BANK ACCOUNT MISUSE ON THE RISE AMONGST YOUTHS

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The term “money mule” is commonly seen and heard throughout the financial services sector, specifically in recent years as financial institutions and federal regulators alike have aimed to halt the seemingly endless trend that is money laundering. A money mule is defined as a person who transfers money acquired illegally in person, through a courier service, or electronically, on behalf of others. These individuals have become a significant tool for criminals to use in the process of cashing out on their potentially compromised bank accounts. In the past, these schemes have targeted unknowing participants with personal and/or financial issues, offering them seemingly legitimate employment opportunities for distinguished positions such as “money transfer agent” or “payment processing agent.” Another common strategy has been the work-from-home (WFH) schemes, which have been “used by fraudsters and mule herders to entice witting or unwitting individuals into providing bank account details for the purpose of receiving an Automated Clearing House (ACH) deposit or counterfeit check. They are then instructed to electronically transfer funds to a third party, often in another country”, through money-service businesses in the form of wire transfers (Charles, 2017). These often utilize job search websites, social networking sites, and automated emails, where WFH offers are disguised to appear as a job opportunity from a legitimate company. In many cases these schemes can be difficult to detect, especially when widely-recognized trademarks and logos are used to help create the illusion of legitimacy. While each of these stunts has had success in their own right in years past, the international public has in large part grown wary of the typical means by which financial criminals have targeted potential mules in the past. However, criminals have turned to a new, more sustainable method that has already seen great success in 2017, and could continue to grow in the years to come.

The money mule trend has re-emerged as a hot-button issue today, as new reports from prominent global law enforcement agencies have shown that children and young-adults have now become the primary targets of criminals looking to move their dirty money. The article “New data reveals stark increase in young people acting as ‘money mules’”, cited in BSA News Now on November 28th, discusses recently released data from the United Kingdom’s fraud prevention service, Cifas, tying the growth of bank account misuse to younger populations. According to the report, there has been a “75 per cent rise in the misuse of bank accounts by 18 to 24 year olds in the past year, with 8,652 cases seen between January and September 2017” as compared to the same period in 2016 (WBWire, 2017). The most common trend in the misuse pattern has seen these youths acting as the aforementioned “money mules” – allowing their bank account(s) to be used to facilitate the movement of illicit funds. Experts believe that this latest development has capitalized on young and relatively naïve individuals, including students, who often have little to no cash flow.

Cifas, working alongside Financial Fraud Action UK (FFA UK), has begun a campaign titled “Don’t Be Fooled” to both educate and discourage younger generations from engaging in activity of this nature. One of the tactics most commonly employed by criminals to exploit this specific demographic is similar to those that were previously discussed. In these new cases, criminals approach students and young-adults with “what looks like a genuine job offer, asking them to receive money into their bank account and transfer it onto someone else, while keeping some of the cash for themselves” (WBWire, 2017). This offer seems like easy money for unknowing youths, requiring them to do little more than visit their local money transfer agency or perform a few clicks of a mouse. However, the repercussions of this activity can be severe, and can impact the futures of the individuals involved for years to come.

Statistics have also shown that money mule fraud has increased profoundly over the past five years alone, as cases involving 18-24 year olds have nearly tripled since 2013. This trend represents a significant threat to the general public in the areas where these tactics are being used, as the proceeds of this form of financial crime are often used in drug and human trafficking, large-scale money laundering and terror financing. One of the key points Cifas and FFA UK have made in their attempts to deter youths from engaging in this activity through their campaign is informing them that if they act as money mules, either wittingly or unwittingly, they are essentially involved in money laundering, albeit often at a small scale. They have also made sure to highlight the fact that it is very likely that this activity will be discovered given the wealth of new, sophisticated regulatory technologies continuing to emerge throughout the financial sector. If unearthed, their financial accounts will undoubtedly be closed, sending them in a downward spiral where they will likely face difficulties in opening accounts elsewhere, while also potentially impacting their ability to “obtain student loans, mobile phone contracts or other financial products” (WBWire, 2017). The groups have also made sure to touch on the most frightening reality involved with being a money mule – that is, a person convicted of money laundering could face up to 14 years in prison.

