ACFCS WebinarJune 19, 2015

Ask a Financial Crime Expert:Advance-Fee Mass Marketing Fraud

Schemes: The fraudster, victim and your organization’s role

Expert speaker: Rachel R. Heintz

United States Postal Inspector

Assistant Editorial DirectorAssociation of Certified Financial Crime

SpecialistsMiami, FL

Daniela Guzman, CFCS

Certification, News, Guidance, Training, Networking

CFCS Certification

The Credential That Demonstrates Competency and Skill Across the Financial Crime Spectrum

Ask the expert

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• Moderator will field questions as they come in• Recording of the presentation and presentation

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Rachel R. Heintz Inspector Rachel R. Heintz is currently assigned to the Mail Fraud Team of the United States Inspection Service’s (USPIS) Harrisburg Domicile, where her investigations center on fraud schemes involving the United States Postal Service. Inspector Heintz began her employment with the USPIS in February of 2014.

Prior to becoming an Inspector, Heintz was a Deputy County Attorney in Yavapai County, Arizona. In that position, she managed the Yavapai County Criminal Organizations, Fraud, and Financial Intelligence Network task force, instructed on a variety of legal topics throughout Arizona, and prosecuted felony level criminal violations, focusing primarily on white collar crime prosecution.

Heintz obtained a Juris Doctor from Hamline University School of Law in St. Paul, Minnesota, and a Bachelor of Science in Business Administration from Drake University in Des Moines, Iowa. Inspector Heintz is a member of the Arizona State Bar Association, Association of Certified Anti-Money Laundering Specialists, and the International Association of Financial Crimes Investigators.

Advance-Fee Mass-Marketing Fraud Schemes:

The fraudster, victim and your organization’s role

Rachel R. Heintz, U.S. Postal Inspector

Disclaimer

Some materials used in this multimedia presentation are the creative works of

others which are being used because they are in the public domain, because of fair

use, or through license or permission. This presentation was prepared in accord with the Copyright Act of 1976, 17 U.S.C. § 107,

and further use or distribution is not permitted.

Any views or opinions presented in this presentation are solely that of the

presenter and do not necessarily represent those of the United States Postal Inspection

Service.

THE UNITED STATES POSTAL INSPECTION SERVICE

And these types of fraud schemes are a big deal!

• During the 2014 calendar year, the Federal Trade Commission’s Consumer Sentinel Network (CSN) received over 2.5 million complaints– 60% of the complaints were reported as

involving various types of consumer fraud

– Customers reported paying over $1.7 billion to fraudsters

Federal Trade Commission. Consumer Sentinel Network Data Book for January – December 2014. February 2015

And these types of fraud schemes are a big deal!

• 2006 Survey by the Office of Fair Trading in the UK– 6.5% of UK adults (3.2 million people)

are victims of mass marketing fraud per year

– Reported losses due to fraud of $6.8 billion

– Less than 5% of people reported to law enforcement or regulatory agencies

Office of Fair Trading. Research on impact of mass-marketing scams: A summary of research into the impact of scams on UK consumers. December 2007.

And these types of fraud schemes are a big deal!

• 2008 study by the Australian Bureau of Statistics– 5% of Australian population had been

the victim of a fraud in the previous year

– Reported loss totaling $900 million

Australian Bureau of Statistics. Personal Fraud. 2007.

And these types of fraud schemes are a big deal!

• Lottery scams are an estimated $30 million annual industry in Jamaica

Testimony of Corporal Kevin Watson during USA v. Sanja Williams trial, May 2015.

• “Jamaican scammers make as many as 30,000 telephone calls each day to the United States telling people that they have won a non-existent lottery.”

Steve Weisman. Jamaican lottery scams often start as 876 calls. USA Today. February 21, 2015.

© Google

Mass-Marketing Fraud Schemes

“… any type of fraud scheme that uses one or more mass-communication

techniques and technologies – such as the Internet, telephone, the mail, and

even mass meetings in person -- to present fraudulent solicitations to numbers of prospective victims, to

conduct fraudulent transactions with victims, or to transmit the proceeds of the fraud to financial institutions or to others connected with the scheme.”

United States Department of Justice, Fraud Sectionhttp://www.justice.gov/criminal/fraud/internet/

Mass-Marketing Fraud Schemes

© Mille & Soeren

Bank and Financial Account Schemes(Fishing and Vishing)

Investment Opportunities(Altered Stock Price, Ponzi)

Advance-fee Fraud Schemes(Sweepstakes/Lottery, Romance, Grandparent, etc.)

© virtualhorizonstudio

Typical Advance-Fee Mass-Marketing Fraud Scheme

© ImageZoo

© ImageZoo

© Casey Page, Billings Gazette

Typical Advance-Fee Mass-Marketing Fraud Scheme

© ImageZoo

© ImageZoo

Blah, blah, blah.

