the web seminar has not yet started: a sound check will be...
TRANSCRIPT
The Rise of Organized Financial Crime: The New Mafia
www2.acams.org/webinars
The web seminar has not yet started:A sound check will be performed 5 minutes before the start time.
COPYRIGHT NOTICE – USE OF WEBEX LOGIN/PASSWORD FOR ACAMS WEB SEMINARS
Each site license entitles registrant to one login: one phone connection (if accessing audio via teleconference) and one Internet connection for simultaneous Webcast, in one room where an unlimited number of listeners may participate.
Providing your login instructions and password to another for their use, using your login ID/password more than once, or any simultaneous or delayed transmission, broadcast, re-transmission or re-broadcast of this event to additional sites/rooms by any means (including but not limited to the use of telephone conferencing services or a conference bridge, whether external or owned by the registrant) or recording is a violation of U.S. copyright law and is strictly prohibited.
The Rise of Organized Financial Crime: The New Mafia
• Can you hear the sound check? • It has begun
www2.acams.org/webinars
The Rise of Organized Financial Crime: The New Mafia
www2.acams.org/webinars
The Rise of Organized Financial Crime: The New Mafia
www2.acams.org/webinars
Q & ATo send a question:Locate the Q & A box on the bottom right hand corner of the WebEx platform.
Type in your question and click send!
The Rise of Organized Financial Crime: The New Mafia
Welcome to the ACAMS Web Seminar
The Rise of Organized Financial Crime: The New MafiaApril 30, 2013
12:00 PM– 1:00 PM ET
The web seminar has not yet started.
www2.acams.org/webinars
The Rise of Organized Financial Crime: The New Mafia
Welcome to the ACAMS Web Seminar
The Rise of Organized Financial Crime: The New MafiaApril 30, 2013
12:00 PM– 1:00 PM ET
www2.acams.org/webinars
The Rise of Organized Financial Crime: The New Mafia
www2.acams.org/webinars
Chris SweckerAttorney/Consultant
Brendan BrothersVerafin Co-Founder
The Rise of Organized Financial Crime: The New Mafia
Co-founded Verafin (BSA/AML Compliance & Fraud Detection software company) in 2003
Computer Engineer with background in analytics
Anti-financial crime subject matter expert with comprehensive technical expertise
Frequent speaker at industry conferences
Principal presenter for Verafin’s thought leadership webinar series
Verafin has more then 1000 financial institution customers across North America
BRENDAN BROTHERSCo-FounderVerafin
www2.acams.org/webinars
The Rise of Organized Financial Crime: The New Mafia
Assistant Director, FBI, (Retired) - 24 years with FBI
As head of Criminal Division - led all investigations including public corruption, money laundering, organized crime/drug trafficking and financial crime matters.
Served as On Scene Commander in Iraq in 2003 - led team of Agents conducting counter-intelligence and terrorism investigations.
Led national task forces on corporate fraud, violent gangs, financial crimes, crimes against children, public corruption and organized crime and established the MS-13 National Gang Task Force and the National Gang Intelligence Center.
Global Security Director, Bank of America (2006-2009) - led investigations; physical security; international security, employment screening and executive protection.
Has testified before Congressional Committees on identity theft, crimes against children, mortgage fraud, human trafficking, financial crimes, information privacy and data compromise, crimes on the internet, drug trafficking and gangs.
Chris Swecker, Esq.
www2.acams.org/webinars
The Rise of Organized Financial Crime: The New Mafia
The Rise of Financial CrimeEnterprises: The New Mafia
The Rise of Organized Financial Crime: The New Mafia
Individuals and businesses depend more and more heavily on data and systems in the virtual world.
The Rise of Organized Financial Crime: The New Mafia
Some Statistics…
2.4 billion Internet users worldwide
2.2 billion email users worldwide
144 billion emails per day
68.8% of those emails are spam
634 million websites
51 million websites added in 2012
The Rise of Organized Financial Crime: The New Mafia
Every new technology opens the doors to new criminal approaches.
