In this data theft scenario, the IT support guy is like the butler in a classic murder novel; he did it. Adeniyi Adeyemi was an IT tech at Bank of New York Mellon. He confessed that he stole sensitive information belonging to 2,000 bank employees and that he used that data to steal more than US$1 million from charities. Technically: grand larceny, identity theft, money laundering, scheme to defraud, computer tampering and unlawful possession of personal identification information.

Adeniyi worked as a contract computer technician at the Bank’s Manhattan headquarters, and the data he allegedly stole belonged primarily to co-workers in the bank’s IT department. The police executed a search warrant at Mr. Adeyemi’s apartment on April 30, 2009. There, “investigators found dozens of Bank of New York employees’ credit reports on his computer, along with many other documents containing personal identifying information of more than 150 Bank of New York employees. In a storage locker Mr. Adeyemi rented, the investigative team found notebooks containing hundreds of names, social security numbers, account numbers, and other personal data, along with numerous credit cards in Bank of New York employees’ names. Investigators also recovered $30,000 in cash from Mr. Adeyemi’s apartment. Mr. Adeyemi was arrested in the course of the search warrant execution, and remained in custody ever since.

Adeyemi confessed to have stolen more than $1.1 million over an eight-year period from charities by transferring funds from the charities’ bank accounts into bogus accounts he’d set up using the personal information of his former co-workers, prosecutors say. He “input the charities’ banking details, including account and routing numbers, to set up wire transfers on the E*Trade and Fidelity sites from the charities’ account to his dummy accounts, and withdrew the stolen funds or transferred them to a second layer of dummy accounts,” the district attorney’s office said in its press release.

More than a dozen charities were victimized, including Goodwill Industries of Greater New York, the Jacksonville Humane Society and the International Association of Women Judges, all of which had publicized their bank account details in order to receive donations.

Adeyemi also admitted to stealing money from his former colleagues, taking control of their online bank accounts and then wiring money to his dummy accounts, the district attorney said. Wiring just under $10,000 at a time to avoid hitting the threshold at which all financial institutions must report transactions to the US Treasury, he is accused of stealing more than $128,000 from staff.

He spent the proceeds on U.S. Postal Service money orders, to pay his rent and credit cards, and to purchase goods that were then shipped to Nigeria, prosecutors said.

Interestingly, the fraud is reported to have been detected not by the bank or victims, but by the New York/New Jersey Electronic Crimes Task Force of the United States Secret Service, which began surveillance on Adeyemi after tracing suspicious Internet activity at his apartment. This investigation resulted in the search of his apartment and his arrest. This is probably just half of the story, but how the case exactly came to light is an interesting point.

How about contemporary standards for IT security in banks? Do IT staff really need access to client data at all? How about monitoring what IT staff (and bank staff for that matter) are accessing? Any red flags that should have been raised during his eight year rampage? Not only banks seems to be struggling to keep client data safe. If you look at the ‘ fraud triangle’, ‘opportunity knocked’  in this case.

http://www.businessweek.com/idg/2010-07-02/ny-bank-it-tech-pleads-guilty-to-data-theft-fraud.html

http://www.newyorkcriminallawyerblog.com/2009/10/bank_of_new_york_melon_compute_1.html

http://bit.ly/9dmraH

http://financialcrimeonline.com/archives/802

http://www.finextra.com/news/fullstory.aspx?newsitemid=20672

The hubby, a lawyer, was also in the plot. He was sentenced to 48 months for money laundering and receiving stolen goods. The brother was arrested when he tried to re-enter the US coming from Vietnam. The automaker ultimately was able to recoup $265,000 of the $889,000 from the Wells Fargo account.

Do trust your accountant? Double check on  him/her every now and then? Are you sure you only pay “legit” creditors? Better be sure. You would expect a company like KIA to have some controls in place that would have prevented this from happening. But hey, where there is a fraud in corporate environment, the controls were probably there (written down somewhere) but fraud awareness and adherence to standards are usually on the lower side of the scale.

http://bit.ly/bWXT6n

http://bit.ly/9cUYHN

“..Among the findings in the new report, which features a number of high-impact maps and charts that illustrate illicit flows and their markets are: Europe is the highest-value regional heroin market (US$ 20 billion), while the Russian Federation is now the single largest national heroin consumer in the world (70 tons). Countries that grow most of the world’s illicit drugs, like Afghanistan (opium) and Colombia (coca), receive the most attention and criticism. Yet, most drug-related profits are made in the destination (rich) countries. For example, out of a global market of perhaps US$ 55 billion for Afghan heroin, only about 5 per cent (US$ 2.3 billion) goes to Afghan farmers, traders and insurgents. The report shows that the North American cocaine market is shrinking because of lower demand and greater law enforcement, which in turn has generated a turf war among trafficking gangs, particularly in Mexico, and new drug routes..”.

