This week, our Secret Crime Fighter uncovered a complex international money laundering scheme, connected to a well disguised pyramid scheme. Only by using intelligent transaction monitoring and looking at the bigger picture were they able to understand the extent of the crime. We think this typology is relevant for any foreign exchange company or bank that allows multi-currency accounts. But the learnings are relevant for any financial institution.
Our Secret Crime Fighter onboarded three seemingly unrelated companies from three different countries.
The first customer was an online verification company registered in Norway and first incorporated back in 2017. The company had a small online presence, which said that it provided verification services to a modular marketing company. There was no adverse media, and it received money from a well established payment processor. No big deal! Pretty low risk.
The second company was a modular marketing company that turned out to be the customer of the verification company. This company was registered in the UK, and had been incorporated in 2020. Whilst there was no direct adverse media for this company, it did have a sister company with a longer history, and there was a bit of adverse media coverage suggesting that this sister company might have been a pyramid scheme. So, there were indications that the modular marketing company could be higher risk, but nothing suggesting it was a scam.
And finally, our Secret Crime Fighter onboarded a company selling COVID-19 life insurance policies. This company was registered in the United Arab Emirates in 2020, had a genuine online presence, and no adverse media.
The only obvious connection between these companies was that money should have been flowing from the verification company to the marketing company, and that did happen.
But, what was unexpected was the flow of money from the verification company to the COVID-19 insurance company, to a company in South Africa, and to an individual based in France who had an email address indicating they were the founder of the marketing company. From this individual’s account, money was quickly moved out, predominantly being spent at car and motorcycle dealerships.
The flows looked something like this:
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Our Secret Crime Fighter could see these money flows because all the companies and the individual had accounts with them. But, there are a couple of important unknown social impacts that our Crime Fighter could not see, and are worth pulling out.
Firstly, the verification company was receiving actual personal information from consumers in order to get verified. It can only be assumed that this verification company will either sell these identities on to the highest bidder, or use them for scams in the future.
Secondly, our Secret Crime Fighter could not tell if the money the COVID-19 insurance company received, separate to the money coming from the verification company, was from individuals thinking they were actually buying life insurance. And if so, was that also a scam?
The classic pyramid scheme has had a lot of press time over the years, and a lot of consumers know to avoid them. Our Secret Crime Fighter believes that the modular marketing company involved in this crime was in fact running a pyramid scheme. By placing an additional verification layer and a separate company between the fraudulent scheme - in this case the marketing company - and the consumer, a mirage of legitimacy is provided. Criminals are finding smart ways to make regular scams look genuine, and they work.
Our Secret Crime Fighter’s transaction monitoring spotted the unusual movements of money generated by this scam and laundering scheme, and it was helped by some red flags that you should all be looking for:
As well as the above red flags, this typology demonstrates one other important consideration for all crime fighters out there, which is the need to look beyond individual customer relationships. Without zooming out and looking at payment and device connections, countries and internal transfers, our Secret Crime Fighter may never have been suspicious of the verification company at all.
Thanks for reading our latest Secret Crime Fighters newsletter. If you have an interesting typology that you’d like to share, we’d love to hear about it! Please email us at [email protected].
How Grasshopper Bank Saved 50+ Hours per Fintech Partner with Cable’s Automated Compliance Testing.png)
Why Fintechs Need 24/7 Automated Compliance Testing.png)
Expanding Compliance Testing: New Modules for Reg E, Reg B, and Reg ZThis week, our Secret Crime Fighter uncovered a complex international money laundering scheme, connected to a well disguised pyramid scheme. Only by using intelligent transaction monitoring and looking at the bigger picture were they able to understand the extent of the crime. We think this typology is relevant for any foreign exchange company or bank that allows multi-currency accounts. But the learnings are relevant for any financial institution.
Our Secret Crime Fighter onboarded three seemingly unrelated companies from three different countries.
The first customer was an online verification company registered in Norway and first incorporated back in 2017. The company had a small online presence, which said that it provided verification services to a modular marketing company. There was no adverse media, and it received money from a well established payment processor. No big deal! Pretty low risk.
The second company was a modular marketing company that turned out to be the customer of the verification company. This company was registered in the UK, and had been incorporated in 2020. Whilst there was no direct adverse media for this company, it did have a sister company with a longer history, and there was a bit of adverse media coverage suggesting that this sister company might have been a pyramid scheme. So, there were indications that the modular marketing company could be higher risk, but nothing suggesting it was a scam.
And finally, our Secret Crime Fighter onboarded a company selling COVID-19 life insurance policies. This company was registered in the United Arab Emirates in 2020, had a genuine online presence, and no adverse media.
The only obvious connection between these companies was that money should have been flowing from the verification company to the marketing company, and that did happen.
But, what was unexpected was the flow of money from the verification company to the COVID-19 insurance company, to a company in South Africa, and to an individual based in France who had an email address indicating they were the founder of the marketing company. From this individual’s account, money was quickly moved out, predominantly being spent at car and motorcycle dealerships.
The flows looked something like this:
Our Secret Crime Fighter could see these money flows because all the companies and the individual had accounts with them. But, there are a couple of important unknown social impacts that our Crime Fighter could not see, and are worth pulling out.
Firstly, the verification company was receiving actual personal information from consumers in order to get verified. It can only be assumed that this verification company will either sell these identities on to the highest bidder, or use them for scams in the future.
Secondly, our Secret Crime Fighter could not tell if the money the COVID-19 insurance company received, separate to the money coming from the verification company, was from individuals thinking they were actually buying life insurance. And if so, was that also a scam?
The classic pyramid scheme has had a lot of press time over the years, and a lot of consumers know to avoid them. Our Secret Crime Fighter believes that the modular marketing company involved in this crime was in fact running a pyramid scheme. By placing an additional verification layer and a separate company between the fraudulent scheme - in this case the marketing company - and the consumer, a mirage of legitimacy is provided. Criminals are finding smart ways to make regular scams look genuine, and they work.
Our Secret Crime Fighter’s transaction monitoring spotted the unusual movements of money generated by this scam and laundering scheme, and it was helped by some red flags that you should all be looking for:
As well as the above red flags, this typology demonstrates one other important consideration for all crime fighters out there, which is the need to look beyond individual customer relationships. Without zooming out and looking at payment and device connections, countries and internal transfers, our Secret Crime Fighter may never have been suspicious of the verification company at all.
Thanks for reading our latest Secret Crime Fighters newsletter. If you have an interesting typology that you’d like to share, we’d love to hear about it! Please email us at [email protected].
