Real Life Cases Of Money Laundering

Posted on 16-08-2021 by admin

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Real Life Cases Of Money Laundering
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There was a discussion on one of the LinkedIn groups regarding the misuse of credit card for money laundering purposes. Some experts shared very interesting examples which I thought might be useful for a wider audience.

(Please note, I am just using their views to share it and not claiming they are mine!)

Hows this for a real life example: Acct holder “A” is receiving donations (supposedly from friends & family for her ‘missionary’ work) but has a significant balance (mostly from credit cards). Acct holder “A” is reportedly located in Canada but is accessing her acct from Nigeria. She is transferring funds to Acct holder “B”, which were donated to Acct holder “A” for a specific charity (not her ‘missionary’ work), but clearly states that she does not work for the charity or is in any way affiliated with the charity she’s received funds for.

10 Most Notorious Money Laundering Cases of the 20th Century. The Benex Scandal. In what was to become known as the “Benex Scandal,” vast sums of money with suspected links to the Russia mafia made its way into “Benex Worldwide” accounts at the Bank of New York, one of America’s oldest and most prestigious banks.
Money Laundering Activities Related to Commercial Real Estate Sixty-three of the 260 SAR narratives described activities deemed suspicious and are generally indicative of money laundering. Table 2 shows a breakdown of the SARs describing businesses, professions and persons potentially involved in activities generally indicative of money laundering.

Well I just learned of one. I had some guests at my house few days ago and one of them owned a forest in the UK. Nothing too big but there is a little known loophole in the UK tax regime. That is the profits from most activities concerning a perso.

Acct holder “B” is also reportedly located in Canada – but has accessed her account from Nigeria as well, but mostly from Canada. Acct holder “B” is not only receiving funds from Acct holder “A” but from Acct holder “C” as well. I should also mention that Acct holder “B” is listed on a charitable website as being reponsible for collecting funds the for the organization in Canada. But Acct holder “B” has no mention within their acct that they work for or that the account is in anyway affiliated with said charity.

Acct holder “C” is located in Europe. Acct holder “C” is primarily accessing their account from Nigeria as well. The funds Acct holder “C” receives is for the sale of a book. The author of the book is affilated with the same charity all three acct holders have received funds for. Account holder “C” is not mentioned on the charities website, but all funds from the sale of the book get transferred back to Acct holder “B”.

The charity is an international charity – registered as a charity in three different jurisdictions. While I have changed the locations mentioned above from the actual locations they are in, it should be noted that the organisations registrations & where these account holders are, also do not match up.

Charity fraud can be hard to find. The above example was originally identified by reviewing irregularities with Acct holder “A’s” transaction history. I followed the money. This is a prime example of how money laundering with CC’s can be done with purchases, transfering funds & a little bit of layering thrown in for good measure.

Transactions do not have to be large to be ‘out of the ordinary’. It could be the number of transactions, repeat customers (or in this case donors) with no discernable pattern, and/or receiving international donations which do not match with information provided by the customer in regards to how they are operating.

Knowing your customer & their business is one of the best ways to identify and stop money laundering from happening.

-by Deborah Porton

We faced with the following scheme of ML using credit cards: For example, money were stolen from banks’ accounts in US, Canada. Then transferred to Europe, Russia, Ukraine, Moldova from multiple senders to multiple receivers (financial mules). For example in Russia, Ukraine third party asking financial mules (students, migrants etc.) to open account and get credit cards. 100 Financial mules open accounts, get credit cards and then just forward cards to the third party. Third party sitting at home (internet cafe) and using internet banking starts to collect hundreds of money transfers from US, Canada, Europe and them withdraw or transfer to different accounts. But there is multiple senders, multiple receivers and lots of transactions and there is no real beneficiary name appears in the system. So it’s hard to detect and stop. In that case proper monitoring system, limits and interdiction could help.