UNODC states that crime has internationalized faster than law enforcement and governance. That is obviously not a new finding, as is this one: “Criminals are motivated by profit: so let us go after their money,” said Mr. Costa (UNODC chief), adding that “We must increase the risks and lower the incentives that enable the bloody hand of organized crime to manipulate the invisible hand of competition”. He called for more robust implementation of the United Nations Convention against Corruption, more effective anti-money-laundering measures, and a crackdown on bank secrecy:

“..That means strengthening integrity by implementing the United Nations Convention against Corruption. It also means stopping informal money transfers (hawala), offshore banking and the recycling through real estates that make it possible to launder money. In particular, governments and financial institutions should implement Article 52 of the anti-corruption Convention that requires Parties to know their customers, determine the beneficial owners of funds and prevent banking secrecy from protecting proceeds from crime..”.

The emphasis on financial investigation and asset forfeiture has increased world wide, as has the bank secrecy crackdown. But financial investigations are labor intensive, complex from an international law point of view and dependent on a commitment to dedicate resources that could also target other types of crime that allow a more direct ‘result on investigation’.

The difficulty to actual reduce (organized) crime is well described by this view on organized crime:

“..Today, organized crime seems to be less a matter of a group of individuals who are involved in a range
of illicit activities, and more a matter of a group of illicit activities in which some individuals and groups are presently involved. If these individuals are arrested and incarcerated, the activities continue, because the illicit market, and the incentives it generates, remain. Strategies aimed at the groups will not stop the illicit activities if the dynamics of the market remain unaddressed..”

The UNODC report has chapters dedicated to different types of crime. Financial crime, fraud and money laundering are not amongst them. UNODC understands that money is key to all types of organized crime so the financial aspect is touched upon in these chapters. Fraud is not a separate chapter; fraud is probably one of the types of crime that generates billions yearly. But while cocaine is cocaine all over the globe, the variance in fraud is significant. This makes fraud more difficult to measure. Let’s see if fraud makes a grand appearance in organized crime statistics someday.

The UNODC report, as always, is a great source of statistics. It describes recent developments in the major crime areas such as drugs, human trafficking and firearms. Just under 300 pages, give it a go on a rainy Sunday morning..

http://tinyurl.com/368dchp

The cash is brought into Mexico both in amounts small enough for an individual to carry and in amounts large enough to fill shipping containers. Revenue from local dealing operations across the U.S. is first consolidated in cities that serve as “collection points,” including Los Angeles, then moved to the border and broken up again for the cross-border leg of the transport.

In Mexico, where 75% of the formal and informal economy works through cash transactions, cartel bosses can launder their profits with all-cash purchases of large tracts of land, luxury hotels, cars, car dealerships and an endless array of high-end items.

The fight between the Mexican administration and the cartels claimed around 27,000 lives. As we speak the Mexicans are still not able to stop the violence, the inflow of money and related corruption.

http://articles.latimes.com/2010/jun/03/world/la-fg-mexico-cash-20100603

http://financialcrimeonline.com/archives/886

http://financialcrimeonline.com/archives/609

http://financialcrimeonline.com/archives/848

From a ‘fraud triangle’ point of view, we have 2 out of 3 covered already; rationalization (the pay cut) and opportunity (inadequate internal controls). Who knows what caused the (financial or psychological) pressure to finalize the triangle?

http://www.justice.gov/opa/pr/2010/June/10-crm-637.html

http://www.bankinfosecurity.com/articles.php?art_id=2602

Mayor Sanchez is suspected of tipping off and protecting the Beltran Leyva and Zetas drug cartels – gangs known for brutal tactics including beheading rivals. He had taken a leave of absence as Cancun mayor to run for governor of Quintana Roo state, known for turquoise Caribbean waters and white-sand beaches marketed as the Mayan Riviera.

On May 13, gunmen killed a mayoral candidate in a town near the border with Texas after he ignored warnings to quit the race. Several other candidates have received threats, and in some towns near the U.S. border, some parties couldn’t find anyone to run for mayor.

High-level corruption remains one of the biggest impediments in the fight against drug trafficking in Western Hemisphere countries that have become key smuggling corridors. In Jamaica, security forces are fighting supporters of a major drug trafficking suspect who has ties to the ruling party and is resisting extradition to the U.S. In Guatemala, the national anti-drug czar and police chief are under arrest in a case involving cocaine and slain police.

