fraud Archives - The Industry Spread

Jury Rules in SEC’s Favor, Finds Brokerage Firm and Two of Its Executives Liable for Fraud

May 20, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: brokerage firm, Executives Liable, final consent judgment, fraud, PAA, SEC, Securities Act

Washington D.C., May 15, 2019 — Jurors in Manhattan federal court today returned a verdict in the Securities and Exchange Commission’s favor against a brokerage firm and two of its executives.

The SEC charged the brokerage firm, Portfolio Advisors Alliance Inc. (PAA), Howard J. Allen, the indirect owner of PAA, and Kerri L. Wasserman, PAA’s president, with fraud and related charges in connection with making material misrepresentations and omissions in American Growth Funding II LLC (AGF II)’s private placement offering. The SEC alleged that AGF II, which raised capital from investors to provide loans to businesses, and its owner, Ralph C. Johnson, promised investors 12 percent annual returns and falsely claimed in offering documents that its financial statements were being audited each year. The SEC further alleged that PAA, Allen, and Wasserman knew the offering documents were inaccurate yet continued using them to solicit sales of AGF II securities.

Earlier this year, the SEC obtained a final consent judgment against AGF II and Johnson, who were charged with lying to investors who purchased AGF II’s high-yield securities.

Marc P. Berger, Regional Director of the SEC’s New York Regional Office

“Brokerage firms have a duty to truthfully disclose all material information about an investment recommended to their customers,” said Marc P. Berger, Regional Director of the SEC’s New York Regional Office. “Today’s jury verdict demonstrates that PAA and its principals, Allen and Wasserman, participated in this fraud to the detriment of their customers.”

The jury found PAA, Allen and Wasserman liable on all counts, finding that they violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The jury also found that Allen and Wasserman aided and abetted PAA’s violations of those antifraud provisions, and that Wasserman aided and abetted Allen’s violations of those antifraud provisions. In addition, the jury found Allen and Wasserman liable as control persons under Section 20(a) of the Exchange Act for PAA’s violations.

The SEC’s litigation is being conducted by Alexander M. Vasilescu, Richard Hong, Jorge G. Tenreiro, Karen M. Lee, and Raymond Chan. The investigation that led to the SEC’s litigation was conducted by Gerald Gross and Ms. Lee, with assistance from Thomas Feretic, Lisa Knoop, and Doreen Rodriguez. The case is being supervised by Sanjay Wadhwa.

CFTC Commissioner Endorses SWAP Regulation Framework

May 20, 2019 by Michael Volpe Leave a Comment Filed Under: Feature Articles Tagged: banks, CFTC Commissioner, energy markets, exchanges, Financial Crisis, fraud, industry, market, SWAP Regulation Framework

A Commodities Futures Trading Commission (CFTC) Commissioner threw his support behind the swap regulation framework which started in 2010.

CFTC Commissioner Dan Berkovitz made a speech at Energy Risk 2019 held in Houston, Texas earlier this week.

During the speech, he noted, “Over the past decade, the regulatory system for our financial and commodity markets has also undergone a remarkable transformation. Following the collapse of global financial markets in September 2009, the G20 convened in Pittsburgh to establish the principles that the nations of the world would follow to safeguard the global financial system. The core objectives established by the G20 leaders included raising bank capital standards, increasing central clearing and exchange trading for standardized derivatives, and fostering fair and transparent competition in our financial markets. Concurrently, the G20 leaders pledged to promote global energy security, the development of clean, sustainable energy supplies, and improved regulatory oversight of the energy markets.