While the opportunity for a quick and easy payout can be enticing for individuals of any age, the repercussions of such activity could be catastrophic. As part of the “Don’t Be Fooled” campaign, Cifas and FFA UK have published a list of ways to avoid becoming a money mule. The 5 simple steps go as follows:

  • Do not give bank details to anyone you do not know or trust
  • Be wary of job offers where all interactions and transactions are done online
  • Be cautious of unsolicited offers of easy money
  • Research any company that makes you a job offer
  • Be wary of job offers written in poor English with grammatical errors or spelling mistakes

 

WEEKLY ROUNDUP

 

EURO CRACKDOWN LEADS TO MILLION DOLLAR RECOVERIES

 

The European law enforcement agency Europol recently had a successful crackdown on the “money mules” discussed in this week’s feature article. Europol reportedly “uncovered $36 million in illicit money transfers and made 159 arrests in less than a week” over the week of Thanksgiving, and found that “Around 90 percent of 1,719 illegal transactions identified during the short campaign were linked to cyber crime, with cryptocurrencies like Bitcoin playing an increasing role in money laundering schemes” (Rumney, 2017). The latest campaign is the third relatively recent effort by law enforcement agencies and banks to combat mule operations and money laundering in Europe, with these entities now beginning to target the organizers and recruiters of these ploys, making their efforts much more effective.

The overall number of money mule cases in Britain increased by nearly 50% overall between 2016 and 2017, making the need for group coordination and cross-border cooperation to hinder this activity vital for the well-being of the financial industry in Europe and across the globe. That collaboration was evident in this latest effort, as “law enforcement agencies from 26 countries spanning the European Union, eastern Europe and the United States participated in the Nov. 20-24 campaign, along with 257 banks and private-sector partners, Europol, judicial cooperation agency Eurojust and the European Banking Federation” (Rumney, 2017).

 

DOJ PROMOTING FOREIGN BRIBERY REPORTING PROGRAM

 

An under-the-radar program undertaken during the presidency of Barack Obama re-emerged on the national stage recently, as the U.S. Department of Justice (DOJ) recently announced its plans to continue its enhancement of international cooperation and financial security. Enacted in early-2016, this program was designed to “encourage companies to voluntarily disclose paying bribes to foreign officials”, and swore to reduce penalties to both domestic and foreign companies that disclose information of this variety and cooperate with the Justice Department. Earlier this week Deputy Attorney General Rod Rosenstein proclaimed that a revised version of the policy will be incorporated to make the legislation permanent, making the program yet another potent tool in the global fight against corporate crime.

The goal of the program is to aid in the enforcement of the Foreign Corrupt Practices Act (FCPA), which made it unlawful for certain individuals/entities to make payments to foreign government officials to assist in obtaining or retaining business. The incentive-based system has promised companies listed on U.S. stock exchanges the chance to receive a 50% reduction in fines if they meet the current self-disclosure guidelines for reporting. Enforcement of the FCPA is likely to receive a significant boost following the announcement, although the program has already  been rather successful. The DOJ has indicated that “Since 2016, they have “obtained criminal resolutions in 17 corporate-related FCPA cases, resulting in penalties and forfeitures of $1.6 billion” (Farivar, 2017).

 

SCANDALS SETTING THE TONE FOR AUSTRALIAN BANKING REFORM

 

Unhappy with the recent string of scandals and crime seen across the Australian banking sector, Australia’s Prime Minister Malcolm Turnbull has called for a “wide-ranging” public inquiry to address the growing issue. In a formal address on the topic, Turnbull stated “the yearlong royal commission will examine the conduct of the nation’s banks, insurers, financial services providers and pension funds, and consider whether regulators have enough power to tackle misconduct” (Scott & Cadman, 2017). Although several of the country’s major banks had opposed an inquiry of this nature – due in large part to the potential ramifications that could ensue given the potential downturn of investor confidence – the banks eventually gave in in order to keep Australia’s sterling reputation as one of the world’s top financial systems intact.

Australia has been riddled with cases of AML law breaches and other improper financial activity in recent years. In fact, Australia’s four largest banks –  Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., Westpac Banking Corp. and National Australia Bank Ltd – which are “responsible for 80 percent of the nation’s loans, have been hit by allegations they gave poor financial advice, failed to honor insurance claims, mistreated small business owners and that some attempted to manipulate benchmark interest rates” (Scott & Cadman, 2017). Although he had been criticized for his over-tolerance in regards to these rather serious issues, Turnbull hopes his latest efforts will further ensure that Australia’s “financial system is working efficiently and effectively” (Scott & Cadman, 2017).