The Sanchez case will be another tough test for Mexico’s judicial system and its ability to successfully prosecute high-profile drug and corruption cases.

http://www.reuters.com/article/idUSTRE64P5ST20100526

http://www.huffingtonpost.com/2010/05/26/cancun-mayor-arrested-for_n_590013.html

http://www.latimes.com/news/nationworld/world/la-fg-mexico-cancun-20100527,0,1967342.story

During raids law enforcement officers have been seizing more and more stash houses full of euros, with the 500 euro note in a leading role. Estimates vary but it is commonly accepted that 80% of 500 euro notes are only used for shady business and cash stashes. The UK based Serious Organised Crime Agency (SOCA) says 90% of the 500 notes sold in the UK are in the hands of organized crime. A SOCA deputy director said 500 euros had become the currency of choice for gangs hiding their profits. SOCA says that an eight-month analysis of movements of the note in the UK revealed that it was almost exclusively used by money launderers shifting cash for major crime gangs.

With this pressure from law enforcement, exchange offices in the UK have stopped selling 500 euro banknotes because of their use by money launderers. The impact of this measure is not predictable but it will be more difficult to change smaller street money for larger denominations. Or does it? It will probably result in a new market for money launders. The 500 euro note obviously is not illicit itself; changes to larger denominations will probably go underground now in the UK, resulting in less CTR’s filed by bureaus de change. Let’s wait for the UK’s assessment of the effectiveness of the ban.

Remember the Canadian $1000 note? That was withdrawn because of crime (money laundering) concerns. The eurozone countries have announced no plans to withdraw the 500 euro note as of yet. Just a matter of time?

http://news.bbc.co.uk/2/hi/uk_news/8678886.stm

http://news.bbc.co.uk/2/hi/uk_news/magazine/8678979.stm

Sources claim the the investigation started when a drug trafficker informed the police about the banker’s role in a money laundering scheme. Based on the suspicions, investigators infiltrated a drug network and sought help from the banker to launder money that the police spy pretended came from trafficking, the government office said in a statement. The banker took the bait. Based on the suspicions, investigators infiltrated a drug network and sought help from the banker to launder money that the police spy pretended came from trafficking, the government office said in a statement. The Swiss government alleges that Holenweger made false representations to banks in the process, while the money from the offshore accounts was used by industrial giant Alstom to bribe officials to win projects and increase market share in foreign countries.

In March 2003 the UK Serious Fraud Office (SFO) arrested three Alstom executives in a corruption probe. UK sources claim that Alstom used money on an offshore account to bribe officials abroad for approx $65 million to secure contracts. According to Swisster, bribes – commonly labeled as “commissions” – were long seen as a way for European businesses to secure business in overseas markets but France outlawed such practices in 2000 after the OECD called for states to stop approving them. Alstom updated its code of ethics this year and maintains it now has “rules and control procedures at the best international standards”.

Banker’s taking customer service to the next (illegal) level; a blast from the past or still common practice? Some things really change.

http://www.swisster.ch/news/business/zurich-banker-charged-alstom-fraud-case.htm

http://www.businessweek.com/ap/financialnews/D9FHECQ80.htm

The (DEA) investigation apparently started when in 2005 dogs sniffed cocaine in an airplane in Miami. The money used to buy the plane was traced back to Mexican exhange houses; that is how the interest for the money flow from the exhange houses from Wachovia started.

Wachovia admitted offering correspondent banking services to 22 Casa de Cabio’s  (CDC) through three methods: wire-transferring money on behalf of third-party customers; accepting bulk cash transfers made by armored cars and other methods; and accepting checks and traveler’s checks put in pouches or digitally scanned through “remote deposit capture.”

From May 2004 to May 2007, Wachovia processed at least $373 billion in wire transfers on behalf of CDCs, the bank admitted. It processed $4.7 billion in bulk cash and $47 billion in ‘remote deposite capture’ deposits for all correspondent banking customers, including Mexican exchange houses, Wachovia admitted.

The case is USA v. Wachovia Bank, 10-cr-20165, U.S. District Court, Southern District of Florida (Miami).

http://www.businessweek.com/news/2010-03-17/wachovia-to-pay-160-million-to-end-laundering-probe-update1-.html

http://www.nytimes.com/2010/03/18/business/18launder.html

http://www.justice.gov/dea/pubs/states/newsrel/boston070208.html

http://www.poten.com/NewsDetails.aspx?id=10317976