The Rise of Organized Financial Crime: The New Mafia
Cyberspace = Growing Opportunities for Organized Crime
The Internet, unfortunately, was not conceived with security in mind.
The Rise of Organized Financial Crime: The New Mafia
556 million victims of cyber crime
1.5 million victims per day
18 victims on average per second
83% of data breaches attributed to organized crime
Cybercrime 2012 Stats…
The Rise of Organized Financial Crime: The New Mafia
Cyberspace has proven to be a gold mine for criminals, who have moved more deeply into the domain as opportunities to profit continue to multiply.
The Rise of Organized Financial Crime: The New Mafia
It’s not LIKE the Mafia, it IS a Mafia running these operations.
The day money became the focus of malware is the day the Internet changed.
The Rise of Organized Financial Crime: The New Mafia
structured group
three or more persons
exists for a period of time
acts in concert
commits serious crime(s) to obtain direct or indirect financial or other material benefit
Organized Criminal Group (OCG)
The Rise of Organized Financial Crime: The New Mafia
acted either out of curiosity or the glory of spreading a virus they'd written
handled all aspects of an operation from phishing to building fake websites to cashing in on the fraud
Just a few years ago, most hackers…
The Rise of Organized Financial Crime: The New Mafia
Because of the Internet…there’s a radical distribution of labor and a radically fast ability to recruit skills
Cybercriminals Today
Specialize
Create markets
Entrepreneurial
The Rise of Organized Financial Crime: The New Mafia
…estimated 3600 OCGs (organized crime groups) active in the EU
some economies in FSU&CEE are known as cybercrime hotspots…
The Rise of Organized Financial Crime: The New Mafia
Why has Cybercrime become so pervasive…
The Rise of Organized Financial Crime: The New Mafia
Extremely profitable
Very low infrastructure cost and readily available attack tools
Hides under the cloak of anonymity, which in turn is protected by many governments across the globe
As it becomes a more profitable industry it is attracting an increasing number of individuals
Separation between the physical and virtual world
Off-the-shelf hacking
OCGs can conduct operations without ever making physical contact with each other
The Rise of Organized Financial Crime: The New Mafia
increasingly operating on network-style basis
70% composed of members of multiple nationalities
more than 30% are poly-crime groups
entrepreneurial in approach and business management
Organized Criminal Groups
The Rise of Organized Financial Crime: The New Mafia
High rates of unemployment make it easy for criminal organizations to recruit young masterminds
Cybercrime during the Recession
The Rise of Organized Financial Crime: The New Mafia
Râmnicu Vâlcea (only ~120,000 residents)
Law enforcement around the world have nicknamed it “Hackerville”
Internet scammers and their ‘co-workers’have turned it into a hub of international organized crime
Center of e-commerce scams and malware attacks on businesses
Cybercrime Central - the Silicon Valley of online thievery
Example: “Hackerville” – a Remote Town in Romania
The Rise of Organized Financial Crime: The New Mafia
July 2012 - local law enforcement and FBI apprehended 23 hackers who were later imprisoned for stealing $20 million from a thousand Americans.
“But here what else can you do? There is no work. The government speaks only of crisis and reduction of salaries. I am 24 and during University I have done nothing but sacrifice.”
(George, a citizen of ‘Hackerville’)
An Example is “Hackerville” in Romania
The Rise of Organized Financial Crime: The New Mafia
The Classic Business Model…
…has been adopted by criminal enterprises
The Rise of Organized Financial Crime: The New Mafia
LEGITIMATE ENTERPRISES
The Rise of Organized Financial Crime: The New Mafia
CRIMINALENTERPRISES
LEGITIMATE ENTERPRISES
The Rise of Organized Financial Crime: The New Mafia
Criminal Enterprise Model…
The Rise of Organized Financial Crime: The New Mafia
Profitability (or Retribution)
Corporate Mission
Organized crime is a multi-billion dollarbusiness and is growing in scale.
