Week 4 - Fraud Typologies: MSBs & Invoice Fraud

Question 1

What are MSBs?

Answer 1

• Money Service Businesses
• Financial entities that provide services beyond traditional banking services

Question 2

What is the use of MSBs in ML?

Answer 2

• CONSUMER TO CONSUMER (C2C) MONEY TRANSFER
• abused by criminals to move money internationally with smurfing
• e.g. Western Union, Moneygram etc.

Question 3

How do MSB C2C transactions work?

Answer 3

1. sender enters MSB with cash
2. Agent sends transaction data to WU
3. WU issues MTCN (Money Transfer Control Number) to the sending agent
4. receiver goes to MSB with the MTCN.
5. Paying agent sends data to WU
6. WU confirms the transaction & allows payout

Question 4

How can MSBs detect illicit transfers?

Answer 4

• Large Transfers
• Evading reporting / authentification limits
• Smurfing or structuring
• Multiple transactions between the same people
• Suspicious Commonalities (same address etc., same transfer agent)
• No apparent business purpose

Question 5

Summarise invoice fraud & why it is used.

Answer 5

• common form of ‘document abuse’
• to INTEGRATE finances back to the launderer
• manipulation of invoices using either UNDER or OVER invoicing to transfer benefit from one person to another.
• used when the buyer & seller are connected or the same person

Question 6

Describe the process of UNDER INVOICING using an example.

Answer 6

1. A. UK Drug dealer. Has aircraft parts business.
2. B. Drugs supplier in hong kong. Orders some parts from A.
3. A supplies £50,000 worth of parts to B. Invoices for only £25,000 (half the value of the parts).
4. B recieves £50,000 parts for £25,000 & sells them on full price (£50,000). Now B has gained £25,000 of benefit.
5. B transfers this £25,000 benefit back to A by sending them £25,000 of heroin.

Question 7

Describe the process of OVER INVOICING with an example

Answer 7

1. A. UK drug dealer owns a UK car dealership.
2. A also has control of an offshore car parts company (via bearer shares) in Panama via a nominee.
3. B is this nominee (does not know that person A controls the business in panama)
4. A buys car parts from the panama company. Panama co bills for goods worth £500,000 (but they are only actually worth £100,000).
5. A pays £500,000 to Panama co.
6. Panama co ships the parts (worth £100,000) to person A.
7. Panama company now has a benefit gain of £400,000 (which has been transferred from person A).
8. Person A instructs person B to pay £400,000 from the Panama business account to his own offshore account.

Question 8

What is Teeming & Lading?

Answer 8

• used by people in control of the money in an organisation
• allocation of one customer’s payment to another customer’s account to make the books balance
• It creates a snowball effect that is hard to cover up

Question 9

An example of TEEMING & LADING

Answer 9

• Club has a number of bank accounts (& chequebooks) and a cash account 9that was recorded on paper)
• Treasurer with full control of accounts.
• record a payment to a service in cash. Steal the cash & pay the service much later by cheque.
• Small amounts each time (100s) but regular and over long period. Stole over £200,000 from the club.
• The entire cash account ended up being almost totally fiction ‘holding’ the £200,000 that he had stolen.