Rostin Behnan, CFTC Commissioner

“In 2010, Congress passed the Dodd-Frank Act. This legislation created a new framework to regulate swaps, which had previously been unregulated. Congress directed the CFTC to write rules to decrease risk and increase transparency in the swaps market, including the registration of and business conduct standards for the large swap dealers, mandating that certain standardized swaps be cleared and traded on regulated facilities, and requiring that all swaps be reported to a swap data repository. In addition to broadening its jurisdiction to include swaps, Congress also gave the Commission new tools to prosecute fraud and manipulation.
“As a result of this new framework and the CFTC’s implementing regulations, our financial markets are safer and more resilient than they were in 2008. The mandates for swap dealer registration and swap clearing, trading, and reporting have been applied to large segments of the swaps market. Today, 105 swap dealers and 23 swap execution facilities are now registered with the Commission. Almost 89% of interest rate swaps and 96% of broad index credit default swaps are cleared through a central clearinghouse. Nearly 98% of all swap transactions involve at least one registered swap dealer.”

The framework which Berkovitz referred to started at the G20 Conference in 2010 held in Pittsburgh; at that conference- which brings the world’s twenty biggest economies- a new framework for trading swaps was agreed upon.

This new framework moved swaps, which trade over the counter, and provided much more oversight, including the introduction of clearinghouses.

Swaps, and particularly credit default swaps, were blamed for contributing to the 2008 financial crisis; credit default swaps are supposed to offload credit default risk by moving baskets of assets which banks have gotten too heavy in to other banks.

In the run up to the 2008 financial crisis, they were treated far more like a casino than a hedging tool.

Berkovitz, in the speech, also said derivatives “do not always evolve naturally within a given industry.”

He pointed to oil markets, once dominated by John D. Rockefeller, as an example; Rockefeller was famous for not only turning oil into an industry, but for being no fan of markets, exchanges, and competition.

At its height, his company Standard Oil controlled approximately 90% of all oil production in the US.

Berkovitz noted, “Rather it was the belief of John D. Rockefeller and his firm, Standard Oil, at the dawn of the age of oil, that commodity exchanges were a source of price volatility.
“It did not take long after ‘Colonel’ Drake drilled the first oil well in 1859, and the oil rush was on in Pennsylvania, for oil markets to develop.  At first, producers and buyers met regularly at specific locations to transact, and these gathering places soon evolved into exchanges.  The Titusville Oil Exchange opened in Pennsylvania 1871, and the National Petroleum Exchange in New York was founded in 1882. Both exchanges offered oil spot and futures contracts. Like markets today, the exchanges thrived when prices were volatile.
“Yet the nascent exchanges developed some very powerful enemies.  Rockefeller and the oil producers believed that speculators who were short selling futures contracts were causing volatility and depressing the price of oil.  So Standard Oil and other members of the Producers’ Protective Association stopped buying or selling on the exchanges, choking off their liquidity.  By the beginning of the twentieth century, the oil exchanges had collapsed.
“As one contemporary described it, ‘the regulation of prices by the Standard has eliminated the speculation in certificates entirely.’  For Rockefeller, it was not free markets, but rather firms acting together to avoid ‘ruinous competition’ and prevent uncontrolled speculation, that stabilized prices and brought benefits to the consumer.  Futures markets for crude oil and refined products would not reappear for nearly a hundred years.”

Berkovitz noted that despite Rockefeller’s dominance over oil, markets did eventually develop in oil, markets which continue to trade today.

“It turned out that Rockefeller also was wrong about the value of the exchanges. Suffocating the exchanges did not eliminate price volatility. Boom and bust would continue to plague the oil industry throughout its existence. But oil firms needed a way to manage this volatility. Although it would take another 70 years before oil futures exchanges re-emerged, once trading began it did not take long for industry participants to see the utility of these risk-management tools and embrace these markets.”

Why the Internet of Things (IoT) Could Cause a Power Cut

May 9, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: EFD, fake sextortion, fraud, IBAN, MELANI, Power Cut, risks, software, transfer fraud

Berne, 30.04.2019 – IoT devices can be misused to a large extent for cyber attacks, successful blackmail attempts (e.g. fake sextortion) as well as money transfer fraud with Office 365 access data and the main topic “Dealing with purchased risks in hardware and software”. The 28th semi-annual report of the Reporting and Analysis Centre for Information Assurance (MELANI) published on 30 April 2019 deals with the most important cyber incidents of the second half of 2018 in Switzerland and abroad.

