The post-Enron, post-global financial crisis world gave birth to a new era of corporate compliance in which corporations and the government became more committed to taking a proactive, rather than a reactive, approach to compliance. The idea is to spend more time and effort reforming and rehabilitating corporations so that future litigation is less frequent and necessary. Spawning from this new era was the proliferation of the corporate monitor.
The purpose of a monitor is to help corporations implement effective compliance programs. A common misconception is that the monitor attempts to do this simply by ensuring the corporation is staying within the law by way of implementing formal controls, such as company policies and operational processes. However, it is not that black and white. In addition to ensuring that a corporation’s formal compliance program is following protocol, it may also be the job of the monitor to implement an informal control system within the organization which addresses the corporation’s ethical culture.
In order to effectively create a positive ethical culture within a corporation, a monitor must assess the tone of a company throughout the entire corporate structure. For example, if there is negative attitude at the executive level, this could mean that management is either promoting, looking the other way, or apathetic towards the criminal conduct of its employees. Such behavior was uncovered during a monitorship of Consolidated Edison (“Con Ed”), where it was discovered that Con Ed was using intimidation to prevent employees from reporting compliance issues.
Once the source(s) of the adverse or corrupt culture is identified, a monitor can then take the necessary steps to reform the culture at the company. In a company where the attitude at the executive level is poor, a monitor could implement a top down approach in which management and executives are actively engaged in promoting the compliance initiatives throughout the company. Such an approach is likely to permeate throughout the corporation. This philosophy was implemented in a Deferred Prosecution Agreement (“DPA”) negotiated between a U.S. Attorney and Bristol-Meyers Squibb which required, among other things, quarterly meetings between senior managers and independent auditors to help cultivate a culture of disclosure and to “spread knowledge and responsibility for doing the right thing throughout the Bristol-Meyers organization”.
It is also important to note that when determining whether or not to investigate and/or prosecute a corporation, government entities, including the Department of Justice, look into and analyze a corporation’s ethical culture. The more evidence that a corporation is committed to compliance directly correlates to an increased probability that the government will pursue alternative remedial measures such as a non-prosecution agreement and/or the placement of a monitor. For example, in 2010 the U.S Sentencing Commission modified sentencing calculations to take into account a company’s compliance and ethics programs. In addition, the Sentencing Commission specified situations in which, despite the misconduct of high level personal, companies can avoid punishment because of having a potent and efficient compliance and ethics programs in place.
In conclusion, not only does promulgating a culture of compliance aid corporations in avoiding future compliance issues, but it also bolsters a corporation’s reputation with current and prospective clients, investors, and business partners. The use of independent monitors to bolster a company’s ethical culture not only serves as to show cooperation with the government, but acts as a preventative measure against future compliance related issues for years to come.
(Photo credit: http://smallbusiness.chron.com)
Key findings and results from the July 18, 2013 Securities Industry and Financial Markets Association (SIFMA) Quantum Dawn 2 cyber-security exercise have recently been announced, providing the financial services sector with an answer to how prepared they are for a rapid fire cyber-attack. The Quantum Dawn 2 cyber-exercise, hosted by SIFMA, represented the next step in the continuing effort by the sector to improve its ability to coordinate and respond to a systematic cyber-attack. During the six-hour exercise, participants received blasts of vague and unclear information about what appeared to be a hacker attack on fake trading and information platforms. In some instances, stocks inexplicably crashed, while in others, government websites shut down, and even basic technology such as telephones and printers stopped functioning entirely.
Representatives from SIFMA, who were stationed at three hubs in New York, Washington, and Chicago, executed these attacks at various times throughout the day, and then paused to allow executives to make decisions regarding how to react to the various threats. Over 500 individuals from approximately 50 entities participated in the SIFMA exercise, including Wall Street firms such as Bank of America and CitiGroup, as well as government agencies, including the Treasury, the Department of Homeland Security, the Securities and Exchange Commission, and the FBI.
