Internet Fraud

...depth look at money laundering, internet fraud and scams in general. Ciao does not have a specific category for what I will discuss, but this category suits the purpose for best of all and I hope will be of interest in any case.

As a background and for some kind of context - I work for the UK government preventing money laundering and terrorist financing.

My work consists of educating businesses who operate money transmission ...
...in associated activities such as internet scams; "get-rich-quick" schemes and other methods where people exploit the ignorant and greedy. For those who know my reviews this will not be funny or random; this is my day job (that I have not yet given up) and I hope the information here will help you increase your awareness; help you in the future and will reduce, if only by a few, the number of potential victims around for these fraudsters.
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Today, I would like to compose a somewhat in depth look at money laundering, internet fraud and scams in general. Ciao does not have a specific category for what I will discuss, but this category suits the purpose for best of all and I hope will be of interest in any case.

As a background and for some kind of context - I work for the UK government preventing money laundering and terrorist financing.

My work consists of educating businesses who operate money transmission services, bureau de changes and those who accept particularly large cash payments from customers.
I also enforce legislation which ultimately can lead to financial civil penalties and criminal prosecution leading to prison sentences.

I also have a keen interested in associated activities such as internet scams; "get-rich-quick" schemes and other methods where people exploit the ignorant and greedy. For those who know my reviews this will not be funny or random; this is my day job (that I have not yet given up) and I hope the information here will help you increase your awareness; help you in the future and will reduce, if only by a few, the number of potential victims around for these fraudsters.

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Contents:

1) (i) Internet Fraud and (ii) email scams
2) Money Laundering
3) Terrorist Financing
4) Money mules
5) Pyramid schemes
6) HOW TO REPORT
7) Useful Links

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1(i) Internet fraud

This area covers many acts of deception, but there is nothing mystical about internet fraud compared to other frauds, the only difference is that many do not understand computer coding "languages" and how frauds can be committed.

Phishing - is an unsolicited email that appears to come from a known person or company, but is actually from made up using pictures and information that looks like the official site. These emails will try to get you to give information over.
Placing an image on to an email is as easy as copying and pasting. Similarly so is placing any text in any font.
HOW IT WORKS
1) You receive an email
2) Email seems to be from famous company usually bank, etc
3) Email asks you for financial information or PIN
4) You click a link and input information
5) You try to buy a coffee and you can't - all your money is gone

WHAT TO LOOK FOR
a) If it arrives in the Junk Mail or Bulk Mail folder then the likelihood is it is a phishing email.
b) If you do not have a junk or bulk mail box go to your email options and turn it on (most are on as a default now). This second inbox is used for addresses you have never received from before (and can be re-directed with your permission)
c) Roll the mouse over any link BUT DO NOT CLICK - look in the bottom part of the web page frame. Here will tell you the webpage the link goes to. If it is not the site of the company i.e. www.companyname.com then it is likely a Phishing email.
d) Look at the email address - if it is not from the company in the email then it is likely a Phishing email (or at least someone trying to get a referral fee for you clicking through their email link)
e) If you are knowledgeable about computers you can turn on advanced routing options - this means instead of just the email address the email has come from you will see in the email header the entire route the email took with IP addresses.
f) ANY ABUSE SHOULD BE REPORTED TO THE FOLLOWING EMAIL ADDRESS: abuse@ the your email providers name e.g. abuse@ yahoo.com
g) Bookmark all your favourite sites - when you want to visit your favourite sites e.g. bank, credit card, shops then you should always use your bookmarks and not links in email or sometimes even links on other sites.

For money mule internet fraud e.g. courier services and car sales please see No. 5 below

(ii) Email scams
Some of (i) would be an email scam, but really what I want to discuss here is the plea for money types of mails which link in with the money laundering aspects I will talk about below.