The rapidly advancing digitalisation can only be mastered with corresponding hardware and software. The market is clearly dominated by US companies, with China in the fast lane and isolated global players in hardware and software, for example from Korea, Russia or Germany. The potential access to ICT manufacturers by the respective host countries leads to questions about how to deal with these risks properly. The 28th semi-annual MELANI report is dedicated to this problem in the key topic and deals with other current topics such as those described below.

Household appliances as triggers for a power failure

With the Internet of Things (IoT) all kinds of devices such as heaters and air conditioners are connected to the internet for remote control. This is practical, but also involves certain risks. According to a study published by Princeton University in 2018, it is quite possible that malicious actors could hack inadequately protected IoT devices, merge them into a botnet and misuse them for cyber attacks, such as a power failure. The semi-annual report highlights the problems and contains recommendations.

Extortion using fake sextortion

Since March 2018 countless fake sextortion emails have been circulating. In an email, the attackers claim to have compromising images showing recipients looking at pornographic websites. As “proof” for the authenticity of the claim, passwords or mobile phone numbers from previous data leaks are often mentioned in the email. The semi-annual report deals with this problem and shows the development of the various fake sextortion waves.

Office 365-access data used for transfer fraud

With over 100 million monthly users, Office 365 accounts have become a popular target for attackers. In the second half of 2018, so-called wire fraud occurred with Office 365 access data obtained in this way. This is what happens when fraudsters search for existing electronic invoices in compromised accounts, then copy them, add a different IBAN and redeliver them.

BCSC Panel Finds that Three B.C. Men and Two B.C. Companies Committed Fraud

May 6, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: BCSC, business, Enforcement section, fraud, investment funds, investment opportunities, Investments, investors, Mortgage Investment, real estate industry

Vancouver – A British Columbia Securities Commission (BCSC) panel has found that three B.C. men and two mortgage investment companies committed fraud against investors by dishonestly spending their investment funds.

Donald Bruce Edward Wilson, David Scott Wright, Patrick K. Prinster and DominionGrand II Mortgage Investment Corporation and DominionGrand Investment Fund Inc. provided marketing materials that would have led a reasonable person to believe their funds would primarily be invested in mortgages secured by real estate. But none of the investors’ funds were actually used for that purpose. Instead all of the investors’ funds were paid to related companies for start-up costs and for other purposes.

The panel further stated that any business person, especially three men with experience in the real estate industry like the respondents, would know that diverting investors’ funds from their intended investment in secured mortgages into unsecured investments in related parties would result in both the risk of loss and actual loss to investors.

Wilson, Wright, Prinster and DominionGrand II Mortgage Investment Corporation were found to have committed fraud with respect to 19 investments for $610,134; Wright, Prinster and DominionGrand Investment Fund Inc. were found to have committed fraud with respect to 21 investors for $506,693.

The panel will impose sanctions after considering submissions from BCSC staff and the respondents.

You may view the findings decision on our website, www.bcsc.bc.ca, by typing Donald Bruce Edward Wilson, David Scott Wright, Patrick K. Prinster, DominionGrand II Mortgage Investment Corporation or DominionGrand Investment Fund Inc. in the search box. Information about disciplinary proceedings can be found in the Enforcement section of the BCSC website.

About the British Columbia Securities Commission (www.bcsc.bc.ca)

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

A securities market that is fair and warrants public confidence
A dynamic and competitive securities industry that provides investment opportunities and access to capital

SEC Charges Truckload Freight Company With Accounting Fraud

April 28, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: accounting fraud, court approval, Criminal Division, Federal Court, fraud, Fraud Section, SEC, SEC investigation, Truckload Freight

Washington D.C., April 25, 2019 — The Securities and Exchange Commission today charged Indianapolis-based Celadon Group Inc. with an accounting fraud that allowed the truckload freight company to avoid disclosing substantial losses and misrepresent its financial condition.

