FRAUD INVOLVING EUROPEAN FUNDS. Dr. Eduard Ivanov

Transcription

1 FRAUD INVOLVING EUROPEAN FUNDS Dr. Eduard Ivanov

2 SCOPE OF THE DISCUSSION Fraud typologies Fraud and corruption Fraud and money laundering The role of inter-agency and international cooperation Cooperation with private sector Slide 2

3 FRAUD TYPOLOGIES Overpricing The use of intermediaries Payments for unnecessary services The use of front companies and the shadow financial infrastructure The use of corporate vehicles Slide 3

4 OVERPRICING Front companies in offshore zones European manufacturers Public official Municipal patient care institution Companyimporter of medical equipment Medical company Private bank accounts Slide 4

5 PAYMENTS FOR UNNECASSRY SERVICIES (CASH FUNDS) 1) Payment for services according fictitious contract 2) Cash 3) Payments for goods within the country and abroad Slide 5

6 PAYMENTS FOR UNNECASSRY SERVICIES (INSURANCE SECTOR) Clients of the insurance companies Insurance company #1 Insurance company #2 Insurance company #3 Insurance company #4 Reinsurance company X Reinsurance company Y Offshor e Reinsurance company Reinsurance company Client Slide 6

7 THE USE OF THE SHADOW FINANCIAL INFRASTRUCTURE Company B Payments according to fictitious contracts (marketing, consulting, etc.) Front company Payments on behalf of the clients Front company Tax evasion, money laundering, shadow economy Company A Slide 7

8 THE USE OF CORPORATE VEHICLES Governmental agency Slide 8

9 THE USE OF CORPORATE VEHICLES Governmental agency Offshore Private accounts Cash withdrawal Private Private accounts accounts Slide 9

10 FRAUD AND CORRUPTION Scenario 1. Company s employee, involved into corruption relationships (Hiring a person with good relationships in the public service) Scenario 2. Company s employee, involved into corruption relationships (Infiltration of corrupt person in a company) Scenario 3. Intermediary, involved into corruption relationships (licensing, public procurement, private intelligence) Scenario 4. Third party, involved into corruption relationships (general contractor, subcontractor) Slide 10

11 HOW PEOPLE PAY BRIBE? Slide 11

12 DO YOU THINK CORRUPT PEOPLE ARE STILL PRIMITIVE? Slide 12

13 THEY ARE NOT! Distinctive features of modern schemes and typologies: Use of all opportunities of the global financial system Use of modern technologies and new payment methods Use of corporate vehicles to hide real beneficiaries Use of numerous intermediaries including non-profit organizations to cut all the links between corrupt partners Use of professional consultants to prepare ideal documents for the due diligence Planning corruption offences in parallel with following money laundering Slide 13

14 USE OF NON-PROFIT ORGANIZATIONS 1) Charitable contribution 3) Payment of honorarium 2) Financing a publishing of a book Slide 14

15 USE OF NON-PROFIT ORGANIZATIONS 1) Charitable contribution 3) Payment of honorarium 2) Financing a publishing of a book Slide 15

16 THE USE OF CYBERSPACE FOR CRIMINAL PURPOSES Use of new payment methods and e-currencies for payments in the framework of criminal financial schemes Groups of professional criminal services providers Slide 16

17 Country 1 Country 2 Country 3 Subcontractors 2. Payments for the construction work 1. Credit 2. Payments for the construction work 3. For the bills of credit 6. Payment of bills 3. For the bills of credit 6. Payment of bills 4. For the Shares 5. For the Bills of credit Offshore Bank Slide 17

18 LINES OF DEFENSE The first line of defense Identification of suspicious business associates The second line of defense Identification of suspicious transactions Slide 18

19 INDICATORS OF FRONT COMPANIES One person is an owner and director of significant number of companies One person is an owner, director and accountant of a company The owners and directors of a company are persons under years or over 60 years old The company is registered at the address at which registered a large number of companies The apparent discrepancy between turnover on the accounts and the amounts of tax payments Slide 19

20 INDICATORS OF FRONT COMPANIES The value of contracts of a company exceeds many times the net assets and equity The company concludes mainly framework contracts which do not contain information about the range, prices of goods, delivery dates and other terms and conditions The company concludes mainly contracts with offshore companies and uses bank accounts in the offshore banks Slide 20

21 IDENTIFICATION OF BENEFICIAL OWNERS Beneficial owners of legal entities, trusts and physical persons EU approach to the identification of beneficial owners Various approaches to the identification of beneficial owners in financial institutions Recognizing a CEO as a beneficial owner Slide 21

22 Payments to shell companies Controversial incoming and outgoing payments Overpricing SUSPICIOUS TRANSACTIONS. SHADOW INFRASTRUCTURE Payments in offshore territories, payments through offshore bank accounts Payments to third parties accounts Slide 22

23 SUSPICIOUS TRANSACTIONS. INSURANCE SECTOR Risk insurance under the overestimated insurance rates Unusual proportion of insurance premiums and indemnities in an insurance company Reinsurance in offshore "reinsurance" companies Slide 23

24 SUSPICIOUS TRANSACTIONS. USE OF INTERMEDIARIES Payments under framework contracts Too high amount of commission, which can include corrupt payment Slide 24

25 THE ROLE OF FINANCIAL INTELLIGENCE UNITS Participation in the control of assets and incomes declarations of civil servants Analysis of financial transactions Detection of fraud and money laundering within the financial investigations Detection of financial institutions which provide services for corrupt officials Slide 25

26 COOPERATION WITH PRIVATE SECTOR Support of AML/CFT and Anti-corruption compliance implementation Raising awareness Training Slide 26

27 Thank you for your attention!