The staged assault provided participating entities with the opportunity to rehearse their existing crisis response plans and risk mitigation strategies, exercise the market response committee’s decision making in the event of a security breach, and develop an understanding of the operational readiness of the industry to open and function after such an attack.
The Association and its members were largely pleased with the operation, and the industry proved to be resilient in the face of an attack. These positive results include:
- Strong coordination of key members of business, operations, technology, security, and crisis management teams
- A chance for the sector to unite and to effectively communicate with government parties to diagnose problems and restore the markets in a timely manner
- Market Response Committee protocol was implemented; decision to close the markets was reached
- Awareness was raised among participants about working collaboratively to address systematic risk issues
While SIFMA was pleased with the overall findings and results of the simulation, the organization has identified the following areas of improvement:
- Institutionalize policies for market open/close decisions during times of crises
- Increase public sector’s awareness of government resources available to mitigate risk
- Augment practices to increase communication and information sharing among market participants
Are you prepared?
Cyber-attacks often occur with no forewarning, requiring financial services to be vigilant and ready to respond. Banks realize that the threat of an attack is not going away, and if anything, the possibility of an online attack is likely to increase as customers engage in more frequent online transactions while banks simultaneously outsource operations to entities whose systems may not be as secure.
Whether your company is a financial institution or government sector, law firm or health care
organization, it is vital that your internal systems are protected, and company and customer information is safeguarded from harm.
MSA Investigations cyber-security professionals work with clients to analyze IT networks, perform penetration testing, and develop incident response plans to protect private information from both external and internal threats.
For more information, visit www.msainvestigations.com
Since the Bank Secrecy Act began to apply to brokers in 2002, firms have established procedures to detect suspicious activities and have put anti-money laundering officers in charge. The Bank Secrecy Act developed and implemented the Anti-Money Laundering (“AML”) compliance program, however problems still persist below the surface for brokerage firms. In September alone, four firms were found to be in violation by the Financial Industry Regulatory Authority Inc. (“FINRA”). Since 2002, FINRA Rule 3310 requires broker-dealers to have a written AML program reasonably designed to achieve compliance with the Bank Secrecy Act of 1970. So far this year, FINRA has fined 23 firms for failing to establish and implement adequate AML programs and other supervisory systems to detect suspicious transactions. FINRA settled 49 cases in 2012 and 38 cases in 2011 against broker-dealers and individuals in enforcement actions that included violations of AML rules. Firms cited in these cases face damage to their reputations as well as significant fines.
Big or small, brokerage firms can still trip up. While these firms may have an AML officer and policies and procedures in place, slip-ups still happen. The following are just three examples of issues that have led firms to be found in violation by FINRA:
- Implementing an adequate Know Your Costumer (“KYC”) system. KYC policies are essential to any financial institution. A KYC breach can result in the firm, as well as individual employees, to be subjected to civil and/or criminal penalties. In May 2013, FINRA fined three firms a total of $900,000 for failing to establish and implement adequate AML programs to fight money laundering and failing to put in place systems to detect suspicious transactions. FINRA also fined and suspended four executives involved.
- Conducting proper supervision. On October 4, 2011, FINRA fined Merrill Lynch, Pierce, Fenner & Smith, Inc., $1,000,000 for supervisory failures that allowed a registered representative at Merrill Lynch’s San Antonio, Texas branch office, to use a Merrill Lynch account to operate a Ponzi scheme.
- Monitoring micro-cap transactions. On August 5, 2013, FINRA announced that it fined Oppenheimer and Co., Inc. $1,425,000 for the sale of unregistered penny stock shares and for failing to have an adequate AML compliance program to detect and report suspicious penny stock transactions.
In enforcement cases, FINRA often finds that firms don’t have adequate procedures to detect suspicious activity, fail to implement or properly supervise an AML program, or neglect to file activity reports with the Treasury Department.
Melissa Rodriguez is a Senior Investigative Analyst with MSA Investigations.