Again any unsolicited email may well be a scam especially when they ask you for money to help a charity or person or even to sell a product (usually medicines or sexual help products)
NONE of these emails are real.
To many this seems obvious, but I repeat: NONE of these emails are genuine.
Even those that relate to actual charitable work in various countries which quote actual charity registration numbers or native contact details. There have been recent emails purporting to be from actual relief aid beneficiaries who quote local intervention exercises of the Red Cross, etc. If you contacted the charity they would confirm that the project is in operation and that money is going to certain areas, however if you were to send money as the spam email asks you to - it would be sent or diverted to criminal gangs in those areas (likely the ones who steal from the food trucks too).
HOW IT WORKS - 1
Trying to sell your car / or other expensive item
1) You receive an email
2) Email asks you to sell item (maybe with a request for more information and / or photos) (regardless of how much information you have put up already)
3) Email states complex business set-up and / or not in the country.
4) Buyer will "wire" or send a banker's draft many times the asking price (£10,000 car - buyer will wire £40,000)
5) You bank the draft / receive funds and then wire back the difference.
6) If you are lucky the banker's draft will clear
7) If you are not lucky the draft will not clear and the bank will ask you to honour the draft
8) In any case your wired funds will have gone leaving you triply out of pocket (money wired / banker's draft not honoured / product dispatched)
THIS IS KNOWN AS "MONEY LAUNDERING" and you will be a "MONEY MULE" if you take part in this.

Reason - you have accepted a large cash payment which WILL be from criminal sources. The money has moved through you and the transfer company and on from there which is hiding the original source of the money - as your payment appears "Clean"
THERE IS NO REASON FOR THIS MANNER OF BUSINESS OTHER THAN TO LAUNDER THE MONEY - MORE BELOW

HOW IT WORKS - 2
1) You receive email
2) Email tells you to transfer or "wire" money to named person
3) Named person may (or may not) actually work for the registered charity
4) Regardless of whether the named person works for the charity the money will be intercepted by someone with fake documents in the country
5) Your money will then be in the hands of potentially a terrorist gang and usually the same gang who steal from the aid trucks in the area.
A money transfer in reply to these emails would lead to either the recipient intercepting the transfer you make to the charity
THIS IS KNOWN AS "TERRORIST FINANCING" - see below for details

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2) Money Laundering

Money Laundering is the moving of criminal money through numerous institutions and people to make the money seem sourced legitimately. This is not a difficult or intelligent crime. The reason money moves through many places is purely in the hope that any authorities do not have the time or resources to follow it back to the original source, particularly as most money laundering is international which creates a problem for a national government.

When reading the above you may be wondering why someone would buy a £10,000 car to launder £40,000. That appears to be wasting £10,000.
This may be the case. Money launderers will absorb (sometimes quite high costs) just to obtain clean money at the end (especially if someone with a gun really wants it quickly)
Always be wary of a customer to your business who does not seem concerned about an exchange rate or cost.
Large scale money launderers will have a room, a house or a storage locker full of money and will take as long as they like to launder it and given that the cash must be "cleaned" sometimes a person will accept high costs and if they don't like the cost they will wait.

Car sales are notorious for money launderers and I myself had ten times more money launderers contacting me than I had actual buyers.

NEVER ENTERTAIN ANY SUCH OFFERS. THEY ARE ALL LAUNDERERS. A quick look at the advanced email options will show you that they come from IP addresses that are either not based in England or even IP addresses that change with each email even though emails could only be 5 minutes apart (an IP address is unique to one computer and can tell you exactly where the computer is based).

My work:
Money Transmission Companies - offer facilities to send money back home to families and many have helped enormously the people who come to this country in providing for their loved ones. However, these companies are also targeted by money launderers.

No criminal wants to be identified and so to avoid the limit for giving ID in this country they will split the transfer into many smaller parts, however they can be spotted as they all end up going to one person.
Alternatively, a launderer could employ people to send money so you may have many different people sending to one person - THIS IS CALLED "SPLITTING"

Sometimes a person may send money to many different people - this money will then later be rejoined back to one person again. THIS IS ALSO KNOWN AS "SPLITTING".