The Rise of Organized Financial Crime: The New Mafia
Executive Suite
Recruiters
Infantry
Help Wanted
Money Mules
Organizational Structure of Crime-as-a-Service (CaaS)
The Rise of Organized Financial Crime: The New Mafia
set up original business model and infrastructure
once get operation off the ground - move to business development role
make decisions, oversee operations, ensure everything runs smoothly
hand off ‘dirty work’ to others
not involved with launching attacks
Executive
The Rise of Organized Financial Crime: The New Mafia
larger organizations have affiliates who recruit and manage the infantry to infect the machines for them
set up recruitment programs (a.k.a. affiliate programs)
funded by the cyber criminal network executive
Middle Management Recruiters
The Rise of Organized Financial Crime: The New Mafia
bottom of chain of command - ground-level forces
initiate infection on a user’s machine
prolific cybercriminals can net up to $5 million per yearby controlling large botnet of malware infected PCs
many ways they infect computers - email links, SEO attacks, poisoned PDFs, compromised websites
leverage social networking links, malicious Websites, and poisoned media (e.g. Flash, QuickTime)
Infantry
The Rise of Organized Financial Crime: The New Mafia
people knowingly or unknowingly employed to launder OCG’s illicit gains
often recruited via ads (e.g. accounts receivable positions) on career sites
move money from one country or bank account to another
money shuffling typically done through anonymous wire transfer services (e.g. Western Union, Liberty Reserve, U Kash, WebMoney)
proxied or anonymous wire transfers important to avoid detection - often broken into smaller transactions to avoid triggering AML alerts
using several mules, anonymous services and various bank accounts -harder for authorities to trace funds - legal responsibility on the mules
Money Mules
The Rise of Organized Financial Crime: The New Mafia
Established to recruit infantry, recruiters and affiliate programs
Many originate in Russia (“Partnerkas”) – closed communities accessible by invite only
Others open to the public – to protect themselves include disclaimers on the site – e.g. “We do not allow spam or other illicit methods for machine infection”
In place to put the legal responsibility on infantry
provide infantry all necessary information to begin infection campaign.
illicit software, support forums, payment rates and tracking, method to receive payments after completing infections
Help Wanted Web Portals
The Rise of Organized Financial Crime: The New Mafia
Broad range of deliverables - consulting, services, advertising, large selection of programs (i.e. “product”)
Richer product features and more complex services command a higher price
Fundamental Laws of Economics
The Rise of Organized Financial Crime: The New Mafia
Non-Infected Computer
The Rise of Organized Financial Crime: The New Mafia
Infected ComputerNon-Infected Computer
The Rise of Organized Financial Crime: The New Mafia
Infected ComputerNon-Infected Computer
The Rise of Organized Financial Crime: The New Mafia
Infected ComputerNon-Infected Computer
The Rise of Organized Financial Crime: The New Mafia
1 hour - $10 USD
1 day - $30-70 USD
1 week - $150 USD
1 month - $1200 USD
Distributed Denial of Service (DDoS)
The Rise of Organized Financial Crime: The New Mafia
closing old sites and opening new ones like a game of “Whac-a-Mole”
for every malicious domain taken down – two more often pop up in its place
Domains
The Rise of Organized Financial Crime: The New Mafia
crucial to success - cyber criminals need locations to store attack content (e.g. exploit code, malware, stolen data)
may be official hosting providers or services posing as hosting providers that offer compromised systems for storage
typically offshore (often political safe havens – Russia, China) - turn blind eye to people purchasing space and illicit content stored
have been instances of US hosting providers linked to malware (e.g. CA based McColo before taken offline)
Hosting Providers
The Rise of Organized Financial Crime: The New Mafia
layered communication infrastructure
infected machines do not directly speak to operators of OCG
go through intermediate machines before reaching criminal operator
usually done through other compromised machines using technologysuch as a virtual private network (VPN)
goal is to complicate tracing efforts
main server typically exists for botnets that receives commands through intermediate (anonymous) servers
main server referred to as the “Mothership”
Anonymous Layers
The Rise of Organized Financial Crime: The New Mafia
OCGs keep track of key metrics how many infected machines they control how many bank accounts have infiltrated how much money have transferred from hijacked accounts
use commercial business process management tools, financial systems, databases and Web portals
manage everything from software development to accounts payable
Money Management
The Rise of Organized Financial Crime: The New Mafia
backend systems are varied and complex
extensive R&D groups create whatever the syndicate needs to attack and infect systems
custom-ordered code, private botnets, fake antivirus software, ransomware, deployment systems…
code is put through a QA process to ensure it functions and potentially evades security detection
Research & Development
The Rise of Organized Financial Crime: The New Mafia
OCGs connect with other organizations and distributors to grow their operation
Merger and acquisitions occur due to competition
Example - Zeus & SpyEy
Business Development
The Rise of Organized Financial Crime: The New Mafia
Protecting A Financial Institution Against Cyber Fraud
The Rise of Organized Financial Crime: The New Mafia
In 2013, organized gangs will perpetrate at least half of the cybercrimes againstfinancial services…as offshore gangs thrive and foreign governments look the other way.