In a complaint filed in federal court in Indianapolis, the SEC charged that between mid-2016 and April 2017, Celadon avoided recognizing at least $20 million in impairment charges and losses – almost two-thirds of its 2016 pre-tax income – by selling and buying used trucks at inflated prices from third parties. According to the complaint, as a result of the alleged scheme, Celadon overstated its pre-tax and net income and earnings per share in its annual report for the period ending June 30, 2016, and in its subsequent public filings for the first two fiscal quarters of 2017.

Joel R. Levin, Director of the SEC’s Chicago Regional Office
“We allege that Celadon knowingly engaged in a multi-faceted scheme to hide at least $20 million in losses from its investors, and lied to its auditors to conceal the scheme,” said Joel R. Levin, Director of the SEC’s Chicago Regional Office. “We will continue to hold issuers accountable for such serious breaches of trust to the investing public.”

The SEC’s complaint charges Celadon with fraud and with reporting, books and records, and internal control violations. Celadon admitted to those violations and agreed to a permanent injunction and to remediate the material weaknesses in its internal control over financial reporting. Celadon has also agreed to pay $7 million in disgorgement, which will be deemed satisfied by Celadon’s payment of restitution in an action announced today by the Department of Justice. The settlement is subject to court approval.

The SEC’s case against Celadon is the latest in a line of actions brought against companies or their executives for committing accounting fraud, by entering into sham agreements with third-parties, suppliers or customers, including SEC v. Tangoe, Inc. et al., 3:18-cv-01479 (D. Conn. 2018); SEC v. Axesstel, Inc., et al., 3:18-cv-01486-L-AGS (S.D. Cal. 2018); SEC v. Bhushan Dandawate, No. 18-cv-4927 (N.D. Ill., 2018); SEC v. Quadrant 4 System Corp., et al., No. 17-cv-4883 (N.D. Ill., 2017).

The SEC’s investigation, which is continuing, is being conducted by Jaclyn Janssen, Trevor Schumacher, Jonathan Polish, Thomas E. Vincus, and Amy S. Cotter of the Chicago Regional Office.

The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Indiana, the Department of Justice, Fraud Section, Criminal Division, the Federal Bureau of Investigation’s Indianapolis Division, and the U.S. Postal Inspection Service.

Silicon Valley Company Prosper Funding LLC Settles Fraud Charge for Misstating Returns to Investors

April 22, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: business, fraud, Fraud Charge, investment, investors, Misstating Returns, Prosper Funding LLC, Silicon Valley

Washington D.C., April 19, 2019 — The Securities and Exchange Commission today announced that Prosper Funding LLC will pay a $3 million penalty for miscalculating and materially overstating annualized net returns to retail and other investors.

San Francisco-based Prosper is a marketplace lender that, through its website, offers and sells securities linked to the performance of its consumer credit loans. According to the SEC’s order, from approximately July 2015 until May 2017, Prosper excluded certain non-performing charged off loans from its calculation of annualized net returns that it reported to investors. The order finds that, as a result, Prosper reported overstated annualized net returns to more than 30,000 investors on individual account pages on Prosper’s website and in emails soliciting additional investments from investors. Many investors decided to make additional investments based on the overstated annualized net returns. The order also finds that Prosper failed to identify and correct the error despite Prosper’s knowledge that it no longer understood how annualized net returns were calculated and despite investor complaints about the calculation.

Prosper Funding LLC
“For almost two years, Prosper told tens of thousands of investors that their returns were higher than they actually were despite warning signs that should have alerted Prosper that it was miscalculating those returns,” said Daniel Michael, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “As this case shows, we are committed to holding fintech companies to the same standards applicable to other participants in the securities markets.”

Without admitting or denying the findings, Prosper consented to the entry of an SEC order finding that it violated the antifraud provision contained in Section 17(a)(2) of the Securities Act of 1933. In addition to the penalty, the SEC’s order requires Prosper to cease and desist from future violations of Section 17(a) of the Securities Act.

The SEC’s investigation was conducted by Jason Casey and Daniel Nigro of the Complex Financial Instruments Unit. Laura Metcalfe supervised the investigation.

