“..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

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

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

This week the feds took down a ring of Medicare fraudsters in Florida. A physician and 29 nurses and health care operators got busted. The doctor is accused of accepting bribes to write prescriptions for about 1,300 homebound patients at Courtesy and other local clinics. But the patients didn’t need the prescribed diabetic, physical therapy and other costly services billed to Medicare, according to a federal indictment.

The arrests underscored the federal push to stamp out the latest fraud scheme in South Florida: billing Medicare for phony home healthcare claims such as treating diabetics who don’t have the disease. Previous schemes in the region, dubbed the nation’s Medicare fraud capital, were dominated by false claims for medical equipment and HIV infusion services.

Some patients were also implicated; they allegedly accepted kickbacks to use their medical files and medicare number for the false claims. Authorities said a patient was paid $100 for each prescription and referral to a home-care agency, and patients were given between $700 and $1,500 in monthly kickbacks for their Medicare numbers. Home-care operators also bribed patients with groceries, housekeeping, even flat-screen TVs, authorities said.

CBS news ’60 minutes’ ran a good story on Medicare fraud a good month ago. It documented non existing medical offices with registered addresses in shopping malls and strips full of pharmacies with hardly any patients visiting them. But the steady stream of invoices originating from these ‘fake’ offices are very real. And they get reimbursed by Medicare. CBS reported that according to the FBI, all you have to do to get into this business is rent a cheap storefront office, find or create a front man to get an occupational license, bribe a doctor or forge a prescription pad, and obtain the names and ID numbers of legitimate Medicare patients you can bill the phony charges to. “There’s a whole industry of people out there that do nothing but provide lists of patients, people’s names, Social Security numbers, addresses, and date of birth. With those four things, you can bill for a patient”. Medicare is obliged to pay the invoices within a month. It doesn’t have the resources to perform effective (fraud) controls on the waterfall of invoices. Medicare has just three field inspectors in all of South Florida to check up on thousands of questionable medical equipment companies.

Fraud is sometimes caught by patients earlier than Medicare. When patients review their Medicare statements and see all sorts of medicine and medical procedures they have absolutely no knowledge of, they ring the fraud bell. The FBI calls it “pay and chase”. First Medicare pays, then they chase. But the phony offices move every two months or so, just to be sure they won’t get caught. What an industry….. Guess what we would choose if we had to pick a criminal career; drugs or Medicare fraud?

http://www.miamiherald.com/news/southflorida/story/1383909.html

http://www.cbsnews.com/stories/2009/10/23/60minutes/main5414390.shtml

http://financialcrimeonline.com/archives/649

http://www.npr.org/templates/story/story.php?storyId=15178883

http://www.stopmedicarefraud.gov/

In Taiwan (heavy on gambling) , specially trained prosecutors watch baseball games for signs of game rigging. Professional baseball game rigging and related underground gambling have been rampant over the past two decades since Taiwan’s Chinese Professional Baseball League (CPBL) was launched in 1990. Over the years, some coaches and players have been detained and indicted for game rigging. In some cases, the coach instructed the pitcher and the other players on the team how to play in order to produce game results in line with the team owner’s plan. This allowed underground gambling rings to net huge winnings from their bets.

The German police is investigating 200 soccer matches for evidence of game rigging. The games include three Champions League ties, 12 matches in the Europa League, formerly the UEFA Cup, one qualifying game for the under-21 European championship. All took place this season. UEFA, the international soccer association, is involved in the investigation. By bribing players, coaches, referees and officials to influence matches, the gang is thought to have earned as much as 10 million euros (15 million dollars) in huge bets with bookmakers in Europe and Asia, primarily in China. The investigations allegedly targets around 200 individuals. 15 have been arrested thus far. More than a million euros in cash and property were seized.

Two of those arrested in Thursday included two Croatian brothers living in Berlin, Ante and Milan Sapina, who were at the centre of a match-fixing scandal that rocked Germany in 2004, newspapers said. The 2004 German scandal saw referee Robert Hoyzer jailed in 2005 after admitting receiving almost 70,000 euros (104,000 dollars) and a plasma television from the Croatian brothers to throw games.

http://financialcrimeonline.com/archives/14

http://www.chinapost.com.tw/taiwan/local/tainan/2009/04/09/203655/Tainan-prosecutors.htm

http://news.yahoo.com/s/afp/20091121/ts_afp/germanyeuropecrimegamblingfblger

The indictment alleges that the group used sophisticated hacking techniques to compromise the data encryption that was used by RBS WorldPay to protect customer data on payroll debit cards. Payroll debit cards are used by various companies to pay their employees. By using a payroll debit card, employees are able to withdraw their regular salaries from an ATM.

“..Once the encryption on the card processing system was compromised, the hacking ring allegedly raised the account limits on compromised accounts, and then provided a network of “cashers” with 44 counterfeit payroll debit cards, which were used to withdraw more than $9 million from more than 2,100 ATMs in at least 280 cities worldwide, including cities in the United States, Russia, Ukraine, Estonia, Italy, Hong Kong, Japan and Canada. The $9 million loss occurred within a span of less than 12 hours.

