Tag Archives: Money Laundering

Asset Misappropriation Monday – Have a Dr. Pepper at Your New Beachouse

Hello, we’re back after a bit of a hiatus that included a couple of home remodeling projects that were, shall we say, challenging. All I can say is try to pay your contractors & vendors with a credit card whenever possible – disputing a charge can be a project-saver.

It’s also been a quite busy time in the fraud world. Seems like we’re particularly rich in employee embezzlement stories this quarter. Most of these stories are well, let’s face it: boring. Myrna the kindly, trusted bookkeeper for local business figures out that nobody but her is watching the main checking account for the septic tank cleaning business she’s worked at for years, and next thing you know she’s in Vegas at the high-roller slots and buying the entire Vera Bradley flowered-purse line on QVC.

Of course, Myrna eventually gets caught when the business owner can’t make payroll, gets suspicious, and hires a forensic accountant to figure out where all his money’s gone. Myrna tearfully pleads guilty, does some time in County lockup, and has to figure out a new way to pay for her Branson trips. Business owner keeps telling anyone that will listen that he still can’t understand how he got ripped off “because I only hire trustworthy people.” Lather, rinse, repeat.

It’s no revelation to anyone in the fraud field that there is still an extraordinary amount of denial in the business community about due diligence in hiring and implementing and maintaining robust preventive and detective internal controls against employee embezzlement. In my experience, owners and managers unconsciously divide people into “trustworthy” and “suspicious” categories with little more evidence than their own unconscious bias, brought to life by Fox News and their buddy who owns a bail bonds business. The research is clear – due diligence in pre-employment screening helps reduce the incidence of hiring career criminals, but there are many pitfalls – stay tuned for an upcoming two-part series on this blog about ways to minimize the likelihood of hiring every business owner’s nightmare – the serial embezzler.


I’m A Pepper, You’re a Pepper, We’re All Convicted…


PROVIDENCE, RI – A national sales executive for Dr. Pepper/Seven Up, Inc., a subsidiary of Dr. Pepper Snapple Group (Dr. Pepper), today pleaded guilty to charges that he submitted more than $1.7 million dollars worth of fraudulent invoices to Dr. Pepper through a promotions and marketing company he formed in his wife’s name. – USDOJ Press Release

As a reminder, if there’s anyone you know who MIGHT have, say, laundered Russian money through a series of inflated value real-estate transactions & then failed to declare the resulting income on their tax return…

“Wire fraud is punishable by statutory penalties of up to 20 years imprisonment and a fine of $250,000. Filing a false tax return is punishable by statutory penalties of up to 3 years imprisonment and a $100,000 fine.

Interesting.


When the Hunter Becomes the Hunted

A former state fraud investigator was sentenced Friday to two years in federal prison for bank fraud and money laundering.

Steven Arthur Knigge, 71, had pleaded guilty to the crimes, which took place over a three-month period in 2015 and involved people out-of-state and overseas.” – Rapid City Journal

What is interesting about this otherwise fairly conventional confirmation fraud/social engineering scheme is the fact that it appears that the perpetrator was also HIMSELF a victim of a Nigerian 419 scam, which is kind of mind-boggling, considering Mr. Knigge is a (now former) professional fraud investigator:

Knigge wired $30,000 of the fraudulently obtained money to people overseas, including $9,500 to Nigeria, which constituted money laundering.

“You were perfectly armed not to get caught in such a scheme,” U.S. District Court Chief Judge Jeffrey Viken told Knigge during his sentencing in Rapid City on Friday. Before retiring, Knigge worked for 32 years at the South Dakota Department of Revenue, where he was an auditor and fraud investigator.”

Judge Viken: “Dude, how did you screw this up? You’re supposed to be a pro! I’m sentencing you to prison because you were dumb and got caught!”


The Cryptocurrency Bubble Loses Some Air

NEWSFLASH: An anonymous method of transferring value has been…gasp…utilized by bad people to do bad things.

In a recent LinkedIn post, Chris McCall referenced crypto-fraud expert Greg Hays’ recent excellent article to drop some very revealing data points about crypto in general, and Bitcoin specifically:
Cryptocurrencies

  • 1,526 cryptocurrencies (coins & tokens)
  • 170 new initial coin offerings this year
  • $434 billion market cap for all cryptocurrencies
  • 5,000 cryptocurrency investment frauds
  • 1 SEC receiver appointed

Bitcoin

  • $150 billion market cap
  • 40% of Bitcoins are owned by 1,000 people
  • 17% to 23% estimate of all Bitcoins mined that have been lost
  • 70% of Bitcoin trading is in China
  • 30% of Koreans own Bitcoins
  • 98% of trading addresses have less than $100 invested
  • 58% of purchasers are under age 34
  • 20% of Bitcoin purchases are with debt
  • 802 total investors in the US have reported Bitcoin income to the IRS $172 million in hacks at prices at the time of theft
  • 1 hour to process a Bitcoin transaction
  • $28 transaction fee when most accounts have less than $100

Others are even more direct. Paul Ford at Bloomberg Businessweek ain’t having it, so to speak:

On the days when Bitcoin crashes, a holiday atmosphere takes over in my corners of the internet. People tweet screengrabs of Reddit fights. It’s always good fun to watch strangers grieve as their digital nonsense nickels melt into slag.”

