Jeremy Schoen CFE, PCI, CAMS March 17, 2016

Transcription

1 Jeremy Schoen CFE, PCI, CAMS March 17, 2016

2 Fraud Investigations Money Laundering Investigations Terrorist Financing Human Trafficking Trade Based Money Laundering

3 Fraud obtain property or financial resources by trick or deceit and to deprive the owner of its use Examples: False Billing Schemes Check Schemes Asset Misappropriation Ghost Employee Schemes False invoicing Double Billing Shell Companies Unknown but similar name Vendor Schemes Workers Compensation Fraud Schemes Collusion between Employee(s) or Employees & Vendors What cost less than $500,000 and changed life as we know it?

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6 Money Laundering The criminal attainment of illegal financial resources for personal gain or profit. Also can be described as a means to clean financial proceeds of illegal activities through the legitimate financial or business systems. Or in other words Using the financial system as a washing machine to clean dirty money. This methodology is commonly found in drug trafficking, arms trafficking, criminal enterprise activities, theft rings, tax evasion, cyber crime, etc. Money Laundering commonly operates in a circular pattern Hawala Black Market Peso Exchange (BMPE) Tax Evasion Front Companies Shell Companies Wire Fraud Cyber Crime

7 05/ Prepaid Credit Cards Being Used To Launder Money Across The Border 07/ Former Chief Financial Officer for Boggs Paving, Inc. Pleads Guilty in Connection with $87 Million Fraud Scheme Involving Government-Funded Construction Projects 08/ Nine People Charged in Largest Known Computer Hacking and Securities Fraud Scheme More Than 150,000 Press Releases Stolen from Three Major Newswire Companies, Used to Generate Approximately $30 Million in Illegal Trading Profits

8 Simple Complex

9 The causation of money laundering and the effects it has on our economy and way of life. How can truly legitimate businesses compete; to include legitimate security companies and related vendors with those companies that are funded by illicit financial sources? In many cases data analytics are utilized to compare companies to one another. If a front security company is being compared to a legitimately funded and sourced security company; on paper, which company would look more appealing for a security contract with a large corporation? At the same time, who wants to sign a security contract with a company that is riddled with corruption or numerous violations of OFAC, corruption, compliance failures, or regulatory violations?

10 ACG Security beneficial owners were using the security company to conduct money laundering activities.

11 Terrorist Financing The criminal use, funding, or disguising of proceeds to support a murderous plot in order to harm human life, destroy legitimate business, support an illegal political agenda, or all of the above. Linear in view and function Operation Smoke Screen Tennessee EBT Fraud used to Support Terrorism activities in Yemen Country study in regard to Montenegro Cigarette Smuggling case from NY

12 Linear chart of Terrorist Financing Terrorist plot is planned, accounts are set up in the target location. Funding the operation is implemented. Players take up residence in target country and live among society while they carry out their plan in secret Money is sent to players for basic living expenses and to obtain the items needed to carry out the plan. Terrorist plot is carried out, and innocent lives are lost.

13 Operation Smoke Screen The Crime and Investigation Recognizing the potential profits in trafficking contraband cigarettes between North Carolina and Michigan, brothers Mohamad and Chawki Hammoud invested $8 millions and began illegal operations in A percentage of the profits went to the Lebanese-based terrorist group, Hezbollah. In 1997, ATF and the Iredell County (North Carolina) Sheriff's Office initiated a joint investigation of the Hammouds. Evidence and intelligence revealed a complicated web of additional defendants and crimes, including money laundering, terrorism support, immigration violations, wire fraud and mail fraud. The Immigration and Naturalization Service (INS), Charlotte-Mecklenburg (North Carolina) Police Department, Internal Revenue Service, Royal Canadian Mounted Police, Federal Bureau of Investigation (FBI), Diplomatic Security Service, (North Carolina) State Bureau of Investigation and Canadian Security Intelligence Service, along with several other local authorities assisted in this complex, multi-year investigation.

14 Operation Smoke Screen Partners Evidence Collected

15 Between 2000 and 2002, twenty-five defendants were indicted and arrested in North Carolina and Michigan for various crimes; contraband cigarette trafficking, providing support to a terrorist organization, money laundering, violations of the Racketeer Influenced and Corrupt Organization Act (RICO) and immigration violations.

16 9/11 Hijackers nor their financial facilitators were experts in the use of the International Financial System The 19 hijackers opened 24 domestic accounts at four different banks Accounts were opened with cash around $3,000 ID used to open accounts were Visa s issued by Foreign Governments All accounts were normal checking accounts with Debit card access Addresses used were Mail or Post Office Boxes and changed frequently The Hijackers chose large, well-known institutions Withdrawals were conducted by debit card. Low percentage of checks were used Deposits were made, followed by immediate withdrawal Majority of transactions were below reporting limits Funding of accounts was conducted by overseas wire transfers The Hawala system was commonly used to deposit money into the accounts to provide a sense of legitimacy. The Total of the entire 9/11 Operation was approximately $465,000

17 Human Trafficking The exploitation of human beings, mainly women and children for prostitution, slavery, or indentured servitude. The rationale of this is for the victim to repay a supposed debt that they owe, most likely their relocation / movement to the United States. The proceeds of this heinous activity are then used to support the continuation of illegal activities, further degrade human life, or grow the illegal operation.