The hackers then allegedly sought to destroy data stored on the card processing network in order to conceal their hacking activity. The indictment alleges that the “cashers” were allowed to keep 30 to 50 percent of the stolen funds, but transmitted the bulk of those funds back to the hackers and other co-defendants . Upon discovering the unauthorized activity, RBS WorldPay immediately reported the breach.

International cooperation was a significant factor in the resolution of this case. In a joint investigation with U.S. law enforcement authorities, Estonian Central Criminal Police apprehended 4 suspects in Estonia earlier this year. Each is facing related charges in Estonia. One suspect is also in custody in Estonia and is pending extradition to the United States. Federal prosecution of the Estonian defendants has been closely coordinated with the Estonian Office of the Prosecutor General. Furthermore, cooperation between the Hong Kong Police Force and the FBI also led to a parallel investigation in Hong Kong, resulting in the identification and arrest of two individuals who were responsible for withdrawing RBS WorldPay funds from ATMs there. The Netherlands Police Agency National Crime Squad High Tech Crime Unit and the Netherlands National Public Prosecutor’s Office also provided significant assistance…”

“Last November, in just one day, an American credit card processor was hacked in perhaps the most sophisticated and organized computer fraud attack ever conducted. Today, almost exactly one year later, the leaders of this attack have been charged. This investigation has broken the back of one of the most sophisticated computer hacking rings in the world. This success would not have been possible without the efforts of the victim, and unprecedented cooperation from various law enforcement agencies worldwide,” said Acting U.S. Attorney Sally Quillian Yates of the Northern District of Georgia.

A similar breach occurred just after the RBS Worldpay breach was communicated within Heartland Payment systems, resulting in the exposure of data over 4 million cards. Suspects were arrested related to this data breach as well. Law enforcement apparently does a better and better job in the digital domain and is improving international cooperation at the same time.

Other than the direct result of criminals cloning cards and stealing money from the original card holder, which banks obviously will take as a loss, the related remediation costs are immense. Think of reissuing cards, fixing data security issues, beefing up other controls and the always difficult to measure costs of reputation loss. How much is the reputation of financial institutions nowadays anyway?

http://www.justice.gov/opa/pr/2009/November/09-crm-1212.html

http://allpaynews.com/content/rbs-worldpay-announces-compromise-data-security-and-outlines-steps-mitigate-risk-0

http://www.v3.co.uk/vnunet/news/2234680/heartland-reveal-massive-credit

http://www.theregister.co.uk/2009/02/16/heartland_card_fraud_arrest/

http://voices.washingtonpost.com/securityfix/2009/01/payment_processor_breach_may_b.html

http://financialcrimeonline.com/archives/540

Normand Marvin (Casper) Ouimet, a rotund 40-year-old Hells Angel who has been on the lam since April, was at the forefront of a conspiracy to take control of Quebec’s bricklaying industry to launder his dirty money, the Sûreté du Québec alleged yesterday. Ouimet was already one of the 10 most wanted men in the province, because of murder and drug trafficking charges produced in April in Operation SharQc, and was not among 10 people rounded up yesterday as the SQ made arrests in Operation Diligence, an investigation into organized crime’s grip on the province’s construction industry.

“Numerous companies were actually being sought after by Mr. Ouimet, or were intimidated by Mr. Ouimet,” SQ Inspector Michel Forget said while calling Diligence the biggest money-laundering investigation in the history of the SQ. SQ Inspector Denis Morin said Ouimet planned to create a consortium of masonry firms through “threats, intimidation and extortion.” Morin said Ouimet laundered money through masonry companies in part by paying bricklayers under the table. He then used the money to buy real estate and moved the profits from that into offshore investments, Morin said. The laundered money is believed to come from drug trafficking.

Morin said dirty money was also injected into masonry companies through fake invoices. Ouimet is alleged too have supplied invoices for consulting fees. If a firm turned Ouimet down in his scheme, threats were made, Morin said. This was followed by extortion used to take control of companies.

More than $9-million worth of assets allegedly linked to Ouimet have been placed under seizure orders.

Included among those arrested was Guy Dufour, 42, a representative with the Quebec Federation of Labour’s construction wing; real estate agent Roberto Amato, a 55-year-old convicted drug trafficker; and Jerry Purdy, 60, of Blainville, who is alleged to have ties to the West End Gang.

Forget said the arrests were the result of a probe that began two years ago while Ouimet and almost the entire membership of the Hells Angels in Quebec were investigated in Operation SharQc, which crippled the gang in April and produced several murder and drug trafficking charges against the outlaw motorcycle gang.

While investigators looked into Ouimet’s alleged money laundering activities, they came to realize he was muscling his way into masonry firms, Forget said. Among the more than 20 charges filed against Ouimet and Purdy at the Montreal courthouse yesterday are at least three related to LM Sauvé 2004 Ltd., a family owned firm whose president, Paul Sauvé, has alleged in media interviews that his company was plagued with problems generated by Ouimet.