According to the Association of Certified Fraud Examiners, a combination of the recent economic crisis in the United States and an increase in layoffs have resulted in an increase in fraud. One of the reasons for this correlation is the decline of internal control systems as a means of fraud prevention. Many companies cut their workforces in an effort to reduce expenditures, which can lead to reduced internal controls and fewer proactive fraud prevention measures. There are several types of fraud that can occur:
- Corporate Fraud
- Securities and Commodities Fraud
- Health Care Fraud Mortgage Fraud
- Financial Institution Fraud
- Identity Theft
- Insurance Fraud
- Mass Marketing Fraud
- Asset Forfeiture/Money Laundering
Research has shown that individuals with certain characteristics and personality traits are more inclined to perpetrate fraud. Six traits have been identified as being essential to the personality of the fraudster.
- Positioning: An employee’s position or function within an organization may provide an opportunity to create or exploit situations for fraud.
- Intelligence and Creativity: One must be smart enough and creative enough to understand and exploit internal control weaknesses and to use position, function, or authorized access to their advantage.
- Ego: Most fraudsters have a strong ego and great confidence they will not be detected. Common traits include being driven to succeed at all costs, self-absorbed, self-confident, and often narcissistic.
- Coercion: The ability to coerce others to commit or conceal fraud is a common trait found among fraudsters.
- Deceit: Successful fraud requires effective and consistent lies that are convincing. The fraudster must also be able to keep track of his or her lies.
- Stress: The individual must be able to control their stress, as committing the fraudulent act and keeping it concealed can be extremely stressful.
While the identification of these traits is largely subjective, there are steps that can be taken to better protect oneself from those who are more likely to commit fraud. Conducting investigative due diligence on an individual is an effective tool to detect and prevent fraudulent activity within a company.
Investigative due diligence combines public records research through public and proprietary sources with third-party interviews and reputational inquiries in an attempt to seek out information on a person’s background, reputation, ethical track record, media presence, compliance history, liabilities and criminal and civil litigation history. The knowledge gained from research and inquiries may identify issues and information that provide valuable insight into a person’s personality traits that make them capable of committing fraud.
E-discovery and digital forensics are also useful in identifying fraudulent behavior by investigating electronically stored information. The process encompasses the seizure, forensic imaging (acquisition) and analysis of digital media, which includes information stored on computers, multimedia files, documents, emails, networks and mobile devices. E-discovery and digital forensics are critical to furthering a company’s claim when it is named as a party in a civil action or to fortifying a defense against a criminal or a regulatory inquiry.
What with the rise of fraudulent activity in recent years, the identification of personality traits attributed to those conducting such activities has proved a valuable asset in fraud investigations. Conducting thorough investigative due diligence on an individual can expose these traits allowing for preventative measures to be taken within an organization. The use of e-discovery and digital forensics are also effective tools in the detection of fraudulent behavior, allowing a company to build a defense against a potential civil action, allegations of criminal activity or a regulatory inquiry.
Suzanne Bishop is a Senior Investigative Analyst with MSA Investigations.
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On October 7, 2013, several former employees of Bernard L. Madoff Investment Securities will stand trial in Federal District Court in Manhattan on charges that they aided in Madoff's elaborately orchestrated fraud, according to a September 17, 2013 piece in Deal Book. Defendants are reportedly expected to argue that they were unaware of their boss's wrongdoing in the epic Ponzi scheme that shook the financial community to its gilded core.
More recently, select Wall Streeters are alleging that another Ponzi scheme, or more accurately, pyramid scheme, has hit the market in nutritional supplement seller Herbalife.
Activist investor and hedge fund manager William "Bill" Ackman who heads Pershing Square Capital Management asserts that Herbalife is operating a pyramid scheme designed to defraud and victimize its low-income sales force and distributors, the majority of whom some claim make little to no income selling the product. (Herbalife's CEO Michael Johnson, by contrast, reportedly brought home $89 million in 2011 and was named one of America's highest-paid CEOs.)