Toronto IMET Charges Part-Owner of a Mutual Fund Dealer with Fraud

April 18, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: fraud, IMET, Law enforcement agencies, mutual fund, Mutual Fund Dealer, Mutual Fund Dealers Association, Ontario, RCMP, RCPM, Toronto IMET, Toronto Integrated Market Enforcement Team

On April 12, 2019, members of the Toronto Integrated Market Enforcement Team ( Toronto IMET ) of the Royal Canadian Mounted Police (RCMP) charged Marilyn Dianne Stuart from Keswick, Ontario with fraud over $5,000 contrary to the Criminal Code of Canada.

Stuart was a principal at W.H. Stuart and Associates, a Mutual Fund company, located in the Greater Toronto Area. The charge relates to the alleged misappropriation of funds of the victim-investors. It is alleged that Stuart improperly diverted investor funds.

“The RCMP’s Toronto IMET program is grateful for the valuable support of the Ontario Securities Commission and the Mutual Fund Dealers Association,” said Karen Manarin, Special Advisor on Financial Crime.

On May 16, 2019, at 10:30 am, Stuart is scheduled to appear in the Ontario Court of Justice, Courtroom 201 at 10:30 am, 50 Eagle Street West, Newmarket, Ontario.

This complex investigation was led by the Toronto IMET. This specialized RCMP-led unit is mandated to protect the integrity of Canada’s Capital Markets by detecting, investigating and deterring capital market fraud, such as market manipulation and filing false prospectuses.

IMETs are located in British Columbia, Alberta, Ontario and Quebec and are funded by the Government of Canada and led by the RCMP. Their goal is to detect, investigate and charge those using capital markets to harm the economic interests of Canadians.

The RCMP would like to thank Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) for their assistance with this investigation.

Law enforcement agencies work diligently to make our communities a safer place to live, however your assistance in remaining vigilant and informing us of any suspicious activities will help us be even more successful. You can contact your local police, the RCMP in Ontario at 1-800-387-0020, or anonymously through Crime Stoppers at 1-800-222-8477 (TIPS), at any time.

SEC Charges Former Woodbridge Directors of Investment With Fraud

April 18, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: financial penalties, fraud, investment, Investment With Fraud, Investor Alert, Office of Financial Regulation, Ponzi scheme, SEC, Woodbridge Directors

Washington D.C., April 11, 2019 — The Securities and Exchange Commission today charged two former directors of investments at Woodbridge Group of Companies LLC for their roles in its massive Ponzi scheme. The defendants, California-based Ivan Acevedo and Dane R. Roseman, were separately arrested and charged by criminal authorities, along with Woodbridge owner Robert H. Shapiro.

The SEC previously charged Woodbridge and Shapiro, and Woodbridge’s highest-earning unregistered brokers. In January, a federal court in Florida ordered Woodbridge, related companies, and Shapiro together to pay $1 billion for operating this Ponzi scheme.

According to the SEC’s complaint, although Acevedo and Roseman were not registered in any capacity with the SEC, they were responsible for fraudulently raising at least $1.2 billion from more than 8,400 retail investors, many of them seniors, and together received more than $3 million in transaction-based and other compensation.

The complaint, filed in U.S. District Court for the Southern District of Florida, alleges that Acevedo oversaw Woodbridge’s fundraising for Woodbridge’s securities from 2012 until his departure in 2015, when he was succeeded by Roseman. According to the complaint, the defendants were responsible for hiring and training Woodbridge’s sales force, approved fraudulent marketing materials and sales scripts, and helped create the false appearance that Woodbridge was a legitimate operation when in reality it was a Ponzi scheme that used money from new investors to pay existing investors.

Eric I. Bustillo, Director of the SEC’s Miami Regional Office

“Instead of telling investors the truth – that Woodbridge’s third-party lending business was a sham almost from inception – we allege that Acevedo and Roseman worked diligently to perpetuate this sham by preparing and disseminating false marketing materials to induce more investments, keeping this massive Ponzi scheme afloat,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “The SEC is committed to continue to hold responsible parties accountable in this far-reaching scheme.”