Deploy layered fraud prevention… In particular, fraud prevention systems that provide user or account behavioral profiling and entity link analysis are useful in these cases.
(Source: Gartner)”
“
The Rise of Organized Financial Crime: The New Mafia
A layered security system affords the best protection, since no single layer is sufficientto stop determined bad actors from penetrating enterprise systems. ROBUST
LAYERED SECURITY
(Source: Gartner)”
“
The Rise of Organized Financial Crime: The New Mafia
EndpointCentric
Endpoint device identification, mobile location services
Secure browsing, OOB authentication and transaction verification
The Rise of Organized Financial Crime: The New Mafia
Navigation CentricEndpoint
Centric
Analyzes session behavior and compares it to what is expected
The Rise of Organized Financial Crime: The New Mafia
Navigation Centric
User and Account
Centric for Specific Channel
EndpointCentric
Monitors and analyzes user and account behavior, and identifies anomalous behavior
The Rise of Organized Financial Crime: The New Mafia
Navigation Centric
User and Account
Centric for Specific Channel
User and Account
Centric Across Multiple
Channels and Products
EndpointCentric
Monitors and analyzes user and account behavior across channels, and correlates alerts for each entity across channels and products
The Rise of Organized Financial Crime: The New Mafia
Navigation Centric
User and Account
Centric for Specific Channel
User and Account
Centric Across Multiple
Channels and Products
Pattern Based Intelligence (Entity Link
Analysis)EndpointCentric
Enables the analysis of relationships among internal and/or external entities and their attributes (e.g., users, accounts, machines)
The Rise of Organized Financial Crime: The New Mafia
Navigation Centric
User and Account
Centric for Specific Channel
User and Account
Centric Across Multiple
Channels and Products
Pattern Based Intelligence (Entity Link
Analysis)EndpointCentric
Most effective way to protect a financial institution is from the inside out.
The Rise of Organized Financial Crime: The New Mafia
Cybercrime scheme involving computer intrusion techniques and malware
unauthorized transfer of funds from small business accounts to “temporary accounts” created for this purpose
accounts closed or abandoned after illicit activity conducted
more than 50 attempted transfers over 4 month period
more than two dozen transfers resulting in theft of ~$850,000
suspects used multiple banks and accounts
FIs filed more than 40 SARs and 20 CTRs detailing illicit activity and movement of funds
FinCEN able to identify network of individuals with connections to Russia and Eastern Europe
BSA Reports Can Play Key Role in Cybercrime Investigation
The Rise of Organized Financial Crime: The New Mafia
The Rise of Eurasian Financial Criminal Enterprises: The New MafiaFinancial Crimes Networks Far Surpass Traditional “Bricks and Mortar” Criminal Enterprises as Most Profitable Crime Model
The Rise of Organized Financial Crime: The New Mafia
Financial Crimes and Money Laundering Go Together Like: “Peas and Carrots”
Transactions involving criminal proceeds from financial crimes SUAs equals money laundering
Charles Intriago: ”It is the Atomic Bomb of the US in its arsenal against financial crime and other offense.”