Relying heavily on the Latino community, Herbalife has come under fire from various advocacy groups and hired former L.A. Mayor Antonio Villariagosa to assist with its business, and undoubtedly, its image problem. Advocates remain skeptical about Herbalife's promises of financial rewards to its Latino sales force. "I absolutely think they're being victimized, and I think it's a really bad idea to become a distributor," said Brent Wilkes, national executive director of the League of United Latin American Citizens.
It is possible, of course, that Bill Ackman is wrong about Herbalife in his argument that the company is a pyramid scheme. That being said, those watching the deeply personal, televised fights over the subject with punches thrown by the likes of Carl Icahn should remember that hedge fund managers with track records such as that of Mr. Ackman perform significant investigative due diligence before making such claims. Regardless of the Herbalife outcome, those waging war over the company's stock along with financial regulators tasked with serving as watchdogs of malfeasance would be wise to conduct equally comprehensive due diligence into Herbalife and its executives.
Perhaps even more important than conducting thorough due diligence is for investors and stakeholders to act in accordance with warning signs and material findings contained in investigative reports. After all, institutional investors and high-net-worth individuals allocate considerable funds to performing due diligence these days. This research was being actively performed on Madoff by a number of sophisticated firms prior to the spectacular blow-up of his investment vehicle. The problem in the Madoff case was not a lack of effective due diligence, but a lack of investors who would heed the obvious red flags revealed in investigative reports--an oversight that cost investors, and the public, billions.
One of the first questions investors and stakeholders must ask during the due diligence process is whether or not executives are in fact who they say they are on their biographies (many executives overstate their educational credentials); whether or not the company's profits and business structure is aligned with the information contained in the company prospectus; and, lastly, whether or not the assigned auditor is in fact performing the task at hand, and performing it accurately.
Herbalife's auditor, PricewaterhouseCoopers (PwC), has been asked to do just that by Mr. Ackman, as auditors often take a litigous punch when companies are later proven to be fraudulent. Even the stretched and often slow-to-act Securities and Exchange Commission (SEC) went after Friehling & Horowitz, which purported to audit Madoff's financial statements. New York prosecutors sued Ernst & Young, auditor of the now famously defunct Lehman Brothers, alleging that Ernst & Young stood by while Lehman used faulty accounting to mask its unsteady finances. PwC Ireland is currently being sued by administrators of Quinn Insurance for €1 billion over alleged negligent auditing.
Among the warning signs revealed in asset manager due diligence, faulty accounting practices is high on the list. Recall that Greenlight Capital's David Einhorn spoke publicly about his distrust in Lehman's accounting practices and decided to short Lehman stock because he was skeptical of its accounting. Mr. Einhorn also shorted Herbalife in 2012 and questioned Herbalife's business model; he no longer holds stock in the company. Even asset managers who believe Herbalife is legitimate--Dan Loeb of Third Point Partners, for instance, went long on the company and soon after sold his shares--presumably do serious investigative homework before allocating funds to a given company's stock.
Those watching the Wall Street spectacle unfold would be wise to conduct due diligence into Herbalife and other hotly-debated businesses before taking sides in the hedge fund wars.
The implementation and usage of monitors is relatively new to the corporate landscape. Traditionally, when there was reasonable suspicion that an entity was involved in illegal activity there were investigations which often lead to the prosecution, fining, and/or sanctioning of the entity in question. However, the aftermath of corporate scandals such as Enron, coupled with the global financial crisis of 2008, left lawmakers and policymakers alike agreeing that a more aggressive approach towards corporate governance was necessary.
In an effort to promulgate this new approach to corporate governance, regulators have increasingly assigned monitors to a wide spectrum of corporations and business entities. Many experts see monitorships as an attractive and efficient means of aiding in corporate governance for a number of reasons, including:
- Instead of engaging in arduous litigation, or feeling the sting of public sanctions and fines, taking on a monitor often helps corporations avoid negative press, which could be devastating in terms of losing current and prospective investors and future business opportunities alike.