FinCEN Issues Advisory on Widespread Public Corruption in Venezuela

FinCEN Issues Advisory on Widespread Public Corruption in Venezuela

The Financial Crimes Enforcement Network (FinCEN) released an advisory on September 20, 2017, to alert financial institutions of widespread public corruption in Venezuela and the methods Venezuelan senior political figures may use to move and hide corruption proceeds.1

The advisory also identified red flags that may assist financial institutions in identifying suspicious activity that may be indicative of Venezuelan corruption, including the abuse of Venezuelan government contracts, wire transfers from shell corporations, and real estate purchases in the South Florida and Houston, Texas regions. The FinCEN advisory also reminds financial institutions of their obligations to monitor, detect, and report such conduct.

Background

Venezuela has been in political and economic turmoil due to the deterioration of its democratic and constitutional order. FinCEN warns that widespread corruption may further destabilize its economic growth and stability. In recent years, financial institutions have reported to FinCEN suspicions that transactions may be linked to Venezuelan public corruption, including government contracts. As a result of these reports and other relevant information, FinCEN considers all Venezuelan government agencies and bodies, including state owned enterprises (SOEs), vulnerable to public corruption and money laundering. According to FinCEN, the Venezuelan government appears to use its control over large parts of the economy to enrich government officials and SOE executives, their families, and associates. FinCEN, therefore, believes that there exists a high risk of corruption involving Venezuelan government officials and employees at all levels, including those managing or working at Venezuelan SOEs.2

FinCEN warns that transactions involving Venezuelan government agencies and SOEs, particularly those involving government contracts, can potentially be used as vehicles to move, launder, and conceal embezzled corruption proceeds. SOEs and their officials may also try to use the U.S. financial system to move or hide proceeds of public corruption. In an effort to thwart the movement of these proceeds, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has recently designated as persons engaged in, or materially assisting, sponsoring, or supporting, public corruption various Venezuelan SOEs, including: National Center for Foreign Commerce (CENCOEX), Suministros Venezolanos Industriales, CA (SUVINCA), the Foreign Trade Bank (BANCOEX), the National Telephone Company (CANTV), the National Electric Corporation (CORPELEC), and the Venezuelan Economic and Social Bank (BANDES). As scrutiny of these enterprises increases, FinCEN warns financial institutions that corrupt officials may try to channel illicit proceeds through lesser-known or newly-created SOEs.

FinCEN also identified red flags that may help financial institutions identify corrupt schemes:

  • Transactions involving Venezuelan government contracts that are directed to personal accounts;
  • Transactions involving Venezuelan government contracts that are directed to companies that operate in an unrelated line of business (e.g., payments for construction projects directed to textile merchants);
  • Transactions involving Venezuelan government contracts that originate with, or are directed to, entities that are shell corporations, general “trading companies,” or companies that lack a general business purpose;
  • Documentation corroborating transactions involving Venezuelan government contracts (e.g., invoices) that include charges at substantially higher prices than market rates or that include overly simple documentation or lack traditional details (e.g., valuations for goods and services). Venezuelan officials who receive preferential access to U.S. dollars at the more favorable, official exchange rate may exploit this multi-tier exchange rate system for profit;
  • Payments involving Venezuelan government contracts that originate from non-official Venezuelan accounts, particularly accounts located in jurisdictions outside of Venezuela (e.g., Panama or the Caribbean);
  • Payments involving Venezuelan government contracts that originate from third parties that are not official Venezuelan government entities;
  • Cash deposits instead of wire transfers into the accounts of companies with Venezuelan government contracts;
  • Transactions for the purchase of real estate—primarily in the South Florida and Houston, Texas regions—involving current or former Venezuelan government officials, family members or associates that are not commensurate with their official salaries; and
  • Corrupt Venezuelan government officials seeking to abuse a U.S. or foreign bank’s wealth management units by using complex financial transactions to move and hide corruption proceeds.

Impact and Regulatory Obligations

The recent FinCEN advisory also reminds U.S. financial institutions that in order to meet their due diligence obligations that would apply to activity involving certain Venezuelan persons, they should generally be aware of public reports of high-level corruption associated with senior Venezuelan foreign political figures and those associated with them; they should assess the risk of laundering the proceeds of public corruption associated with specific particular customers and transactions; and they should be aware of OFAC designations related to Venezuela.

FinCEN also recommends that financial institutions take reasonable, risk-based steps to identify and limit any exposure they may have to funds and other assets associated with Venezuelan public corruption, taking care not to put into question a financial institution’s ability to maintain or continue otherwise appropriate relationships with customers or other financial institutions. FinCEN warns, however, that such steps should not be used as the basis to engage in wholesale or indiscriminate de-risking of any class of customers or financial institutions.

