U.S. Department of the Treasury's Financial Crimes Enforcement Network issues alert on federal student aid fraud, urging banks to detect and report ghost student and straw student schemes

The U.S. Department of the Treasury's Financial Crimes Enforcement Network has issued an alert urging financial institutions to detect, prevent and report suspicious activity linked to fraud against federal student aid programs. The alert focuses on schemes in which fraud rings use stolen or fabricated identities to enroll fake students, obtain student aid funds and then move the proceeds through the financial system. FinCEN describes several typologies. Fraudsters may use stolen personally identifiable information, including that of minors, to create "ghost students" without victims' knowledge, or combine stolen data with fabricated details and fraudulent documents to create synthetic identities that can bypass verification controls. Other schemes rely on complicit "straw students" who provide their information in exchange for payment, while corrupt staff at educational institutions may recruit those individuals or alter educational records to facilitate the fraud. For banks and other financial institutions, the alert points to student aid refund payments as a key indicator, including deposits sent directly by educational institutions or by intermediaries, often through Automated Clearing House transfers with references such as "refund" and the institution's name or abbreviation. It also notes that, after obtaining the refunds, fraudsters may launder the money through money mules, shell companies and fraudulent accounts.