The SEC’s complaint charges Acevedo and Roseman with violating the securities registration, broker-dealer registration, and anti-fraud provisions of the federal securities laws, and seeks disgorgement of allegedly ill-gotten gains, with interest, and financial penalties.

The SEC’s investigation, which is continuing, was conducted by Scott A. Lowry, Russell Koonin, Christine Nestor, and Mark Dee in the Miami Regional Office, with assistance from David Baddley, and supervised by Jason R. Berkowitz, Fernando Torres, Thierry Olivier Desmet, and Glenn Gordon. The litigation will be led by Ms. Nestor and Mr. Koonin under the supervision of Andrew O. Schiff. The SEC appreciates the assistance of the Florida Office of Financial Regulation, the U.S. Attorney’s Office for the Southern District of Florida, the Miami field office of the Federal Bureau of Investigation, and the Internal Revenue Service, Criminal Investigations.

The SEC’s Office of Investor Education and Advocacy has issued an Investor Alert to help seniors identify signs of investment fraud and, in conjunction with the Division of Enforcement’s Retail Strategy Task Force, another Investor Alert about Ponzi schemes targeting seniors. The SEC strongly encourages investors to use the agency’s Investor.gov website to check the backgrounds of people selling them investments to quickly identify whether they are registered professionals.

Operational Alert: Laundering of the Proceeds of Romance Fraud

April 12, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Bank, bank drafts, fintrac, fraud, mass marketing fraud, Money, money transfers, Operational Alert, Romance Fraud, romance fraud victims, social media platform, suspicious transaction reporting, transactions, victims

Romance fraud involves perpetrators expressing false romantic intentions toward victims to gain and then take advantage of their trust and affection in order to access their cash, bank accounts and credit cards. The Canadian Anti-Fraud Centre has found that romance fraud victims account for some of the highest dollar losses per year from mass marketing frauds in Canada. However, romance fraud is one of the lowest reported types of mass marketing fraud, because victims can be ashamed to come forward, or may be unaware or unwilling to accept that they are a victim.

The laundering of the proceeds of romance fraud largely resembles that of other types of mass marketing fraud. However, reporting entities—front-line employees, in particular—must be aware of contextual factors that both suggest clients are victims of romance fraud and might not be apparent from reviewing transactions alone. To that end, reporting entities, particularly financial entities and money services businesses, should consider the indicators set out below that relate to both victims and the transactions perpetrators of romance fraud carry out in combination with the indicators of mass marketing fraud listed at the end of this document. FINTRAC uses these indicators, along with other context and facts, to assess reporting entities’ compliance with their suspicious transaction reporting obligations.

Victims

Generally, perpetrators use fake profiles on social media or online dating sites—set up with stolen photos, and fictitious names and occupations—to contact possible victims. Once trust is established, perpetrators request financial assistance. Although the specific reasons perpetrators give for needing funds vary, they tend to focus on life-or-death medical emergencies, being unable to access their own money in a foreign jurisdiction (e.g., their bank account is frozen or their wallet lost or stolen), fees imposed by an international authority (e.g., taxes, customs or legal fees) and/or money needed to obtain more money (e.g., investments, inheritance fees, work equipment, wages). Reporting entities should be particularly attuned to clients telling hard-to-believe stories about why they are conducting certain transactions.

Indicators relating to romance fraud victims

Client met the individual they are transacting with on a social media platform, via email or on a dating website.
Client always, or almost always, communicates with the individual they met online by email or text.
Client has never met or has never seen the individual they are in the relationship with, and is often older than that individual.
Client relays a confusing, conflicting or non-believable story about why the funds are needed or the transaction is taking place.
Client is at a potentially more vulnerable stage of life (i.e., a senior or widowed, separated or divorced).
Client provides minimal or inconsistent information and/or avoids answering questions about the purpose of the transaction.