Money laundering is a separate crime for each transaction
Criminal indictments in most cases include one or more money laundering counts
The Rise of Organized Financial Crime: The New Mafia
Sun Tzu
Know Your Enemy, Know Yourself
If you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.
The Rise of Organized Financial Crime: The New Mafia
Traditional Organized Crime
“Fat Tony” SalernoJohn Gotti:
The Teflon Don
The Rise of Organized Financial Crime: The New Mafia
Drug Cartels: Bricks and Mortar Criminal Enterprise
The Rise of Organized Financial Crime: The New Mafia
Catalyst for a New Crime Paradigm: November 1989
The Wall Comes DownRussian Mob and KGB Run The Black Market
The Rise of Organized Financial Crime: The New Mafia
“Yaponchik” Top Thief in Law
Paid 15,000 for marriage to gain US Green Card
Arrested by the FBI in 1995 for extortion of $2.7 million from an investment advisory firm known as Summit run by two Russian businessmen
Established Russian mafia presence in US in Brighton Beach (“Little Odessa”) in 1992
Established “Daisy Chain” fraud schemes
BRIGHTON BEACH FOOTHOLD
Vyacheslav Kirillovich Ivankov
The Rise of Organized Financial Crime: The New Mafia
Simeon Mogilevich: Mob Boss Hiding in Plain Sight in Russia
The Rise of Organized Financial Crime: The New Mafia
Financial Crime Focus
The Rise of Organized Financial Crime: The New Mafia
The New Mafia: Crime as a Business
Viral
Global
Institutions and governments are prime targets
Developed fraud as an industry
Bad guy numbers increasing
Fraud opportunities increasing
Minimal risk of prosecution
Network vs. well defined hierarchy
The Rise of Organized Financial Crime: The New Mafia
FBI Director Mueller
International Organized Crime
The playing field has changed. We have seen a shift from regional families with a clear structure, to flat, fluid networks with global reach.
These international enterprises are more anonymous and more sophisticated.
Rather than running discrete operations, on their own turf, they are running multi-national, multi-billion dollar schemes from start to finish.
The Playing Field Has Changed
The Rise of Organized Financial Crime: The New Mafia
Chris SweckerFBI Assistant Director (Ret.)
To be effective (and compliant), AML and anti-fraud professionals must keep astride of an ever changing global landscape of adversaries and the threats they present, while constantly assessing their own strategies and capabilities to meet the threats.
New Paradigm
The Rise of Organized Financial Crime: The New Mafia
Mulay Hamid El Raisuli, Lord of the Riff, Sultan to the Berbers, Last of the Barbary Pirates.
You are like the Wind and I like the Lion. You form the tempest. The sand stings my eyes and the ground is parched. I roar in defiance but you do not hear. But between us there is a difference. I, like the lion, must remain in my place. While you like the wind will never know yours.
The Wind and The Lion: No Boundaries
The Rise of Organized Financial Crime: The New Mafia
Risk Management Perspective
Low Reward-High RiskLow Risk-High Reward
The Rise of Organized Financial Crime: The New Mafia
Fraud and Organized
Crime Intersect
The Rise of Organized Financial Crime: The New Mafia
Professional Criminals
Work in organized gangs
Multiple fraudulent identities
Target multiple organizations/brands
Detailed fraud systems knowledge
Continually test thresholds
Place and/or groom insiders
Use many products/brands concurrently
Operate multiple fraud modes & evolve continuously
Patiently operate below the radar
Work alone
Single identity
Target one organization
Limited understanding of systems
Little knowledge of thresholds
May know an insider
Focus on one product/brand
Focus on one mode of fraud at a time
Impatient & often greedy
Opportunistic Individuals
THE PROFESSIONALS
TREND
Enhanced focus on networking fraud data will detect and prevent both opportunistic and professional organized fraud
Traditional systems and software products using scorecards and profiling alone focus on only preventing opportunistic fraud
The Rise of Organized Financial Crime: The New Mafia
Evolution of the Eurasian Crime Wave
Staged Accidents and PIP Insurance Fraud
The Rise of Organized Financial Crime: The New Mafia
Staged Accidents Headlines
Eight Floridians Arrested for Staged Crashes
Canadian Police Arrest 43 from “Project Sideswipe”
Eleven More Including a Chiro Indicted in Florida Staged Crash Ring
Clinic Manager Gets 5.5 Year Sentence for Role in Staged Accident Ring
FL Staged Accident Ring Uses Food Trucks, Leads to 15Arrests Michael Zemlyansky
$400 Million in Claims
https://www.nicb.org/theft_and_fraud_awareness/multimedia?media=542aba81-9b0c-4cae-a454-d20600346829
The Rise of Organized Financial Crime: The New Mafia
Evolution of the Eurasian Crime Wave
Staged Accidents and PIP Insurance Fraud
InnovativeHealthcare Fraud
The Rise of Organized Financial Crime: The New Mafia
William Corr, Deputy Secretary HHS
The Health Care Fraud Threat
Criminals who commit health care fraud are becoming more sophisticated and are often organized crime enterprises.