A way to avoid the issue of having to prove source of funds is to claim the money is from savings or a bank loan or even from a pay packet.
Without examining a person's incomings and outgoings it is hard to spot where money does not actually come from earnings (unless it is blatantly out of line with proven earnings)
Even if a customer offers proof of funds as a bank loan, etc it does not mean that the bank loan is where this money comes from.
I could for example go to twenty outlets with the same letter and I may have even a bank loan, but the bank loan money may have been blown on the 2.30 at Newmarket.

Bureau de Changes
A similar problem exists with bureau de changes; however the quickest way to launder money through the first step is to visit a bureau. Below the limit there are not required checks and instantly you have one stage removed from the actual first movement into the system.
Having exchanged your money you can then offer the bureau's receipt as proof of funds at the next stage which may be transmission to another country.

Large cash payments (KNOWN AS HIGH VALUE DEALS or HVDs)
This may affect some readers. If you business accepts large cash payments you have to be registered with HM Revenue & Customs (HMRC) BEFORE you take the cash. The current limit at 02/2008 is €15,000 in value.
The obvious target of a money launderer would be such businesses as €50,000 of criminal cash could be converted into a car, a house or twenty pallets of mobile phones or even tinned peaches.

If you come into contact with any attempt at money laundering or any time you have a suspicion then this ought to be reported (business registered with HMRC are obliged to report and must have processes in place to do so)

Money Launderers will tend to live outside their apparent means (spending cash at every opportunity - as they need to get rid of it) By spending criminal cash personally then can then transfer their own money (usually from a legitimate income) to the person who is owed from their own bank account.

Another tactic to transfer money around is to mix it with genuine legitimate money. Many people do this already. Someone that earns £50 for a one-off weekend job will not declare this money as income and neither really will HMRC really consider this a "crime". The money will then be mixed into their other money and used. THIS IS CALLED "SMURFING" (although I do not know why)
Laundering money through smurfing would be mixing criminal cash with legal income perhaps through a company as part of an expenses claim which reduces taxable profits and therefore increases the available cash of the company which can then be transferred as legitimate money with the source seemingly proven.

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3) Terrorist Financing

The issues here are identical to money laundering and mostly are interchangeable; however there is one stark difference here.
If I earn say £100million a year and I want Kosovo to be part of Serbia I might be inclined to send some money in helping Serbia retain the Kosovo area and if things got a little hairy I might be inclined to pay for some protection equipment i.e. guns. So even though I earn my money through perfectly legitimate means with no problem about where it comes from or even what tax I pay on those earnings, helping people buy guns to support a group which may not be a legitimate government (or even potentially funding a legitimate government) IS KNOWN AS "TERRORIST FINANCING".

It is my job to try to stop this kind of activity sometimes through education of legitimate traders so as they are aware of potential risks and also through enforcement of legislation by preventing certain people from operating or imposing fines (for non-compliance with legislation which could have left a business open to a money laundering activity).
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4) Money Mules and Parcel Mules
People may know what a drugs mule is and a money mule is essentially the same thing (and with new legislation people may even resort to swallowing cash in little pouches to get round personal allowances)
Money mules have been around for ages and with internet forums and community and part-time job sites the scheme has emerged anew.
HOW IT WORKS 1
See above re internet fraud

HOW IT WORKS 2
1) Job offer is posted
2) Job offer states you receive parcels from the warehouse for onward transfer
3) You receive a box to a PO Box address that you create
4) You repost the box to a new address
5) You are paid by wire or even Paypal for each successful receipt

Such job postings are ALWAYS MONEY MULE SCAMS. Perhaps you will get paid, perhaps you won't, however the scam is that parcels can be sent through the post and money can be exchanged, transferred thus laundering the cash.
Parcel mules tend to be recruited once and may even be paid, but often they are not, which means that one person has laundered one item and sent one consignment of drugs in the post.
Transfers are often seen coming from many different people and drugs mules are many different people which creates a problem for officers trying to identify where the next one will come from as moving something once is easy. Money Laundering and Drugs Mules rely on a vast turnover of "staff" to avoid detection by intelligence teams.