The FinCEN advisory also reminds financial institutions of the applicable regulatory obligations that are intended to facilitate the discovery and disclosure of attempts to move and hide corruption proceeds from Venezuela:

  • Enhanced Due Diligence Obligations for Private Bank Accounts: Covered financial institutions maintaining private banking accounts for senior foreign political figures are required to apply enhanced scrutiny of such accounts to detect and report transactions that may involve the proceeds of foreign corruption, consistent with obligations under Section 312 of the USA PATRIOT Act (31 U.S.C. § 5318(i)) and FinCEN’s regulations implementing that Section.
  • General Obligations for Correspondent Account Due Diligence Money Laundering (AML) Programs: U.S. financial institutions must comply with their general due diligence and AML obligations,3 ensuring that their due diligence programs, which address correspondent accounts maintained for foreign financial institutions, include appropriate, specific, risk-based, and, where necessary, enhanced policies, procedures, and controls that are reasonably designed to detect and report known or suspected money laundering activity involving accounts in the United States.
  • Suspicious Activity Reporting: A financial institution is required to file a suspicious activity report (SAR) if it knows, suspects, or has reason to suspect a transaction involves funds derived from illegal activity, or attempts to disguise funds derived from illegal activity; is designed to evade regulations promulgated under the Bank Secrecy Act (BSA); lacks a business or apparent lawful purpose; or involves the use of the financial institution to facilitate criminal activity, including foreign corruption.

Conclusion

FinCEN emphasizes that reports and information from financial institutions are critical to stopping, deterring, and preventing the proceeds tied to suspected Venezuelan public corruption from moving through the U.S. financial system. Accordingly, companies should remain vigilant of these risks and ensure their due diligence and monitoring programs are up-to-date and comply with all relevant regulatory obligations.

https://www.lexology.com/library/detail.aspx?g=1b0f91d1-43b9-4031-83e7-fbf2ed5768ab

Three Orlando area lawyers suspended, including former Cay Clubs attorney

Three Orlando area lawyers have been suspended in the most recent action by the Florida Bar, including one that provided legal advice to the Cay Clubs Ponzi scheme in the Florida Keys.

The following details were provided by the Florida Bar and court records:

William Scott Callahan, Winter Park, was suspended for one year, retroactive to April 20. Callahan was subpoenaed and agreed to cooperate in a federal fraud investigation involving the Cay Clubs vacation rental scheme. He had been a partner at a law firm that handled closings for the company. In the course of his duties supervising the closing agents, Callahan violated Bar rules.

According to court records, Callahan made misleading statements, and when he learned the principals of the company were omitting pertinent information from the closing documents, he failed to warn them, failed to obtain additional legal opinions and failed to withdraw from further representation. Callahan received immunity from prosecution in return for providing information. (Florida Supreme Court Case No. SC17-539)

Michael Kevin Rathel, Orlando, suspended for one year. According to the Florida Bar and court records, Rathel bought a house after persuading the seller to hold a second mortgage for $100,000 needed by Rathel to pay the purchase price. Rathel promised to repay the seller and pledged his current home as security for the mortgage. Rathel sold his current home without telling the seller or repaying the seller’s second mortgage. Commencing in or about 2010, Rathel failed to file and pay his personal federal and corporate tax returns in a timely manner. In another matter, Rathel failed to timely respond to an inquiry about a Bar complaint. Suspension is effective 30 days from a March 23 court order. (FSC Case No. SC16-1024)

http://www.orlandosentinel.com/business/brinkmann-on-business/os-bz-florida-bar-suspensions-20170530-story.html

Photo: Florida Bar

 

U.S. judge approves $2.6 billion fine for Odebrecht in corruption case

A U.S. judge on Monday sentenced Brazilian engineering company Odebrecht SA to pay $2.6 billion in fines in a massive criminal corruption case, signing off on a plea deal between the company and U.S., Brazilian and Swiss authorities.

U.S. District Judge Raymond Dearie said at a hearing in Brooklyn federal court that about $93 million will go to the United States, $2.39 billion to Brazil and $116 million to Switzerland.

Odebrecht, along with affiliated petrochemical company Braskem SA, pleaded guilty to U.S. bribery charges in December. U.S. authorities charged Odebrecht with paying about $788 million in bribes to officials in 12 countries, mostly in Latin America, to secure lucrative contracts.