Transactions

Romance fraud generally involves victims carrying out transactions that do not fit their profile, including sending funds directly to individuals to whom they have no apparent connection. This type of fraud may also feature sudden increases in wires/email money transfers (EMTs). In some instances, victims sell or pool assets to fund transfers to perpetrators and/or third parties, sending increasing amounts over time as perpetrators gain their trust. These funds are generally sent domestically through wires/EMTs, and internationally by wire transfer through banks and money services businesses. Common international destinations for these transfers are the United States, Ivory Coast, Nigeria, Ghana, Burkina Faso, South Africa, Mali, the United Kingdom, Malaysia, Turkey, Philippines and Benin. Returned or cancelled transfers may indicate either that perpetrators have been caught or victims have realized they are being defrauded.

A money mule is an individual who, wittingly or unwittingly, transfers or transports funds on behalf of the perpetrator of a crime, or a money launderer.

In many cases, perpetrators attempt to have victims act, unknowingly, as money mules to move proceeds of crime to other victims, perpetrators and/or third parties. As a money mule, victims serve as intermediaries to distance the funds from the perpetrators and make transactions more difficult to track. The transactions conducted by money mules may resemble in-and-out activity, which could, for example, include multiple third-party transfers into the victim’s account followed by cash withdrawals. These transactions could also take the form of outgoing wires/EMTs or purchases of money orders/bank drafts. Reporting entities should be mindful of individuals conducting transactions at the direction of others (who may or may not be present at the time) or who do not have the expected information related to the transactions. In addition, victims may give perpetrators direct access to their bank accounts by disclosing online login information or sharing bank cards.

Indicators associated with transactions related to romance fraud

Client appears to be pooling all financial resources from various sources (e.g., credit cards, loans, retirement savings, insurance policies) and depleting assets (e.g., home, vehicle, investments and retirement savings) to fund transfers to individuals/entities.
Client sends funds to another individual, and the amount or frequency of funds sent increases over time.
Client is transacting with one or more individuals suspected of being either a victim or perpetrator of romance fraud.
Client is identified as a victim and is transacting with one or more individuals who are also identified as victims of romance fraud.
Client either cancels transaction for no apparent reason or transaction is refused due to questionable rationale for it.
Client makes payments to online dating services or social media websites.
Client conducts large volume and/or excessive number of transactions involving foreign jurisdictions over a short period.
Client receives funds from numerous individuals in multiple jurisdictions. The funds are then depleted by cash withdrawals conducted in Canada or abroad, or by wires to the benefit of individuals/entities in Canada or abroad.

Indicators of mass marketing fraud

Client conducts financial activity or holds accounts at multiple financial entities without adequate rationale.
Non-account holders or apparently unrelated individuals make deposits or payments to client’s account.
Client does not appear to know the sender of a wire transfer from whom the wire transfer was received, or the recipient to whom they are sending a wire transfer.
Client conducts transactions at different physical locations or with different representatives in an apparent attempt to avoid detection.
Account is used for pass-through activities (e.g. to receive and subsequently send funds to beneficiaries).
Client becomes defensive when asked about the rationale for a transaction and may take steps to close account or conduct transaction elsewhere.
Client orders wire transfers that are frequently returned or cancelled.
Client frequently deposits fraudulent cheques or bank drafts that are later returned by the financial institution.
Client appears to be directed by a third party to deposit funds into accounts or to wire funds to individuals domestically or in foreign jurisdictions.
Client sends and/or receives an increasing amount of wires/EMTs.
Client’s wire transfers involve amounts or jurisdictions that are inconsistent with their profile.
Client receives multiple incoming wires into a business account in a manner inconsistent with day-to-day business.
Client makes numerous third-party cash deposits followed by outgoing draft/wire transfers to or cash withdrawals in high-risk jurisdictions.
Client receives payments from payment processors that are inconsistent with the client’s profile.

Reporting entities may wish to advise victims of romance fraud to contact the Canadian Anti-Fraud Centre at 1-888-495-8501 and their local police.