- By cooperating with a monitor, a corporation sends the message to investors, creditors, and government regulators, that it is devoted to the continued strengthening of its compliance practices.
- Employing a monitor can assist a business entity in realizing some of its weaknesses, and encourages such entities to adopt more effective internal compliance programs.
Often it is the case that a monitor is appointed to a business entity by a regulatory agency. In these circumstances, the monitor’s power can vary greatly. Because it is common for the appointment of a monitor to be in lieu of an investigation and or prosecution, regulatory agencies often have a large amount of bargaining power in terms of determining both the monitor’s power and scope of the monitorship. Powers often granted to monitors are:
- Oversight of the entity’s day to day activities
- Ability to restructure the entity’s internal processes
- Waiver of attorney-client privilege
- Demand the production of documents and electronic devices
- Conduct in-depth interviews of the entity’s employees and associates
Since monitors are being increasingly utilized across wide variety of business areas, it is likely that legislation will be proposed in order to address some of the growing concerns regarding monitors. For example, one of the largest issues regarding monitorships is known as “scope creep." This is where the monitor and the firm disagree as to the monitorship’s sphere and reach. These issues often arise because the regulatory agency who appointed the monitor was not clear as to the monitor’s purview in the first place. Down the line, it is likely that we will see legislation addressing such issues so that both business entities and monitors will have a clearer idea of what the monitorship is supposed to entail.
Brian Kesselman is an Investigative Analyst with MSA Investigations. Learn more about MSAI's monitorship capabilities.
In 2013, tightening anti-money laundering (AML) procedures has become a top priority for regulators such as the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA, formerly the NASD), not to mention global regulatory agencies. After several financial scandals involving banks ensnared in money laundering scandals, financial regulators say they are paying closer attention to AML policies.
In the U.K., the Financial Conduct Authority’s Mark Wheatley said banks have not done enough to combat money laundering. “It’s simply not acceptable for firms to turn a blind eye to where the money comes from, its journey from A to B,” Mr. Wheatley said, as reported by a July 1, 2013 piece in The Telegraph. The news piece noted that HSBC, Lloyds Banking Group, and Standard Chartered were fined for breaches of anti-money laundering rules, while Barclays and Royal Bank of Scotland were involved in a heavily publicized Libor-rigging scandal. Standard Chartered settled for $327 million with U.S. Regulators over alleged violations of restrictions against doing business with financial institutions based in countries under sanctions. Reuters in an August 17, 2013 article reported that Germany’s regulator, BaFin, was examining “whether or not Deutsche Bank should improve the controls it has in place against money laundering.”
Banks are being fined for numerous reasons, but here are the most common:
- Ineffective compliance
- Fraudulent behavior
- Sanctions violations
Financial institutions are attractive to individuals attempting to launder money due to the high volume of transactions performed on a daily basis. Many banks have tried to improve their Know Your Customer (KYC) practices along with their AML departments, but obviously more needs to be done. Prior to transacting business, a bank should follow KYC guidelines. Conducting thorough due diligence likewise has the capacity to reveal a business or individual’s relations with countries under sanction or without KYC agreements, avoiding any fine or other penalty in the process.
Appointing senior leadership executives with AML experience in banks, along with expanding the budgets of AML departments, may help ensure that financial institutions comply with increasingly stringent procedures and policies. Since the terrorist attacks of 9/11, substantial financial regulations have been established across the globe to ensure banks do not knowingly or inadvertently fund terrorist groups. Yet, according to news outlets, banks have paid U.S regulators approximately $5 billion in recent years for illegal banking practices.
The heavy toll of financial fraud is better spent on tightening AML procedures and engaging in investigative due diligence to forestall future financial malfeasance.
John Maguire is an Investigative Analyst with MSA Investigations.