Some of those bribes flowed through U.S. banks, the prosecutors said.

Monday’s order comes as Odebrecht tries to negotiate plea deals with other countries, including Argentina, Chile, Colombia, Ecuador, Mexico, Peru, the Dominican Republic, Venezuela, Panama and Portugal.

A public relations executive working for Odebrecht in São Paulo declined to comment, as did William Burck, a lawyer for Odebrecht in the United States.

The charges against Odebrecht stemmed from a nearly three-year investigation in Brazil into corruption at the state-run oil company Petrobras, which has led to dozens of arrests and political upheaval in Brazil.

Brazilian President Michel Temer said on Monday he expects some of his ministers to resign after they were accused of wrongdoing by Odebrecht executives in plea bargain testimonies and placed under investigation by a Supreme Court justice.

http://www.reuters.com/article/us-brazil-corruption-usa-idUSKBN17J1A7

Photo: Reuters 

 

Ex-South Korean president Park Geun-hye arrested in corruption probe

Ousted South Korean President Park Geun-hye has been arrested and taken into custody over a corruption scandal that led to her dismissal.

The 65-year-old was driven to a detention centre south of Seoul after a court approved her arrest.

She is accused of allowing her close friend Choi Soon-sil to extort money from companies, including Samsung, in return for political favours.

Ms Park, who was removed from office earlier this month, denies the claims.

She is the third former president of South Korea to be arrested over criminal allegations, Yonhap reports.

The Seoul Central District Court earlier issued a warrant to detain Ms Park while she is investigated on charges of bribery, abuse of authority, coercion and leaking government secrets.

It followed a nearly nine-hour court hearing on Thursday that Ms Park attended.

“It is justifiable and necessary to arrest [Ms Park] as key charges were justified and there is risk of evidence being destroyed,” the court said in a statement.

Live television footage showed a black sedan carrying her to the detention facility from the prosecutor’s office where she had been waiting.

Despite the early hour, some 50 supporters, waving national flags and demanding her release, were at the gate to greet her, the AFP news agency reports.

Ms Park can be held for up to 20 days before being formally charged.

If convicted she could face more than 10 years in prison.

http://www.bbc.com/news/world-asia-39449681

Photo: EPA

Navy bribery scandal widens as more sordid details emerge

Officers in a burgeoning Navy bribery scandal called themselves the Lion King’s Harem, the Wolfpack, the Cool Kids and the Brotherhood. They scouted for others who might also accept sex, trips and other lavish perks from a Malaysian defense contractor known as “Fat Leonard” in exchange for classified information.

Allegations outlined in an indictment unsealed in San Diego on Tuesday give more details in the 3-year-old scandal that had appeared to be fading before re-emerging even bigger and more sordid than before.

Nine current and former military officers were charged in the latest indictment, including a recently retired rear admiral who collected foreign intelligence for the Navy’s Seventh Fleet.

It gives an extensive list of bribes to the officers from 2006 to 2012 from Leonard Francis in exchange for classified shipping schedules and other information to help his company, Glenn Defense Marine Asia. In one example, a party with prostitutes at the Manila Hotel’s MacArthur Suite during a 2007 port call to the Philippines included sex acts using historic MacArthur memorabilia.

One meal during a 2006 port visit to Hong Kong cost $20,435. A dinner during a port call to Singapore that year featured foie gras, oxtail soup, cognac that cost about $2,000 a bottle and cigars at $2,000 a box.

Prosecutors say Francis, who is nicknamed Fat Leonard for his wide girth, bilked the Navy out of nearly $35 million, largely by overcharging for his company’s services supplying Navy ships in the Pacific with food, water, fuel and other necessities.

Navy officers provided classified information to Francis that helped him beat competitors and, in some instances, commanders steered ships to ports in the Pacific where his company could charge fake tariffs and fees, prosecutors said.

The latest indictment raises the number of current and former officials charged to 20 in one of the Navy’s worst corruption scandals. Bruce Loveless, who recently retired, became the second admiral charged in the investigation.

Adm. John Richardson, the Navy’s top officer, vowed Tuesday to repair damage caused by the scandal.

“This behavior is inconsistent with our standards and the expectations the nation has for us as military professionals,” he said. “It damages the trust that the nation places in us, and is an embarrassment to the Navy.”

http://abcnews.go.com/US/wireStory/navy-bribery-scandal-widens-sordid-details-emerge-46137785

Photo: Associated Press