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Germany cracks down on coronavirus aid fraud

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Via Financial Times

German authorities have vowed to crack down on coronavirus-related fraud amid mounting evidence that scam artists, many of them based in eastern Europe, were hijacking the country’s generous aid programme for businesses hit by the pandemic.

Hubertus Heil, labour minister, said all would-be swindlers will be investigated and prosecuted. “Most people will behave decently and the black sheep that are committing fraud, we will catch them, and we will punish them,” he told German state broadcaster ARD TV this week.

On Thursday, Berlin police said a man identified as Ahmad A was under investigation for “exploiting the corona crisis” to scam €18,000 in financial assistance from IBB, Berlin’s development bank. 

The man, who police said has links to a militant Islamist movement in the capital, claimed to be running a business that was suffering because of the coronavirus-related shutdown, when in fact he was living on benefits. Officers searched his flat and confiscated cash and electronic devices.

In the most spectacular instance of abuse so far, the government of North Rhine-Westphalia, Germany’s most populous state, was forced to suspend its aid programme for a week after discovering that criminals were exploiting it to divert hundreds of thousands of euros into their own pockets.

The fraudsters had constructed more than 90 fake websites that trawled the data of companies applying for emergency funds, an activity known as “phishing”. They then used the information to apply for funds that flowed from state coffers into their own accounts.

Authorities said they are currently investigating 104 such fake sites, some of which have been traced back to servers in Slovakia and the US. “We’re talking about absolute professionals with excellent IT expertise,” said the region’s interior minister Herbert Reul.

He said criminals were boasting on the so-called dark web, a part of the internet that can only be accessed using specialised software, of having successfully phished 3,500-4000 data sets.

Isabel Skierka, a researcher in digital security at the ESMT Berlin business school, said the pandemic had provided lucrative new opportunities for cybercriminals to prey on people’s fear. “People are less cautious and more willing to download documents or open links related to the virus and their personal and financial situation in this crisis,” she said.

With more employees working from home, criminals were also better able to “get access to a company’s internal network through employees’ insecure home office set-ups,” she added.

Germany was one of the first countries to set up big aid programmes for businesses affected by the coronavirus pandemic, which the IMF has forecast will cause the worst global economic slump since the Great Depression of the 1930s. Output has dropped sharply after companies across Germany suspended production in a lockdown that has shuttered tens of thousands of businesses.

Over the past few weeks the German government has established a €600bn bailout fund for large companies, a state-backed scheme offering quick loans of up to €500,000 to small and medium-sized enterprises, and a €50bn hardship fund that hands out cash to small businesses, the self-employed and freelancers.

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Officials stressed from the start that speed and simplicity in distributing the funds would be the priority. The economy ministry said it had approved 1.1m applications for its self-employed fund in the three weeks since it launched and granted a total of €9bn in aid.

Individual states such as North Rhine-Westphalia and Bavaria have also set up their own schemes. Hubert Aiwanger, Bavaria’s economy minister, said last month that getting the funds out fast was the first priority.

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“But when we have air to breathe in a few months time, we will of course check to see whether there were any charlatans who cheated us [and] they will have to pay the money back,” he told Bavarian Radio.

But Ms Skierka pointed out that in many cases the aid programmes had no way of properly verifying applicants’ identities. Germany has “struggled with the digitisation of government services . . . for years, and in times of crises like these, such delays really take their toll,” she said.

The North Rhine-Westphalia aid programme started accepting applications with tightened security requirements again on Friday after the week-long shutdown. Mr Reul said investigators were working “flat out to uncover these perfidious schemes”.

Scams have spread to other parts of the country. In the eastern state of Saxony, the local development bank SAB said on Thursday it had stopped paying out grants to small businesses because of the prevalence of fake websites. The bank said it had “taken all the necessary measures to avoid the misallocation of public funds”. 

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German police have also warned the public to beware of fake emails purporting to come from the World Health Organization or other organisations with ransomware attachments. Other scammers have been sending fake maps pretending to show the spread of the disease in real time. When opened, the email installed malware that reads victim’s passwords and bank account details, the police said.

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