Another accounting fraud scandal is rocking the global business community as Britain's Serious Fraud Office prepares to prosecute Japan's Olympus for operating "an elaborate, long-running scheme to cover up $1.7 billion in losses after its newly installed chief executive, Michael C. Woodford, blew the whistle on irregular accounting practices at the company," The New York Times reported on September 5, 2013. Mr. Woodford was later fired for "asking too many questions about [Olympus'] questionable accounting practices," CNN reported in a piece published on July 3, 2012. News reports stated that the accounting scandal began in October 2011 and resulted in suspended jail sentences for former Olympus Chairman Tsuyoshi Kikukawa, former board director Hideo Yamada, and Hisashi Mori, a third Olympus executive.
Witnessing the recent downfall of Olympus, which joins the ranks of companies engaging in financial statement fraud, such as that conducted by Enron (and Qwest, Adelphia, Sunbeam, and WorldCom, etc.), can be difficult to discover. That being said, it's helpful to remember that Enron was not brought down by Wall Street analysts performing complex forensic accounting methodologies, but by journalists reviewing public filings during a standard due diligence process. Given that recent studies conducted by the Association of Certified Fraud Examiners suggest that financial statement fraud accounts for around 10 percent of white collar crime, it's worthwhile to review some of the more common ways by which this type of fraud is practiced.
Signs of Accounting Fraud
- Overstating revenues by recording future anticipated sales
- Fictitious sales
- Understating expenses
- Inflating the net worth of assets by failing to apply depreciation schedules
- Hiding obligations and liabilities from corporate balance sheets
- Understating revenues in one accounting period in order to maintain them as a reserve for future periods ("cookie-jar accounting")
- Growing revenues without correlating cash flows
- Consistent sales growth when competitors are experiencing poor performance
- Rapid rises in sales and receivables mixed with growing inventories
- Performance surges at the end of the fiscal year
- Auditor replacements
- Manager compensation based on bonuses from short-term goals
Ironically, of all the tell-tale signs of fraud to look for, one of the most auspicious signals of accounting fraud is that something about the company's business model and profit structure just "feels off." This "off" feeling, for lack of a better word, is what drove Boston-based derivatives analyst Harry Markopolos to inform the Securities and Exchange Commission (SEC) (in 2000, 2001, and 2005) that Bernard "Bernie" Madoff was orchestrating the largest Ponzi scheme in history.
Several media outlets, including Forbes, have suggested that the "stretched SEC" may be "neglecting accounting fraud," particularly after reorganizing its enforcement division post-Madoff and eliminating the accounting fraud task force. (For objectivity's sake, Forbes also reportedly ignored a tip in 2001 that Madoff was a fraud). And while public auditors are now required to flag "material weaknesses" in a company's internal controls, with the aim of providing early warning to companies, investors, and the SEC, it's worthwhile to remember that auditors gave no warning about Citigroup low-balling its sub-prime mortgage exposure in 2007, or Lehman Brothers' infamous collapse in 2008.
In an effort to forestall white collar crime and help enforcement agencies like the SEC effectively regulate companies, public auditors and experienced investigators must be utilized to examine the financial standing of various companies. To learn more about MSA Investigations' due diligence practice, contact us today.
Social media and social networking sites are a great way to communicate with family and friends, but are you sharing too much personal information in the process? With only a few key pieces of information, thieves can you steal your identity online using information culled from social media sites.
The use of social media across the globe has created more opportunities than ever before to steal identities or commit identity fraud online. For example, an average Facebook profile lists a person’s name, date of birth, and hometown. Cyber thieves look for these key bits of information to figure out what your confidential passwords could be, costing victims countless hours and money to fix the damage done.
Five ways that you might be putting yourself at risk of identity theft:
- Using low or no privacy settings on social media accounts such as Facebook and Twitter
- Accepting invitations to connect to social media sites from people you don’t know
- Downloading free applications for use on your social media profile
- Clicking on links that lead you to other websites, even if the link was sent to you by a friend
- Falling for email scams that ask you to update your social networking profiles
The use of social networking sites can increase vulnerability to theft because of the amount and type of information people share on sites such as Twitter, Facebook and LinkedIn. However, people do little or nothing to protect themselves from online fraud.