-by Elizaveta Oralova

In the context of credit cards, however, (and apologies if I am being too simplistic) there are two fundamental principles when considering ML potential. Firstly the available credit limit on a credit card is ‘supplied’ as clean funds by the financial institution and secondly those funds can only be spent/used at selected outlets – or withdrawn in cash, of course.

The real ML risk, I believe, comes into play at the repayment stage and in my time with law enforcement I did witness occasions where monthly repayments were repeatedly made both early and way in excess of the O/S balance, this in itself giving rise to suspicious behaviour. At the time there was very little way of knowing the payer or funds source.

Managing this risk always comes back to regular, realistic and sustainable transaction monitoring controls e.g. electronic scenario/peer group based, to detect potential fraudulent card usage or for AML purposes, unusual/suspicious repayment patterns.

We all have to step back and think what is going through the criminal’s mind in these scenarios. He/she will want to deflect any point-of-sale suspicion on the grounds that it is a lesser risk to repay – or over pay – with relative anonymity, a debt early than hand over cash up front. If this is the case, let the bad guys dream on………….

-by David Thomas

Credit card fraud has always been a major issue for all of the issuing banks I have worked for. The millions and millions you talk about are not from one card but from the volume of credit cards that are used to launder money/ commit fraud.

I have experienced the following types of money laundering with credit cards. If you multiply this fraud ( say one credit card balance of 3k) by thousands upon thousands of cards and then again by the number of banks issuing cards, you can begin to understand the scale of the problem.

Credit cards are applied for fraudulently using impersonation fraud and then the credit balance is spent and never paid back. This happens in a number of ways – either on high value products, which are then sold for cash; the cards are sold on for cash; or the credit balance is moved to another account – either a bank account or a prepaid card and then withdrawn as cash via an alternative route making it harder to trace.
Credit cards are cloned at ATM machines, or sometimes even the doorways of banks where you swipe your card to access the building.Then, these card details are very often sold online or are used to duplicate existing cards and then spend the balance as explained in point one.
The most intelligent criminals out there operating in this space will also attack credit card issuers – the banks themselves. They will either hack into banking systems, or more often the service providers who store credit card details, steal the data and then mirror the process in one or two. This method has a far higher return with less risk. You get access to millions and millions of cards without having to stick cloning devices on lots of doorways/ ATMs and have minions to go and collect the devices and data for you.

There are other ways that credit card fraud happens but these have been the most typical examples I have come across over the years. One of the most interesting discussions this often leads to is how accurately fraud is actually reported.

Internal politics and perceptions within the eyes of regulators and shareholders can often lead to fraud/ money laundering losses being reported as bad debt (ie consumer was legit but couldn’t afford to pay debt back) which I would argue masks a huge chunk of financial crime from the public.

Some of the billions of bad debt paid back by the UK people to help save banks would, I would certainly argue, have be used to pay off ‘bad debt’ on credit card balance sheets that were the result of money laundering.

The other point to make on this subject is that since the introduction of 3D secure and Verify, the actual annual losses to fraud on credit cards has been reduced significantly.

-by Michael Lucas

Credit cards can be used to launder in the following ways:

Making large payments in excess of the amount due which creates a large credit balance. For example, the credit card monthly payment is $0 and the client makes an overpayment of $10,000. This is unusual for a credit card as most clients owe money to the bank, not the other way around. A bank’s monitoring systems should pick this up but I have seen cases where no monitoring rules were in place to detect this type of activity. In most cases, the bank is most concerned about the credit/fraud risk ie is the payment legitimate rather than the source of the funds as an indicator of ML. The bank should look at the transactions on the card closely to see if there are any unusual spending patterns on the card.
Further to scenario #1 above, a client could make an overpayment and then ask for a refund via a cheque. This would be a great way to layer.
I have seen examples where credit cards are used to buy luxury items monthly and the client makes large pre-payments so that there is always sufficient room on the card to continue making purchases. In my opinion, one should look at the source of funds/wealth for these type of clients to assess reasonability. These type of scenarios are perfect way to launder money in the layering stage.
Using cash to pay off the credit card bill monthly. I have seen examples where this type of activity did not trigger large cash transaction reporting. For example, the client makes a payment greater than $10,000 towards a credit card bill but this does not result in a CTR being filed. So this could be an example of ML at the placement stage. However, a more common scenario (which has been noted by others in this discussion) is the on-going spend on the credit cards, along with the payments could be from the proceeds of crime. This would be indicative of the layering stage of ML.
Credit cards could also be an excellent method to sustain a terrorist organization or fund their events. For example, you could have several supplementary or additional cards issued to members within the terrorist group that they could use to sustain their operations.
In my opinion, credit cards can be used to launder significant sums of money if they are used by a criminal organization broadly ie by many of its members having cards, and over several years.