They are preying on both providers and beneficiaries by illegally obtaining their provider or enrollment information and using it to submit fraudulent billings to Medicare and Medicaid.
The Rise of Organized Financial Crime: The New Mafia
Reported his attorneys prosecuted $638 million in healthcare fraud last year - indicting 197 individuals in 120 cases
Bank SARs played a “valuable role” in helping prosecutors identify fraudulent medical billings and payments allowing his office to return $40 million to Medicare
Miami HEAT Investigators advise over 90% of their healthcare fraud case initiations come from bank SARs
Most of these indictments include a money laundering count
Source: Florida International Bankers Association Anti-Money Laundering Conference
Miami U.S. Attorney Alex Acosta
The Rise of Organized Financial Crime: The New Mafia
Ouch! One Patient/85 Procedures/20 Months
The Rise of Organized Financial Crime: The New Mafia
Ringleader - “Thief-in-Law”member of select group of high level criminals from Russian and former Soviet nations
$163 million
Oct. 2010
Health Care Fraud Takedowns
73 defendants including Armenian-American organized crime enterprise
The Rise of Organized Financial Crime: The New Mafia
$200 million
Ringleader - “Thief-in-Law”member of select group of high level criminals from Russian and former Soviet nations
$163 million
Oct. 2010 Feb. 2011
20 individuals including 3 doctors charged in fraud scheme
Health Care Fraud Takedowns
73 defendants including Armenian-American organized crime enterprise
The Rise of Organized Financial Crime: The New Mafia
$200 million $295 million
Ringleader - “Thief-in-Law”member of select group of high level criminals from Russian and former Soviet nations
$163 million
Oct. 2010 Sept. 2011Feb. 2011
Nationwide takedown charges 91 defendants
20 individuals including 3 doctors charged in fraud scheme
Health Care Fraud Takedowns
73 defendants including Armenian-American organized crime enterprise
The Rise of Organized Financial Crime: The New Mafia
$200 million $295 million
Ringleader - “Thief-in-Law”member of select group of high level criminals from Russian and former Soviet nations
$163 million
Oct. 2010
$430 million
Oct. 2012Sept. 2011Feb. 2011
91 individuals charged with health care fraud-related crimes and MONEY LAUNDERING
Nationwide takedown charges 91 defendants
20 individuals including 3 doctors charged in fraud scheme
Health Care Fraud Takedowns
73 defendants including Armenian-American organized crime enterprise
The Rise of Organized Financial Crime: The New Mafia
Law Enforcement Too Far From the Action
$200 million $295 million
Ringleader - “Thief-in-Law”member of select group of high level criminals from Russian and former Soviet nations
$163 million
Oct. 2010
$430 million
Oct. 2012Sept. 2011Feb. 2011
91 individuals charged with health care fraud-related crimes and MONEY LAUNDERING
Nationwide takedown charges 91 defendants
20 individuals including 3 doctors charged in fraud scheme
Health Care Fraud Takedowns - The Tally: > $1.1 Billion
73 defendants including Armenian-American organized crime enterprise
The Rise of Organized Financial Crime: The New Mafia
Evolution of the Eurasian Crime Wave
EscalatingInternet Fraud
Staged Accidents and PIP Insurance Fraud
InnovativeHealthcare Fraud
The Rise of Organized Financial Crime: The New Mafia
Russian Business Network
The Rise of Organized Financial Crime: The New Mafia
Homeland Security Cyber Project
Network Scan Results All companies had what appeared to be fully compromised computers (remote desktop connections, backdoors, etc.)