Five tips to protect yourself from identity theft:
- Use the least amount of information necessary to register for and use the social media site
- Create a strong password and change it often
- Use the highest level of privacy settings that the site allows
- Be wise about what you post on social media accounts
- Verify emails and links in emails you supposedly get from your social networking site
If you believe you have been the victim of identity theft or negative or unflattering content, please contact MSA Investigations’ professionals for information on our investigative due diligence and reputation investigation services.
Melissa Rodriguez is a Senior Investigative Analyst at MSA Investigations. For information on MSA Investigations' social media monitoring capabilities, Contact Us.
For clients who want to be proactive in identifying and eliminating fraud and corruption, or for those who have been required to do so by a court-ordered mandate or government agency, MSA Investigations provides independent compliance monitoring services across a wide range of industries. MSA Investigations takes a multi-disciplinary approach to addressing fraud such as organized crime during the course of its monitorship engagements.
Organized crime is characterized as transnational, national, or local groupings of centralized enterprises run by criminals who engage in illegal activity for monetary profit. The illegal activities most commonly associated with organized crime include extortion, illegal drug trade, money laundering, arms trafficking and prostitution, among other crimes. In recent years, organized crime has grown more complex and broadened its reach due to globalization and advances in technology.
In a recent study published by the Congressional Research Service on January 6, 2012, entitled “Organized Crime: An Evolving Challenge for U.S. Law Enforcement,” it was revealed that organized crime targeting the United States has internationalized and its structures have flattened. Today, loosely structured small groups with global reach harm consumers, businesses, and government interests on a daily basis. Growing international trade has facilitated smuggling and illicit trade. The internet and cell phones have increased communication. In addition, the increase in globalization has weakened security at borders, which has caught the attention of organized criminals. Organized criminals have taken advantage of the weakened security at borders in the following ways:
Drug Trafficking - Globalization has facilitated international travel, communications, and transportation networks. Because of this, drug trafficking groups need not be directly tied to the large cartels to have significant worldwide reach. Even relatively small groups can build far-reaching supply and transportation links.
Money Laundering - The movement of money, either as bulk cash or digital transactions, across international borders is critical to the success of organized criminals. There has been an increase in the use of stored-value cards and digital currency accounts to launder money across borders. Also commonly used are e-businesses that transfer funds via the Internet and mobile payments through cell phones.
In addition to globalization contributing to the changes in organized crime, technology has helped this evolution as well. Criminals have adapted to incorporate technology-driven fraud into their capabilities. For example, traditional criminal activity, such as illegal gambling, has been transformed by in the Internet. The following are other examples of illegal activities that have been transformed by technology:
Mass Marketing Fraud - International fraud schemes that use mass-communications media, such as the Internet, to contact, solicit, and obtain money, funds, or other items of value from multiple victims in one or more jurisdictions. Advance fee fraud, a form of mass marketing fraud in which criminals appeal for money via email, has become a popular method of theft facilitated by technology.
Cyberspace, Electronic Information, and Organized Crime - organized criminals become experts at stealing information stored and shared electronically. This covers a range of activity including cyber intrusions into corporate databases, the theft of individual consumer credit card information, and a wide variety of fraudulent online activity.
Online Identity Theft and Sophisticated Credit Card Fraud - Organized criminals are involved in stealing the identities of online consumers and engage in technologically advanced credit card fraud. Some criminals use skimmers that capture information from magnetic strips on credit cards, or use cameras to capture pin numbers.
Organized Retail Crime and Online Fencing - Organized retail crime refers to large-scale retail theft and fraud by organized groups of professional shoplifters. These crimes range from retail, manufacturing, distribution, and cargo theft, to gift card fraud, receipt fraud, and ticket switching. The stolen goods are sold in a variety of fencing operations such as flea markets, swap meets, pawn shops, and, more recently, online marketplaces.
To discuss MSAI's monitorship capabilities, contact us today.