That all of this adds up to money is ridiculous, and we should probably mock it more than we do

It’s a good read, and worth your time, even if you are a true believer (Full Disclosure: I’m not).


Music RecommendationFirepower, Judas Priest. Don’t question my inner 14-year-old metalhead’s musical taste! Just turn it up as loud as it will go, and hear how metal is REALLY supposed to sound.

Food Recommendation: The Z-Man sandwich from Joe’s Kansas City BBQ. I live a mile from one of the 13 places Anthony Bourdain says you must eat before you die. Life is good.

Until next time…Rock, Chalk, Jayhawk – Go KU!

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Fraud Friday: Ain’t Superstitious

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The truth always comes out. 13 is a very interesting number.

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The Beautiful Game (Of Money Laundering)

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Sorry to have been away so long, but now we’re back just in time for a veritable cornucopia of fraud-related news. Much more to come shortly, and I’m working on some ideas to provide additional in-depth analysis of fraud and internal-control failures both in the public and private sectors. So on to today’s debacle…

The FIFA arrests are top-of-mind for the collective consciousness of much of the world, and boy, they do not disappoint. Rather than rehash them, I’ll just link to this excellent analysis from Screamer, the soccer sub-blog for the sports-related site Deadspin, as well as provide a link to the 176-page indictment document in all its unvarnished glory:

Analysis: http://screamer.deadspin.com/how-many-ways-can-you-hide-a-bribe-the-best-of-the-fif-1707221505

Indictment: https://www.scribd.com/doc/266878681/FIFA-Indictment

This will be interesting to watch from a legal perspective, to see how the Justice Dept. applies the Foreign Corrupt Practices Act and the Foreign Tort Claims Act to prosecute. Perhaps we’ll try and solicit a guest post from an attorney who can shed additional light on this aspect of the case.

Finally, as we were writing this post, it appears that FIFA President Seth Blatter (awesome supervillain name, btw), has been re-elected to a fifth term, and has essentially become FIFA President-For-Life:

http://sports.yahoo.com/news/sepp-blatter-wins-fifa-re-election-the-old-fashioned-way-162620493.html

Favorite quote from the Yahoo story, and it is oh-so-true:

“If you grease the skids and take care of the corners then no amount of cries of scandal from the wealthy elite, howls from the media and complaints – or even convictions – of illegal behavior can unseat you.”

More as the case develops. Thanks for reading, and please feel free to suggest topics for future postings!

Now Here’s Some Rock Music:

Echosmith – Cool Kids

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Money Laundering Made Easy or, Remember Kid, It’s All About Location, Location, Location…

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Today we once again turn our attention to the fascinating world of international money laundering. As I mentioned in a previous post, it’s no secret that in recent years the US government has made a concerted effort to close the Swiss-cheese-like loopholes in both the federal tax and criminal codes that have allowed so many to essentially completely dodge their tax obligations.

However, yesterday a landmark piece of legislation called the Foreign Account Tax Compliance Act (FACTA) took effect that may essentially put an end to the time-honored tradition of stashing your ill-gotten gains/Nazi blood money/FIFA World Cup bribes/despotic-dictator-corruption-skim, etc. in a handy-dandy numbered Swiss account.

This is great news if you’re a law-abiding citizen of the world, or a sovereign government trying to collect taxes that it’s owed, but it may significantly complicate matters for the criminal underworld and big-time tax dodgers. After all, once you steal a billion dollars, you gotta launder a billion dollars. Ask any old-school mafioso or Russian oligarch: Cleaning the money is often more difficult than stealing the money.

Fear Not, Thou Amoral Criminal, New York Real Estate Brokers Have a Solution For This Conundrum:

As detailed by New York Magazine, and referenced by Alison Griswold in today’s Slate, money is flowing into high-end Manhattan real estate transactions faster than you can say “Jamie Dimon”:

http://www.slate.com/blogs/moneybox/2014/07/02/new_york_city_real_estate_launder_money_without_swiss_banks.html

The original piece by Andrew Rice, perfectly titled “Stash Pad,” is fascinating and well worth a read:

http://nymag.com/news/features/foreigners-hiding-money-new-york-real-estate-2014-6/

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