Typical Advance-Fee Mass-Marketing Fraud Scheme

© ImageZoo

© ImageZoo

Typical Advance-Fee Mass-Marketing Fraud Scheme

© ImageZoo

© ImageZoo

Typical Advance-Fee Mass-Marketing Fraud Scheme

© ImageZoo

© ImageZoo

Typical Advance-Fee Mass-Marketing Fraud Scheme

© ImageZoo

© ImageZoo

Typical Advance-Fee Mass-Marketing Fraud Scheme

© ImageZoo

© ImageZoo

Examples of Advance-Fee Mass-Marketing Schemes

• Sweepstakes/lottery

• Grandparent scheme

• Romance scheme

• Hybrid scheme

• Fund recovery schemes

Moving the Money

• Products and services that offer fast money transfers include: – Bank wires– Money service

businesses• MoneyGram• Western Union

– Reloadable prepaid debit cards

• Green Dot MoneyPak

• Vanilla Reload Network

Written Statement of Green Dot Corporation For

Senate Committee on Aging Hearing

“Hanging Up on Phone Scams: Progress and Potential Solutions to this Scourge”

July 16, 2014

“… Based on dispute filings, we believe Victim Assisted Fraud represented approximately $30 million in cash

loads in 2013 out of total load volume of approximately $20 Billion, or approximately one-quarter of one percent

of loads.”

“…given the "Victim Assisted" nature of the fraud and our inability to completely eradicate this nefarious use of our

MoneyPak PIN product, Green Dot has decided to discontinue the MoneyPak PIN method of reloading a card altogether, and instead, move fully to the "card

swipe" reload process. This reload method requires the actual cardholder to be present in the store and swipe

the actual debit card in order to reload funds.”

Moving the Money

Moving the Money

Moving the Money

• Domestic Travel– Picking up funds

from a “sponsor”– Giving funds to a

someone believed to be working with you

• International Travel– Personally carrying

large amounts of funds to another country

– Dangerous

Moving the Money

• Innovative Funds Transfers– Precious Metals– Investing in low

value currency– Electronics

• Emerging Technologies– Cryptocurrency

Who are the fraudsters?

• Organized fraud syndicates located outside of the United States

Fraud Hot SpotsCanadaNigeriaJamaica

Costa RicaMexico

NetherlandsUnited Arab Emirates

… and more!

Who are the fraudsters?

Being a “scammer” is a way of life

“I spoke with two little boys, two students, who said they wanted to become scammers,” Watson says, “They said, 'Well, sir, we see scammers driving nice cars, and they have big houses and they wear nice clothes and party, and that's what we want.' I think young, impressionable minds like this now see this as a really easy way to make money.”

Public Radio International. Why some Jamaican kids want to grow up to be lottery scammers. May 6, 2015. http://www.pri.org/stories/2015-05-06/why-some-jamaican-kids-want-grow-be-lottery-scammers

Who are the fraudsters?

“Reparation” by VYBZ Kartel featuring Gaza Slim“Big up every scamma

Weh mek U.S. DollaBuild up di house fi yuh mama

Western union people fi gi wi more honorSlah, full-stop, comma

Every ghetto yute fi a live like Tony MantanaPresidental like barruk obama

Pool inna house and plane inna hangerWho say di scamma dem wrong

No, Hungry, poverty dat more wronger…”

Who are the fraudsters?

• Nigerian/West African

• Domestic participants– Middle men and

women– Victim network

• Other groups– Business

knowledge– Banking knowledge– Social engineering– Want/need for

funds

But they are not just fraudsters…

• What exactly is the fraud funding?– May 2015: London

police detain and then charge seven people in an elderly fraud investigation

– Proceeds of the fraud scheme were to fund and facilitate travel to Syria and Iraq to fight with the Islamic State

© Christopher Thomond for the Guardian

Find more information here: http://www.theguardian.com/uk-news/2015/may/07/five-charged-in-syria-investigation

Factors that Contribute to Victimization

• Individual Factors– Emotions– Loneliness/isolation– Greed– Confusion– Deterioration of

brain function– Threats

• Other Factors– Use of legitimate

names, logos, companies

– Technology

Challenges to Detection and Investigation

• Red Flags– If it sounds too

good to be true, it probably is!

– Working with a stranger

– No time to make a decision

– Secrecy– Change in behavior

Challenges to Detection and Investigation

• Challenges posed by the victim– May be tough to convince the victim of

the fraud– What is a scheme vs. what is

legitimate?– The victim may be your investigation’s

target– Fluidity of schemes– Threats of violence by fraudsters to

maintain compliance by the victim– Where and how to report?

Challenges to Detection and Investigation

• Challenges posed by the characteristics of the scheme– Could reach far outside your

jurisdiction or area of responsibility– Tracking is resource and time intensive– Tons of people between the victim and

fraudster– Use of legitimate business or entity

names• Including the use of U.S. Government

Agencies and law enforcement or judicial titles

Challenges to Detection and Investigation

• Challenges posed by the use of technology– Use of emerging technology– Use of fast money transfers – Shielding identities through a network– Anonymous communications– Allowing the fraudster to operate from

any location

How do we combat this epidemic?

• Partnerships– Law enforcement– Governments– Public and Private

Sectors– Communities

• Continue learning to (attempt to) stay one step ahead

• Awareness

Rachel R. HeintzU.S. Postal Inspector

Philadelphia Division | Harrisburg Domicile

RRHeintz@uspis.gov | Office: 717.257.2342

http://postalinspectors.uspis.gov/

Thank you.

• After the webinar ends, please make sure to fill out the short survey you will receive via email.

• And if you have any further questions, please contact us at dguzman@acfcs.org.