All companies had some sort of nefarious activities - even ones with industrial grade enterprise security suites Most common threat appears to originate from Russian Business Network actors No APT detected over 4 week-long scans (Scanned 7 of 9 participants) Most/all vulnerabilities could have been avoided through common security practices
General Threat Findings Owners who outsource assume security rolled into service they are buying (it is not) Largely - very little to no formal security or IT policies exist No application of “defense in depth” Lack of security trained personnel on-site No active patch management performed
The Rise of Organized Financial Crime: The New Mafia
Eskola$130,000
Patco Construction $588,000
Sign Designs$99,000
Lifestyle Forms & Displays$1,200,000
Village View Escrow$465,000
Family Smile Zone$205,000
Genlabs$437,000
Ferma Corp$447,000
DKG Enterprises$100,000
Golden State Bridge$125,000
McFadden Law$250,000
http://krebsonsecurity.com/category/smallbizvictims/
What is it like to have $100K+ stolen? (and not have your losses covered)
The Rise of Organized Financial Crime: The New Mafia
* 2011 Javelin ID Fraud Survey, ** Use 25% of ACFE and FBI Average Reported Acct Takeover Fraud Loss of $200K
33
84
169
253
338
Impact .1% .25% .5% .75% 1%Victims 676 1.7K 3.4K 5.1K 6.8K
Business Bank Account Takeover676,000 Records
Avg. Loss = $50,000**
400
350
300
250
200
150
100
50
25
110
220
331
22
Impact 1% 5% 10% 15%Victims 35K 175K 350K 525K
Individual ID Theft3.5MM Records
Avg. Clean Up = $631*
Millions
S.C.Potential Exposure
400
350
300
250
200
150
100
50
25
Millions
The Rise of Organized Financial Crime: The New Mafia
Biggest ID Scam in US History Results in 111 Arrests
111 people made bogus credit cards as part of a Queens-based scam that cost consumers, banks and retailers $13 million
Scammers - members of 5 organized forged credit card and identity theft rings – had ties to Europe, Asia, Africa and the Middle East
New York Post, October 7, 2011
The Rise of Organized Financial Crime: The New Mafia
Good Guys Two Steps Behind
Law Enforcement Coordination Lacking
Limited jurisdictional reach and resources
Spotty forensic capabilities
High investigative/prosecution thresholds
The Rise of Organized Financial Crime: The New Mafia
Bad Guys Go Phishing!
Malware-infected phishing and spearphishing e-mails
Zeus virus installed itself and gathered usernames, passwords and financial account numbers typed by the victims on their own computers
The Rise of Organized Financial Crime: The New Mafia
Specializations
Coders or programmers
Distributors or vendors
Techies
Hackers
Hosters
Cashers
Tellers
Money Mules
Leaders
The Rise of Organized Financial Crime: The New Mafia
Operation Trident Breach: The Critical Role of “Money Mules”
FOCUS ON THE MULE AND HIS EFFORTS TO “MONETIZE”
Student or temporary work Visas
April to late September
Mules open multiple bank accounts
Mules share addresses
Common accounts
Frequent International money wires
Personal accounts with high velocity transfers business account
Eastern European Passports
INDICATORS
MONEY MULES: THE VULNERABLE LINK
The Rise of Organized Financial Crime: The New Mafia
ANTI FRAUD PROGRAMSDETECTION WITHOUT CONTEXT
The Rise of Organized Financial Crime: The New Mafia
The Whac-a-Mole Strategy
The Rise of Organized Financial Crime: The New Mafia
2 degrees
1 degree
Malignant Social Networks
How are they connected? Address Employment Phone numbers ID elements Accounts Financial transactions
Who knows whom? What people do these people have contact with? Do they have direct or indirect interaction?