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6) Pyramid Schemes

Not so common now perhaps, although this is partly through a "rebranding" exercise. Many pyramid schemes are now "Multi-Level Marketing" or MLM; they were once called Matrix Systems.
MLM is not necessarily a pyramid scheme, however in order to succeed you have to involve yourself in a pyramid style selling method and this is the difference and this is what makes it legal.

Pyramid scheme are not really connected to money laundering and are a separate concern, however I include them purely to illustrate the de-frauding element.
If you send £1 to one person and get three people to sign up under you, you will make £2 profit and those three people get 3 people to sign up, etc, etc. MLM has referral levels where the person at the top gets a percentage of many levels deep, so you only start making money when you are around level 4 above the lowest in your pyramid.

The invention of E-Books is what has prevented many MLM concepts from being a pyramid scheme. The E-Book, in itself, is invariably either useless, simplistic and never really says anything of interest, but it is nevertheless a product and so the pyramid scheme is really about selling books....your honour.

Perhaps you are able to recruit people to buy the product and there must be a select few who do, but essentially this is nothing more than the top of the pyramid receiving its 5% from thousands of people and there are billions of people in the world.

The concern really is that without adequate contact details many companies never actually pay out the referral monies to their salesmen and so money is effectively stolen.

Pyramid systems works for the same reason that money mules work - each "victim" thinks that it might work the once.
IT WILL NOT WORK THE ONCE, but after you leave cheated there are thousands of other people who grow up to take your place.

As a side issue these small classified adverts about envelope stuffing are PYRAMID SYSTEMS also. No company needs people to stuff envelopes it is done by machine. These companies always ask you in the envelope received to send £39 or similar to receive your introduction pack. The pack merely asks you to post classified adverts and ask people to reply where you can then ask for £39. They do not want you to find them and that is why they are P.O. Box numbers.

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6) HOW TO REPORT

As every good citizen knows - if you know of a crime report to your local police constable:

However to help them out here are some direct links to report to:

HM Revenue & Customs - www.hmrc.gov.uk/mlr
Customs Confidential 24hr free phone hotline 0800 528 0506
For all money laundering and tax related reports

1) Metropolitan Police - http://www.met.police.uk/fraudalert

2) Serious Organised Crime Agency - www.soca.gov.uk

3) http://www.cybercrime.gov - for internet based crime

4) Europol - the EU Police Intelligence Network

http://www.europol.europa.eu

5) Interpol - The International Police Intelligence Network

http://www.interpol.int

6) FBI http://www.fbi.gov

7) Financial Services Agency - Professional body that supervising banks, accountants and the like

http://www.fsa.gov.uk

8) Direct page to unauthorised internet banks - usually those with similar names to actual banks http://www.fsa.gov.uk/pages/Doing/Regulated/Law/Alerts/internet.shtml

9) Companies House - records will show if a company is genuine and still active
http://www.companies-house.gov.uk

10) Good reference source and further explanation of some of the issues discussed above
http://www.banksafeonline.org.uk

11) A loner gunman as it were in the fight against cyber crime who knows far more about zombie botnets and other matters than I ever will
http://www.bobbear.co.uk

I hope this has been a rudimentary trip in money laundering and cyber crime territory please look into the other sites for further details and the many other sites around. If you are reading this endnote the chances are that you are aware enough not to fall victim to these scams, however as people get wise the fraudsters get smarter; it always pays to maintain your vigilance.

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Relevant Legislation - all current UK legislation as amended can be found here:
UK Statutes and Regulations - http://www.statutelaw.gov.uk/Home.aspx

EU Regulations and Directives - http://eur-lex.europa.eu/RECH_menu.do?ihmlang=en

THIS SITE IS EXCELLENT (just click on the country)
Anti-money Laundering Laws around the world -
http://www.anti-moneylaundering.org

Money Laundering Regulations 2007 (previously 2003 Regulations)
Payment Regulations 2007
Proceeds of Crime Act 2002
Control of Cash (Penalties) Regulations 2007
Commissioners for Revenue & Customs Act 2005

Finally,
In time honoured fashion these reviews shoud appraise the topic discussed with a view to you making a purchasing decision.
So in conclusion - I would not recommend money laundering or becoming a drugs mule to anyone. 

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