for and disbursement of stimulus and relief funding, banks and financial institution lenders need to remain vigilant, while meeting the challenge of disbursing funds as quickly as possible.

This will require participating banks and financial institutions to balance their respective BSA/AML obligations—including customer due diligence (CDD) and associated beneficial ownership identification and verification requirements—with the need to expeditiously get money into the hands of qualifying businesses and individuals.

In addition, the requirement to detect and prevent illicit financing, fraud, cyber crime, money laundering, and other financial crimes against lenders remains a priority.

K2 Integrity professionals have extensive experience in the development, implementation, testing, and oversight of regulatory compliance systems and financial crime governance frameworks for federally insured depository institutions, credit unions, FinTechs, and governmental entities.

How We Assist

One of K2 Integrity’s principal strengths is our investment in and use of technology.

Utilizing our in-house innovation lab, Agile Technologies, we have developed a series of financial crimes compliance capabilities that allow us to assist our clients with the facilitation of BSA/AML compliance remotely, including the ability to collect, process, investigate, and decision customer onboarding, screening, and transaction monitoring remotely.

Compliance and Governance
K2 Integrity works with financial institution clients to ensure they have the proper governance, controls, and compliance frameworks in place to mitigate the regulatory risks of managing stimulus and relief disbursements.

Our work includes developing and reviewing all facets of a compliance framework to address stimulus and relief funding eligibility requirements and distribution-related illicit financing risks—including evaluating and modifying BSA/AML policies and procedures, tailoring CDD and suspicious activity reporting processes, and complying with Office of Foreign Assets Control (OFAC) sanctions and state regulatory requirements, such as those of the New York State Department of Financial Services (NYDFS).

In addition, our teams can assess the efficacy of fraud prevention, cybersecurity, and governance frameworks, identifying control weaknesses and making recommendations to enhance effectiveness and gain efficiencies through sound application of a risk-based approach.

Know Your Customer (KYC)
K2 Integrity helps leading financial institutions, investment funds, and governments with the management of risks related to customer onboarding, due diligence, and account updating processes.

Our team can design, assess, strengthen, and implement KYC policies and procedures in accordance with global standards and U.S.- and state-based laws and regulations—including with respect to customer identification and verification programs (CIP), the CDD Rule and related beneficial ownership requirements, specific and enhanced due diligence (EDD) programs, and OFAC sanctions screening.

Our efforts include the collection and validation of customer data supplied as part of a financial institution’s KYC programs, investigation into beneficial ownership, verification of customer risk rating, and the identification of opportunities for enhancements to customer risk profiles.

In connection with the evaluation of customer risk profiles, K2 Integrity reviews and assesses transactional activity to identify and document potential money laundering and other financial crime typologies, including fraud and other indicia of unusual or suspicious activity to effectively counter risks associated with stimulus and relief fund disbursements.

Transaction Monitoring Services
K2 Integrity professionals have diverse consulting and in-house experience to meet the challenges that banks and financial services firms will face in developing and maintaining a fully compliant transaction monitoring program in light of the additional requirements and volume created by the stimulus and relief funding and loans disbursements.

We work closely with clients facing temporary transaction monitoring staff shortages by providing professionals with relevant experience to assist with alert backlogs and overall maintenance of business as usual (BAU) volumes.

In support of clients’ technology needs, K2 Integrity calibrates and tests their transaction monitoring systems to ensure compliance with evolving requirements and risk profiles.

Our transaction monitoring services are available remotely, and our in-house systems are capable of connecting to our client’s existing technologies.

Lastly, our professionals have broad experience in helping financial institutions comply with regulatory consent orders involving historical transaction reviews.

Outsourced Managed Services
K2 Integrity’s outsourced managed services capabilities incorporate an end-to-end BSA/AML compliance solution, allowing financial institutions participating in the CARES Act to manage the risks that come from a sudden increase in demand on existing compliance systems and personnel without the need for K2 Integrity to be onsite.

Our offering integrates anti-fraud, AML, and sanctions functions with leading process management systems and business intelligence tools for risk-based onboarding, CDD, and transaction clearing.

Located in the United States and staffed with seasoned professionals, we provide institutions with a short ramp-up and integration time remotely, relying on our use of remote technology and secure networking.

K2 Integrity’s managed services solution can support existing BSA/AML and sanctions compliance programs in a variety of ways, including through customer screening and onboarding, periodic KYC reviews, risk-based CDD, EDD, and investigative support, and KYC remediation.

Our transaction monitoring systems and alert management processes utilize continually updated, state-of-the-art technology combined with our veteran team of analysts to identify and investigate potential suspicious activity.

Lastly, our transparent and efficient workflow and case management infrastructure enable rapid reporting and provide near-immediate insight into stimulus and relief fund disbursement risks and related compliance controls.

Independent Monitoring
Regulators are increasingly expanding the use of appointed independent monitors to assess, oversee, and monitor financial institution and corporate compliance with relevant laws and regulatory actions—particularly for banks and financial institutions with regulatory enforcement actions or deferred prosecutions by law enforcement.

K2 Integrity has a broad range of experience serving as an independent monitor for banks and other financial institutions, and as a monitor or compliance officer for investors, strategic acquirers, and sellers pursuant to the Committee on Foreign Investment in the United States (CFIUS) mitigation agreements and orders.

Our monitors, brought in as part of a government settlement agreement, have the expertise to tackle a broad range of financial crimes and national security and trade compliance issues, including compliance with AML, BSA, and OFAC; antibribery and anti-corruption regulations; and foreign investment review regimes, export controls, and other trade-related national security matters.

K2 Integrity helps those firms subject to enforcement actions comply with settlement terms and, on an ongoing basis, assess compliance programs and internal controls to address, help remediate, and avoid future problems.