A classic organized crime scheme; forcing your way into someone’s business. Unfortunately still also common scheme. When we talk about criminals infiltrating the business sector and money laundering, we often forget that businessmen do not always voluntary participate in money laundering schemes. Fear and greed can be forces of equal strength. In the end it is still about the money..

http://www.montrealgazette.com/news/arrested+construction+probe/2181299/story.html

http://www.theglobeandmail.com/news/national/quebec-corruption-crackdown-yields-10-arrests/article1350504/

“ICE’s bilateral cooperation between its foreign law enforcement partners has significantly furthered ICE’s mission to disrupt the criminal organizations that are smuggling narcotics into the United States and smuggling bulk cash shipments out, which they use to fund additional criminal activities,” said the Department of Homeland Security Assistant Secretary for ICE John Morton. “This seizure of more than $41 million has surely put a dent in the illegal activities of the individuals involved.”

“We recognize both the U.S. government and the Mexican authorities as our best allies in the fight against organized crime and thank and congratulate ICE for their support and collaboration,” said General Oscar Naranjo Trujillo, director general of the Colombian National Police. “We also praise the dedicated and professional work of 152,000 Colombian policemen that work day and night towards security and coexistence amongst Colombians and the work of the members of the Customs and Tax Police and the Anti-Narcotics Directorate. We are determined to bring to justice the suspected owners of these illegal funds, as well as other drug traffickers that through their illegal activities damage Colombia and its allied countries.”

Alfredo Gutierrez, chief of Mexico’s Tax Administration Service, said, “The data we collect electronically from the trade community on a regular basis and the data we receive from and crosscheck with our international partners is now processed through highly sophisticated systems and cutting-edge technologies. Our personnel have been trained to make the best of these instruments and the results are there.”

* On Sept. 9, Colombian customs inspectors and Colombian National Police (CNP) officers seized $11.2 million in U.S. currency hidden in two shipping containers, each containing 20 big bags filled with ammonium sulfate. Sixteen of the 40 bags contained $700,000 in $20 dollar bill denominations. The containers departed on a vessel from the port of Manzanillo, Mexico, destined to the west coast port of Buenaventura, Colombia. According to Colombian customs inspectors, this seizure is the most cash ever seized by police at a port in Colombia.

* On Sept. 10, a second seizure of U.S. currency estimated at $11.2 million was also seized at the port of Buenaventura.

* Additionally on Sept. 11, ICE Attaché Mexico City special agents reported that information developed by ICE Attaché Bogota agents resulted in a third seizure of U.S. currency estimated at $11 million discovered hidden inside two shipping containers containing sodium sulfate at the Port of Manzanillo, Mexico.

* On Sept. 14, ICE special agents along with Colombian authorities discovered in Buenaventura three additional shipping containers containing approximately $5 million in $100 and $50 dollar bill denominations concealed within bags labeled as sodium sulfate. These shipping containers also originated in Manzanillo.

* On Sept. 18, a second seizure was recovered in the amount of $2.15 million in $100 dollar bill denominations concealed within two containers with similar bags containing sodium sulfate aboard a vessel that arrived in Manzanillo.

The ports of Buenaventura and Manzanillo are key points of a well-known route used for smuggling cocaine northward to Mexico and then on to the United States, and for sending cash back into Colombia.

The ICE Attaché Bogota office is the lead U.S. law enforcement agency in this bulk cash smuggling investigation, with assistance from ICE Attaché Mexico City, the Colombian National Police, Colombian Department of Treasury, Mexican Customs, and the Mexican Assistant Attorney General for Special Investigations and Organized Crime (Siedo).

ICE is the largest investigative arm of the Department of Homeland Security, charged with enforcing a wide array of laws, including those related to financial crime, trade fraud, narcotics smuggling, cash smuggling, and others. ICE has taken a leading role in combating bulk cash smuggling, teaming in 2005, with U.S. Customs and Border Protection (CBP) to launch Operation Firewall, a comprehensive law enforcement operation targeting criminal organizations involved in the smuggling of large quantities of U.S. currency. The ICE Office of International Affairs (OIA) is a critical asset in this mission, responsible for enhancing national security by conducting and coordinating international investigations involving transnational criminal organizations and serving as ICE’s liaison to counterparts in local government and law enforcement.

Since its inception in 2005, Operation Firewall efforts have resulted in approximately 524 arrests and 3,275 seizures in the United States and abroad totaling over $260 million. Over $100 million has been seized by foreign authorities. In Jan 2007, Colombia authorities working in conjunction with ICE and other federal authorities found approximately $85 million in U.S. currency, euros and gold bars in five stash houses in Cali, Colombia. This is the largest cash seizure in Colombian history.

This will be a big blow to the cartels; and some people involved will be held accountable for the breach in operational security will… As it always is; someone’s loss is the other’s gain… Or is it? Anyway, it is all about the money and this is a great success.

http://www.ice.gov/pi/nr/0909/090928washingtondc.htm

http://www.youtube.com/watch?v=kSjEgYGdCPs&feature=player_embedded