DHS’s Partnership with Private Industries Leads to a Crackdown of Fraudulent Behavior During the Pandemic

Michell Pacheco

Associate Editor

Loyola University Chicago School of Law, JD 2022

After the COVID-19 pandemic spread to the U.S. in February of 2020, there was a surge in fraudulent behavior as criminals took advantage of the fear revolving around the pandemic to profit from selling defective goods and scamming the public. This has resulted in the loss of millions of dollars by the public. Scammers will continue to benefit and take advantage of the public until the government steps in and takes preventative measures to stop this criminal behavior during the pandemic.

Fraud during COVID-19 era 

To deter and prevent this surge of illegal activity and fraud surrounding COVID-19, Homeland Security Investigations (HSI), the largest investigative branch of the Department of Homeland Security (DHS), launched Operation Stolen Promise. The operation includes a public-private partnership with other federal agencies as well as private companies such as Pfizer, Citi, Alibaba, 3M, and Amazon. Through this public-private partnership, HSI has investigated financial fraud schemes, the importation of prohibited pharmaceuticals and medical supplies, websites defrauding consumers, and other criminal activity that has compromised the public’s safety during the pandemic.  

HSI has seen a significant increase in criminals attempting to capitalize on the fear and anxiety surrounding the pandemic, including the sale of counterfeit pharmaceuticals and medical equipment. Fraudsters have been selling products and offering treatments that supposedly cure the viral infection, such as taking high doses of intravenous vitamin C, using Chinese herbs, chiropractic treatments, to name a few. Further, members of the public are receiving calls and emails appearing to originate from the Center for Disease Control and Prevention requesting donations or other personal sensitive information, such as social security information. 

Response to fraudulent behavior from other federal agencies

Thus far, the Federal Trade Commission (FTC) and U.S. Food and Drug Administration have responded by sending warning letters to companies that may be violating federal law by selling products that have not been evaluated for safety or effectiveness. FTC has seen an overwhelmed response from companies that have received these warning letters. According to FTC, these companies have taken steps to correct inappropriate advertising and marketing language and come into compliance with the law. FTC has also filed lawsuits against online merchandisers for failing to deliver on promises to ship PPE equipment during the pandemic quickly.  

The recipient companies differed from companies working with DHS in Operation Stolen Promise, such as Amazon and Alibaba, in that they are smaller business models that directly target and contact the consumer to obtain personal information or sell defective products. In contrast, companies like Amazon are e-commerce giants with global operations that do not personally reach out to consumers.   

The FTC has received over 185,000 reports of fraud, identity theft, and other illegal criminal activity, including $132 million in total fraud losses. Scammers are specifically targeting older Americans who are concerned about their health and finances. People over forty years of age have been disproportionately affected by fraudulent behavior from scammers during the pandemic. Recent data suggest that these age groups account for more than half of the public’s total losses from fraud during the pandemic. Fraudsters have primarily benefitted from travel vacation and online shopping scams, with reports showing a loss by the public of $58 million.

Outcome of DHS’s public-private partnership  

Since the launch of the operation, HSI special agents have seized over $7.9 million in illicit proceeds, made fifty-nine criminal arrests, and worked alongside U.S. Customs and Border Protection to seize 969 shipments of mislabeled, unauthorized, and prohibited COVID-19 test kits and personal protective equipment (PPE). Private industries have also contributed to the fight against fraud during the pandemic. Amazon has stopped more than 6.5 million products with inaccurate claims, removed over one million offers for suspected price gouging, and suspended more than 10,000 selling accounts for suspected price gouging. By identifying and dismantling fraudulent schemes, HSI, with the help of private industries, has been able to prevent the illegal criminal trade of fraudulent COVID-19 related products and protect the health and safety of the American public and the American economy. 

What can federal agencies do to prevent this behavior 

As fraudulent behavior surrounding the pandemic rise, federal agencies should continue to increase its preventative measures by closely monitoring social media, online marketplaces, and incoming complaints to help ensure that companies do not continue to market fraudulent products. Further, an ongoing collaboration of public and private industries will provide HSI and other federal agencies with sufficient support and information about how fraudulent businesses have been using services, such as Amazon, to perform their criminal activities. This public-private partnership will disrupt illegal activity and protect the public from falling victim to future COVID-19 related scams.