Once the criminals have placed their money in the system, credit cards could be an excellent vehicle for layering.

-by Sal Jadavji

Detailed conversation on linkedIn group can be found here

Money laundering and fraud cost UK businesses, citizens and the government more than £100 billion a year, according to the National Crime Agency. The effects can have a devastating impact on ordinary people as well as businesses and the government.

The following cases show the huge sums of money that can be involved plus the massive fines that have been given to firms who are in breach of anti-money laundering rules.

‘Mr Big’ on the run

In 2012, after serving a three-year prison sentence for money laundering for drug dealers, Maythem Al-Ansari, also known as ‘Mr Big’, was facing another jail term for multi-million-pound mortgage fraud.

After handing over his passport when being released on bail, a blunder allowed Mr Big to contact the Home Office to obtain a new passport, which he quickly used to flee to Syria. At the time, this left millions of pounds unaccounted for, but in 2016 Al-Ansari gave himself up at London Heathrow.

This mishap was purely down to lack of communication and coordination between various government bodies.

To avoid any similar blunders in future, these government bodies must endeavour to work together more closely, to ensure confiscated identity documents cannot be reapplied for when a person is released on bail.

UK’s largest ever visa fraud

In September 2019, four people were sentenced at Southwark Crown Court for their involvement in the UK’s largest-ever immigration fraud case. The fraudsters posed as ‘immigration advisors’ who devised a network of fake companies to deceive officials in the Home Office.

The culprits charged extortionate fees for pulling together hundreds of false immigration applications that would’ve cost the taxpayer millions of pounds, had the scheme run successfully. Raids on the defendants’ homes and businesses provided substantial evidence for the case to be prosecuted.

For those looking to migrate to the UK, it’s essential to go through the official channels to avoid any possibility of being defrauded.

Standard Chartered Bank fined £102.2 million

The Financial Conduct Authority (FCA) issued its second-largest fine to Standard Chartered Bank in April 2019, a nine-figure sum of £102,163,200 for anti-money laundering (AML) breaches.

Serious and prolonged shortcomings in Standard Chartered’s approach towards identifying and rectifying money laundering risks led to this fine. An example of these failings includes opening an account with 3 million UAE Dirham (£500,000) deposited from cash in a suitcase without verifying the funds.

Businesses, particularly those in the financial sector, must take an active approach in identifying potential money laundering risks and reporting suspicious transactions, to avoid breaching AML regulations.

Investing the time to ensure all money laundering processes are water-tight will save businesses money in the long run as any resulting fines, if caught, would be far greater in size than the fraudulent funds.

The UK’s most prolific female fraudster

Maria Michaela, dubbed by police at the time as the UK’s most prolific female fraudster, conned banks out of £13 million by submitting offers on houses over the market value and then defaulting on the mortgages.

By creating false identities, Michaela was able to repeat this scam multiple times, conning banks out of millions until she was eventually arrested in January 2012 after being tracked back to a mortgage broker she had been working at in Blackheath.

Offers coming in well over the asking price on properties may be a classic case of being too good to be true. Of course, many strong offers will be genuine, but mortgage brokers should critically analyse these to consider whether there may be something fraudulent going on.