Reporting to FINTRAC

To facilitate FINTRAC’s disclosure process, please include the term Project CHAMELEON or #CHAMELEON in Part G—Description of suspicious activity on the Suspicious Transaction Report.

MAS Bans Three Individuals for Fraudulent and Dishonest Conduct

April 12, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: CDSA, criminal conduct, Dishonest Conduct, Financial Advisers Act, financial advisory firm, financial products, fraud, HSBC, MAS, SFA

Singapore, 10 April 2019. The Monetary Authority of Singapore (MAS) has issued prohibition orders (POs) against two former bank employees and a former insurance agent for fraudulent and dishonest conduct. The individuals are:

Name	Duration of Prohibition Orders
Ms Emeline Tang Wei Leng, former representative of the Hong Kong and Shanghai Banking Corporation Limited (HSBC)	20 years
Mr Nguyen Duy Minh, former representative of United Overseas Bank Limited (UOB)	12 years
Mr Koh Zhan Loong John, former representative of NTUC Income Insurance Co-operative Limited (NTUC Income)	10 years

The POs were issued against Ms Tang, Mr Nguyen and Mr Koh following their convictions in the State Courts of Singapore for offences involving fraud and dishonesty. The three court cases are not related. The ban against the three individuals took effect from 5 April 2019.

20-year POs issued against Ms Emeline Tang Wei Leng

Ms Tang is prohibited for a period of 20 years from (i) providing any capital markets and financial advisory services under the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA); and (ii) taking part in the management of, acting as a director of, or becoming a substantial shareholder of any capital market and financial advisory services firm under the SFA and FAA¹.

She had deceived five individuals into handing over more than $5 million to her on the pretext of placing the monies into fixed deposit accounts with HSBC on their behalf. Forged documents were given to the victims to convince them that their monies had been deposited with the bank. In June 2018, Ms Tang was convicted of cheating and forgery offences under the Penal Code (PC), as well as offences under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) for using the proceeds of her crime. She was sentenced to 10 years and 6 months’ imprisonment.

12-year PO issued against Mr Nguyen Duy Minh

Mr Nguyen is prohibited for a period of 12 years from providing financial advisory services, acting as a director, or becoming a substantial shareholder of any financial advisory firm under the FAA².

He had sold fictitious financial products to his customers and forged documents to purchase financial products without their knowledge. He also misappropriated monies entrusted to him by a customer, instead of depositing it into the customer’s bank account as instructed. Mr Nguyen’s actions caused eight customers to lose approximately $500,000. In June 2018, he was convicted of offences involving cheating, forgery and criminal breach of trust under the PC, and offences under the CDSA. He was sentenced to 3 years and 9 months’ imprisonment.

10-year POs issued against Mr Koh Zhan Loong John

Mr Koh is prohibited for a period of 10 years from (i) providing financial advisory services, acting as a director, or becoming a substantial shareholder of any financial advisory firm under the FAA; and (ii) carrying on business as, and taking part in the management of, any insurance intermediary under the Insurance Act (IA) for a period of 10 years³.

He had misappropriated insurance premiums amounting to approximately $500,000, which he had collected from 11 customers. In June 2018, Mr Koh was convicted of one charge of criminal breach of trust under the PC and sentenced to 4 years’ imprisonment.

Mr Lee Boon Ngiap, Assistant Managing Director (Capital Markets), MAS
Mr Lee Boon Ngiap, Assistant Managing Director (Capital Markets), MAS, said: “MAS imposed POs of considerable duration against these individuals as they had abused their position of trust by engaging in criminal conduct at the expense of their customers. Their egregious misconduct caused considerable monetary losses to the victims. MAS will act firmly and decisively against financial services professionals who undermine consumers’ trust and work to keep such unsuitable persons out of the industry.”

*****

¹ The POs against Ms Tang were issued under section 101A of the SFA and section 59 of the FAA.
² The PO against Mr Nguyen was issued under section 59 of the FAA.
³ The POs against Mr Koh were issued under section 59 of the FAA and section 35V of the IA.