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The Caribbean Association of Banks Inc. 39 th Annual General Meeting and Conference Remaining ahead of the Highly Innovative and Technologically Advanced Fraudster. The question???. Is it really possible to “ Remain ahead of the highly Innovative and Technologically Advanced Fraudster”.
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The Caribbean Association of Banks Inc 39th Annual General Meeting and Conference Remaining ahead of the Highly Innovative and Technologically Advanced Fraudster.
The question??? Is it really possible to “Remain ahead of the highly Innovative and Technologically Advanced Fraudster”
WHY • As financial institutions improve their Anti-Money Laundering (AML) and Risk Management procedures, money launderers and fraudsters are becoming more creative.
The truth is simply • Throughout history, man has had a conflicted relationship with technology
A Balancing Act The balance lies in between Technology & Risk Management
The Technological Race • Everyone wants to be the first
FATF Recommendation 15 • New technologies Countries and financial institutions should identify and assess the money laundering or terrorist financing risks that may arise in relation to (a) the development of new products and new business practices, including new delivery mechanisms, and (b) the use of new or developing technologies for both new and pre-existing products. …...
Develop a risk assessment for new products and services When a new product is introduced it is often gauged towards satisfying the consumer’s need. AND Just as law abiding citizens use these products to aid in there daily lives. Criminals / Fraudsters will adapt these products for their use.
Typology Payment for goods & services • A Businessman in OECS country “B” supplies merchandise to distributors in OECS countries “G” & “H”. • The Businessman also provides the distributors with bankcards on his account. • To pay for the merchandise, the distributors effect ATM cash deposits in their country into the Businessman’s account. • This not money laundering. • The Businessman has found a cost effective way to receive payment for his merchandise.
Merchandise VALRICO products stuffed with marijuana
Think like a criminal • Schemes • Be knowledgeable of the various fraud schemes. • Think of ways in which they can be modified to your industry. • Indicators • Recognize that any product or service can be adapted for criminal use by the involvement of someone with an inappropriate (fraudulent) disposition
TypologyDebt Collection Services • A Law Firm in Antigua receives a call from an individual who claims to be an International Financier in the USA. • He claims that he has a client in Antigua who owes him a large sum of money and he has been unable to collect on the debt. • He wishes to utilize the services of a law firm in Antigua to institute legal action towards collection of the debt.
TypologyDebt Collection Services • The debtor is a well known company in Antigua. • Discussions continue as to the amount of the debt, the legal cost and best course of action for collection is agreed. • The next day the law firm receives a call from an individual purporting to be a representative for the debtor. He states that the company does not wish to get into a legal debt collection procedure and would like to make arrangements to settle the matter out of court.
TypologyDebt Collection Services • He will be arranging for his USA office to send a cheque to cover 25% of the debt and will arrange to make regular monthly payments in settlement of the balance. • Within 2 days the law firm receives a cheque for US$20,000.00 from the debtors USA office and deposits same to their “Clients Account”. • Before the law firm can contact the “Financier”, he calls and requests that the funds less cost be wired to his Canadian bank.
TypologyPayment for Services • Bank receives a courier delivery containing a cheque for US$114,000.00 and all relevant information for deposit to a customer’s account. • The customer however expects a wire transfer for US$14,000.00. • The bank advises the customer of receipt but not by what means the funds were received. • The remitter notifies the customer that they had overpaid their bill by US$100,000.00 and requests a refund by wire transfer. • The customer complies but the cheque for US$114,000.00 is returned unpaid. Two different schemes – Same methodology!
Think like a criminal • Mitigation • Develop mitigation plans specific to fraud and money laundering. Address how the particular risk should be handled – what to do, when, by whom and how will it be done to avoid or minimize the consequences, the liability and the customer. • Develop an effective process to follow the money trail.
Return rates on Money Laundering • Estimates by experts place the rate of return on laundered funds at between negative 20-25% . i.e. Launder (invest) $100,000.00 Earn $75,000.00
Risk Management vs Marketing • Risk Based Approach • Systems and controls should reflect the degree of risk associated with the business and its customers • Take into account the greater potential for terrorist financing, money laundering and fraud which arises when the customer is not physically present
Things to Remember • Don’t ignore or downplay indicators that customers (or their associates) may be involved in illegal activities. • REMEMBER! • The fraud can be costly to you, your customers & the institution.
