Week - 9: Fraud Methods Flashcards
Basic fraud via bank draft & sale (e.g. car sale)
- A victim advertises their car for sale
- offender contacts victim online & they negotiate until end of the week
- meet in a public location (car park etc) on Thurs eve or Fri
- offender arrives with fake bank draft for the full asking place or near to it. Deal made. Offender takes car
- victim doesn’t realise it is fake for many days or weeks later.
- while this has been going on the offender has been advertising & selling the car elsewhere for cash (slightly less). Meet on the weekend to sell
Now there are 2 victims, the original victim has no car and owes the bank the value of the draft. The second victim goes to register the car & it flags as stolen. They end up with no car & no money
How to investigate - will use fake names / email / phone etc BUT will use same wording on adverts - google power search & find a new one - use UC tactics.
Prime Bank Note Fraud
- basic idea is the offer to make large amounts of money trading ‘bank guarantee notes’ or ‘prime bank guarantee’
- high net worth individuals are targeted as victims. Often approach by other victims who are trusted by them (don’t knoiw they are being scammed)
- very large return promised 20-100%
- told to sign NDA
- term is usually a year & a day and has complicated language
- professional looking websites with ‘professional’ complex language and forums so everyone can talk together, build excitment
- fraudsters use various techniques like impersonating bank managers
- asked to transfer money to a bank account to ‘lease a note’ for the scheme. Told they have the chance to invest this note mulitple times & everyone in the group will profit by X amount. As soon as all the money has been transferred it is all taken.
- Low reporting rates
Explain Conveyancing Fraud (Business Email compromise - BEC)
- offender targets a legal firm who offer conveyancing infiltrate their email system & find a victim who is buying a house.
- Offender either creates a new fake email address that is very similar to the business one (e.g. .co.uk instead of .com or a typo in their name etc) or may even use the true business email they have compromised.
- emails victim with an urgent problem late in the week that needs uregnt money transfer. Pressure on victim to pay an amount immediately.
- they supply a bank account & money is paid.
- Offender disapears
CEO & Invoice Redirection Fraud (2 more variations of Business Email Compromise - BEC)
CEO Impersonation:
- offender intercepts or impersonates an email from company CEO
- sends instruction to junior employee to transfer funds to a specific account
another variation is invoice re-direction fraud.
- employee recieves a call or email on a Friday from a large creditor with urgent issue re payment that needs settling asap or the companies services will be lost. pprovide new bank account. Payment made to offender.
- company recieves a call or email from a ‘supplier’ who say they have changed their bank account. When routine invoice payment is made at the end of the month the payment is re-directed to an offender bank account.
Credit Card Fullz - How do criminals obtain the fulls required? Give an example
- OCG uses an insider in a hotel - e.g a night porter or receptionist with access to a computer.
- OCG gives the hotel employee stacks of cards at a time to find out the spending limit
- Hotels can run checks on residents cards to check they have the balance to settle their bill. No payment is taken.
- hotel employee does this check on the stack of cards and records each limit attached to each card
- OCG sell them online with the limits attached
Explain the key features of Vat Carousel Fraud (Missing Trader Fraud)
- Direct attack on the tax system of a country.
- Can occur anywhere there are borders & differnt tax regimes
- VAT (Value Added Tax) is paid by companies when they export goods out of the country
- Governments want to increase trade between common communities (e.g. the EU) so they allow refunds on VAT paid by companies
- the scam is that the VAT is never paid, but they claim a refund. So they gain 20% ish each time
- Costs Europe 60 Billion EURO each year!
- Funds other criminality. The professionals involved who make it work are likely to be money launderers.
Vat Carousel Fraud (cont) - How does it work?
- Company trading low bulk high value goods between at least 2 countries (e.g phones / computer chips / jewellery etc).
- the same goods move around in a chain between the same traders
- involves a ‘MISSING TRADER’
- Claim VAT refund as good exit one country
- But VAT never paid in first country (MISSING TRADER)
- appear to be part of a legitimate cycle with small profits recorded (indication on paper is a company with a v high turnover but v small recorded profits and v low volume of actual traffic of goods)
- Fake invoices & docs, no reality to trading pattern - unrealistic prices & sales, vast rapidlly increasing turnover (to generate larger VAT refunds). Will have unexplainable price drop somewhere in chain
- companies involved only deal with traders not retailers.
- payments to or from offshore companies
- transactions are within an internal ‘ring’ of criminal companies
- A third country is used to reduce the value of the goods down again & re-import to resume another cycle (to get more VAT refunds without ever paying any VAT)
Background methodologies: Offshore companies, offshore corporate bank accounts,
nominee companies, loan back and back-to-back loan schemes, third party financing and
incoming and outgoing payments wire transfer etc
Vat Carousel Fraud is based on Simple VAT Fraud. How does Simple VAT Fraud work (with example)?
- Company in Country A wants to buy a container of high value children’s toys. They get a VAT registration number in another EU member state. They can purchase goods free from VAT
- They purchase the toys (for 10,000) with no VAT added and sell them to another company with the VAT added (for 12,000).
- they take the 2,000 profit & disapear
Not used much now as too basic. VAT carousel fraud used which introduces more steps / complexities & obfuscation
Describe the Key Elements of a VAT Carousel Fraud Example
This example is all based ‘on paper’ - no real goods involved. It can work with real goods but it is not necessary.
Has 3 key elements:
BROKER, MISSING TRADER, BUFFER TRADERS. Also the original criminal supplier who buys the goods originally.
The BROKER is the key party. End of the cycle. Exports the goods & reclaims the VAT. A single broker could provide services to multiple carousel schemes.
The MISSING TRADER (the ‘misser’). This is the entity that IMPORTS the goods VAT free & sells them on. They sell them with VAT added but never pay the VAT.
BUFFER TRADERS can be added to provide distance between the misser and the broker.
Key things to note are that the profit of the enntrire chain will usually be the same as the amount of VAT reclaimed - hallmark of VAT fraud. Shows no legit business activity
Give an example of simple VAT Carousel fraud to demonstrate how it works.
Step 1. IRELAND SUPPLIER buys pallet of mobile phones
Step 2. UK MISSER buys them from Ireland (not VAT paid - zero rated for VAT). They later vanish and never pay VAT
Step 3. UK MISSER sells phones to a UK BROKER who pays VAT on them
Step 4. UK BROKER sells the phones BACK to IRISH SUPPLIER. BROKER claims back their 20% VAT refund.
Say the pallet of phones was worth a million £. They get £200,000 of tax payers money each time.
Vat Carousel Fraud - Points for Investigators
Misser is intended to be sacrificed. We will not find funds or assets there. People will be fronts or fictitious. Their bills will be paid by buffer traders or 3rd party (to avoid having the missing traders funds seized if discovered early)
A 3rd party or buffer trader will also pay the IRISH supplier of the phone on behalf of the Misser
buffer traders are entities that buy in one country and sells immediately / quickly to another. Often protected by criminals who want to keep using them on further cycles. Pay careful attention to the persons invovled in these.
The UK BROKER will deny any knowledge of wrongdoing by other parties.
INVESTIGATORS NEED TO FOLLOW THE MONEY.
Concentrate on the UK BROKER but also…
Investigate the people running the banking and admin of the companies, who is paying bills for the people directly in the chain. Need to obtain accountant’s records.
Check for STRs for all parties in the chain.
Remember the NET PROFIT FOR THE CHAIN WILL BE THE VAT RECLAIMED. Demonstrates absence of commercial process and identifies it as just a FRAUD.