The Rise of Organized Financial Crime: The New Mafia
WHY IS THIS IMPORTANT?MAKE LINKS AND IDENTITY GROUP ACTIVITY
The Rise of Organized Financial Crime: The New Mafia
Banks asleep at the switch need to wake up. . . [The] Bank Secrecy Act applies to more than just drug and terrorist financing.
Anne Tompkins - U.S. Attorney, Western District of North Carolina
Now that’s a warning!
The Rise of Organized Financial Crime: The New Mafia
18 U.S.C. 1956 outlaws four kinds of money laundering -promotional, concealment, structuring, and laundering of the proceeds generated by designated federal, state, and foreign underlying crimes known as “Specified Unlawful Activities”
AML PROGRAM UNDERPINNINGS
SUAs are predicate offenses committed or attempted under one or more of three jurisdictional conditions
certain financial transactions
laundering involving international transfers
stings
The Rise of Organized Financial Crime: The New Mafia
18 USC §1956(a)(1): Required Elements
a financial transaction
knowing that the property involved in the transaction represented the proceeds of some form of unlawful activity
which in fact involved the proceeds of SUA
The Rise of Organized Financial Crime: The New Mafia
230 “SUAs” Encompassed by 18 USC 1956
Bank Fraud Wire Fraud
Identity Fraud Health Care Fraud
Securities Fraud FCPA
Theft RICO/CCE/ITAR
Food Stamp Fraud State violations
Conspiracy & Attempts Aiding & abetting
1956 (h) has no overt act requirement
The Rise of Organized Financial Crime: The New Mafia
SIGNIFICANCE TO AML & FRAUD PROFESSIONALS
Criminal networks engage in serial group actions
Important to make links to discover the scope of the malignant social network
Most fraud and AML systems focused on singular behavior which enables perpetuation of criminal conspiracy
Thresholds hinder making associations
Practice of filing singular SAR and moving on is risky
Quality detections
Need for a “transaction” hinders prevention of losses
Detection of group activity leads to fewer false positives
The Rise of Organized Financial Crime: The New Mafia
CONCLUSIONS Financial crime violations are often organized, systemic activities
Detection of FCs will reveal money laundering and/or terror financing
Distinction between fraud and money laundering is a false one
Programs that don’t detect “group” activities will be at risk even if they are “compliant”
Quality detections plus link analysis will prioritize case work
Due to electronic filing and new data fields it’s a new day as FinCen’ s use of sophisticated analytical tools raises the bar
Effective use of real time detection and new analytic technologies to link disparate activities will become routine and expected
Type of business activity is relevant in detection of suspicious activity
Proactive strategies will become the norm
The Rise of Organized Financial Crime: The New Mafia
REVERSE THE ROLES!THE HUNTERSTHE PREY
The Rise of Organized Financial Crime: The New Mafia
[email protected] Swecker, Attorney/Consultant
The Rise of Organized Financial Crime: The New Mafia
www2.acams.org/webinars
The Rise of Organized Financial Crime: The New Mafia
www2.acams.org/webinars
If you have additional questions for today’s expertsor
suggestions for future web seminars
please send those to:
Thank you for joining us today!
The Rise of Organized Financial Crime: The New Mafia
Future Web Seminars
www2.acams.org/webinars
MAY 01 – AML Essentials: Examining the Key Components of anEffective AML Risk Assessment Model (Part III)Level: BasicNoon to 2:00pm EDT
MAY 15 – Focus on AML Audit: Improving Practices and ProceduresLevel: Intermediate/AdvancedNoon to 2:00pm EDT
JUNE 05 – Emerging Crime Trends in Digital Wallets and Mobile BankingLevel: Intermediate/AdvancedNoon to 2:00pm EDT