Designer watches, gold bars, and 500 lottery tickets

Police had suspected Stephen Burton, from Tunbridge Wells, of purchasing expensive items and rare metals to cover up money earned through illegal activity.

When his home was eventually raided in February 2019, police uncovered possessions with value totalling nearly £1 million, including gold bars, Krugerrand coins, silver coins, designer watches, thousands of pounds and euros, 500 lottery tickets, and various false identity documents, including two passports with Burton’s name, but different birthplaces and dates of birth.

This is a prime example of detectives ‘following the money’, as purchasing expensive metals and items as an average citizen can often be a clear indication of fraudulent activity.

£15 million smuggled from UK to Dubai in suitcases

In November 2019, ten suspected members of an organised crime gang were arrested under suspicion of smuggling £15.5 million out of the United Kingdom to Dubai in suitcases. These suspects were also wanted in connection for conspiracy to illegally transport 17 people into the UK.

Luxury cars, drugs and cash were all seized from the suspects’ homes when they were raided by the National Crime Agency.

This is another example of the authorities building a case on suspected illegal activity and acting upon their information. Unusual travel patterns and living far beyond one’s means is often a key indicator that illegal activity may be going on.

One of the UK’s largest benefit frauds

Ethel McGill, 68, of Chesire, was jailed in July 2019 for one of the largest benefit frauds ever recorded in the UK.

McGill claimed her dead father, Robert Dennison, was still alive and doing so allowed her to claim his war pension and benefits after his death in 2004. At one point McGill even asked a friend to lay down underneath a blanket to pretend to be Mr Dennison.

McGill also faked disability and dementia for over two decades. Eventually, investigators from the Department for Work and Pensions acquired video recordings of her driving and moving around, despite claims she needed a wheelchair.

This is a sad case of benefit fraud but thankfully investigators eventually caught up with McGill’s charade. However, everyday people should keep an eye out for suspicious activity and report it to the authorities if something doesn’t appear genuine.

Bank of Scotland’s rogue employees in £245 million scandal

Between 2003 and 2007, rogue employees at Bank of Scotland’s (HBOS) Reading branch worked with a group of consultants to defraud the bank and small businesses of roughly £245 million, leaving hundreds of people in dire financial trouble.

HBOS was consequently fined £45.5 million for failing to disclose information about the scandal. The scheme involved referring small businesses to a turnaround consultancy, which would load the businesses with obscene debts and fees.

Small businesses should be wary about being referred to outside consultancies and should always look to seek independent legal and financial advice when faced with this kind of situation.

Four suitcases stuffed with £1.5 million in cash

Mohamed Imran Khan Sathar Khan, 36, was caught in 2019 by Border Force officials attempting to smuggle £1.5 million in four suitcases onto a flight to Dubai. Each case weighed exactly 20kg, which raised eyebrows among border guards, before they found the money.

This is an exemplary case of the Border Force realising something may be amiss and investigating thoroughly to uncover a crime. Although not all attempts to smuggle cash out of the country will be as blatant as this, it’s important for authorities to remain vigilant and investigate suspicious patterns.

Commonwealth Bank agrees to pay £400 million fine

Australia’s largest lender, Commonwealth Bank, agreed to pay a £400 million fine (the largest ever civil fine in Australian corporate history) in 2018 for breaching anti-money laundering and counter-terror financing legislation.

The bank failed to report 53,000 suspicious transactions to the relevant authorities. According to Commonwealth Bank this was caused by a coding error which meant their machines were not able to automatically report the transactions.

Organisations in the financial sector should carry out regular checks to ensure their software is in good working order, and actively seek expertise on complying with anti-money laundering and fraud legislation.

Comment

Money Laundering News

John Dobson, CEO at SmartSearch, comments: “With the astronomical cost – well into the hundreds of billions of pounds – of money laundering and fraud to British citizens, businesses and the government each year, the scale of this criminal activity can almost be incomprehensible.