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19 Image credit: Combating Terrorism Technical Support Office & Association of Certified Money Laundering Specialists

20 Image reference

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22 Government controls Regulatory means Industry Controls Self Regulation Societal Shifts Financial Crises of 2008 and the resulting fallout, the many failures we learned about pre 9/11 and the resulting fallout Throw tax payer money at it Does an escalation of commitment create a return on investment? Look the other way and pretend it does not have an affect? See, Hear, Speak no Evil (Willful blindness) It will not happen here mentality, that was a long time ago, or that was a government conspiracy or cover-up Forget milestone tragedies of the past (9/11, Oklahoma City Bombing, Boston City Marathon Bombing, San Bernardino, etc.)

23 EEE - Enhanced Enforcement Environment How to mitigate the affects Personal Liability Business Liability Properly Licensed or Bonded and Insurance Due Diligence utilize good business practices Enhanced Due Diligence Know Your Customer methodology use readily available sources - internet Know what type of business your customer operates Know your customers / owners background and or criminal history Don t complete business with customers involved in potential criminal or questionable activities

24 Government Regulators/Compliance Secretary of State Corporations Commission, LLC, LP, Sole Proprietorship, Etc. State Securities Commission In some states this is also completed by the Secretary of States Office OFAC Office of Foreign Assets Control DOJ Department of Justice OCC Office of the Comptroller of Currency FDIC Federal Deposit Insurance Corporation FINRA Financial Regulatory Authority Department of Revenue

25 Government Regulators/Compliance FinCEN Financial Crimes Enforcement Network MSB s (Money Services Businesses: Money Gram, Western Union, Inter-mex, RIA) Collection of SAR s & CTR s for financial intelligence and investigation Banking Institutions Regulating body Financial Intermediaries Insurance Agents Dealers, Bonding Agencies, Mortgage and Loan institutions, Certain Securities Dealers / Brokers, Real Estate Agents

26 Conduct a business Risk Self Assessment Establish a sensible Risk Tolerance Methodology Develop policies and procedures that support a culture of strict compliance of industry standards, best practices, and compliance with the law! Willful blindness Looking the other way, not questioning suspicious activities. Understand the definition and develop a culture that thwarts the harmful affects.

27 Develop sound internal controls Know your employee Mandatory vacations!!! Especially in key areas of the business involving invoicing, accounts payable, accounting, auditing, payment processing, vendor approval. Make sure terminated employees whether voluntary or involuntary are removed from the payroll, keep tabs on Human Resource (HR) personnel to be sure this task has been completed. Safeguard intellectual property, proprietary information, and critical data, as well as infrastructure that supports these crucial vehicles.

28 Conduct a Customer Risk Assessment Get to truly know your customer If it is too good to be true, walk away Is the customer or business operating under the disguise as legitimate when in reality it is a Front Company for illicit criminal activity? Just because a company has a website does not mean it is legitimate, research the domain name not just the companies name. If the domain name suggests the domain was created in the last week, it could be a fraud or Front Company Conduct regular vendor audits Create a hotline for both external vendors, contacts and internal employees Investigate all incidents and reports with caution, diligence, confidentiality, and haste (depending on the nature or location of evidence it could easily be moved, replaced, or destroyed)

29 Group effort to fight the fraud lifestyle: Public / Private Partnerships such as ASIS Chapter meetings Information Sharing through discussion of industry and current trends Know industry challenges, as well as those industries considered to be high risk Formulate a combined mitigating effort with businesses / Law Enforcement Traditional High Risk industries: Jewelry Wholesalers Wholesalers of Merchandise Charitable Organizations Gaming / Casinos Attorneys that act as intermediaries to set up Trusts, Businesses, etc. ATM Operators Cash Intensive Businesses

30 Lax or non-existent governmental or regulatory controls Also known as loopholes Citizenship by Investment Government sponsored citizenship if the foreign individual(s) pay a fee of a specified amount, such as found in the Dominican Republic, Cayman Islands, Etc. Or in the case of the United States, a foreign individual will receive expedited citizenship if he or she is willing to pay a specified fee and is willing to move their business or a portion of their business to the United States to support job creation. Alternative remittance systems Chiti Banking, Hawala, Black Market Peso Exchange. These systems are primitive and usually do not use the traditional financial system, funds are laundered through a series of trade based transactions and settlement through brokers attackers and masterminds commonly used the Hawala system to disguise their terrorist plot.

31 Good Example is in the United States lawyers who act as intermediaries for businesses, trusts, or corporation procurement are not required to report suspicious behavior or activities.

32 New York Times series about shell companies

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34 Questions?