• In this series, ACFCS takes a look back at our premier event of the year, Fincrime Virtual Week 2021, with key highlights, takeaways and snapshots of resonance and relevance through the eyes of an attendee: Mehrzaad Mogrelia, a forensic accountant, author, speaker and mentor in India.
• Mogrelia’s deep and detailed accounts and proficient and prolific social posts spoke to his passion for the field of financial crime and compliance and the value and knowledge of the speakers and topics.
• On the second day, speakers offered insight and thought leadership on the need to follow funds in the real and virtual worlds, the proliferation of zombie synthetic identities, along with the most victimized demographics and the importance of keeping a closer eye not just on blacklisted jurisdictions, but the countries near them that could be evasion “conduits.”

By Brian Monroe
bmonroe@acfcs.org
September 13, 2021

In this series, ACFCS takes a look back at our premier event of the year, Fincrime Virtual Week 2021, with key highlights, takeaways and snapshots of resonance and relevance through the eyes of an attendee: Mehrzaad Mogrelia, a forensic accountant, author, speaker and mentor in India.

More than 6,500 financial crime compliance professionals – current and former anti-money laundering officers and fraud fighters, regulators, investigators and watchdog groups – registered for ACFCS’ Second Annual Fincrime Virtual Week last month, with the overarching theme of empowering the community to be “Agents of Innovation.”

On the second day of the event last month, speakers offered insight and thought leadership in the areas of Counter-Proliferation Financing, Human Trafficking, Synthetic ID Fraud, Artificial Intelligence, Crypto Investigations, and more, with top discussion points related to the need to follow funds in the real and virtual worlds and keep a closer eye not just on blacklisted jurisdictions, but the countries near them that could be evasion “conduits.”

Mogrelia’s deep and detailed accounts and proficient and prolific social posts spoke to his passion for the field of financial crime and compliance and the value and knowledge of the speakers and topics. To read the full series, click here.

Here are some of his thoughts on Day Two:

Where to focus sanctions, counter-proliferation resources? Think conduit countries, dual-use goods

The first session was conducted by Mr. Andres Betancourt (Senior Audit Manager, AML and Sanctions at Scotiabank) and Ms. Togzhan Kassenova (Senior Fellow, Project on International Security, Commerce and Economic Statecraft at University of Albany, SUNY).

The session commenced by the speakers elaborating on the need and importance understanding why Proliferation Financing matters.

This was followed by a detailed discussion on effective measures that FIs can take to detect Proliferation Financing, which is legal or illegal weapons getting to groups not allowed to have them – in some cases in war-torn regions on international blacklists.

While typically involving complex investigations to uncover parties tied to proliferation financing, banks can stack the odds in their favor by having a good AML know-your-customer (KYC) Process, pushing to better understand a given company and its products to better divine a potential link to banned weapons or components, among others.

Along with FIs, there are four key regimes along with the World Trade Organization (WTO) across the globe (The Australia Group, The Nuclear Supplies Group, The Missile Technology Control Regime and The Wassenaar Arrangement) that have developed a list of control items in their respective regions.

The most vulnerable industries to proliferation financing were the Financial Sector, Maritime Sector and Virtual Asset Service Providers, among others.

They have also detailed some of the various illicit procurement techniques, like lying about the end user and use, shipping via third countries, and the like.

One speaker noted that non-sanctioned countries (also known as Conduit countries) can pose even greater risks than sanctioned countries as the private actors constantly use them to circumvent sanctions – as they typically won’t be given as much scrutiny as formally blacklisted regions – particularly countries with a propinquity to designated jurisdictions.

The session concluded with a famous North Korean case study on the use of a Foreign Trade Bank to give rise to Proliferation Financing in their nuclear program.

How hard is it to go after proliferators looking for components tied to weapons of mass destruction?

The short answer is Very. Why?

A seemingly innocuous term: dual-use goods.

Because in many cases, a component for a piece of medical equipment or machines used to freeze dry noodles and coffee, can also be used to craft weapons with devastating destructive capabilities.

“There are all these goods, components and technology readily available because we need them in our everyday life,” said Kassenova, the Senior Fellow at the University at Albany. “But they can also be used in weapons programs.”

These products are available on international markets, she said, making it harder for banks and import/export firms to divine they are tied to blacklisted groups.

“Those proliferators who want to build or expand their weapons proliferation program, they usually go to markets in the U.S. Europe or Asia,” she said. “That also means the payments for these types of procurements have to go through the formal financial sector.”

In short, that is the “choke point, one more line of defense, where financial institutions can minimize the risks and make it more difficult for actors like that to procure such items for nefarious purposes.”

Human, child trafficking on the rise, with most victims being women

Human Trafficking, especially Child Trafficking has been on the rise over the years and the efforts to prevent this has been constantly evolving with the evolution of technology.

The session on Techniques and Toolkits to take on Human Trafficking was presided over by Ms. Erin O’Loughlin (Senior Director, Training at ACFCS) and Ms. Kara Smith (Senior Targeting Analyst at DeliverFund).

The session commenced with some glaring numbers related to Human Trafficking in the US- 90% of trafficking victims are Females, 83% of the victims in the US are US Citizens.

The victims are mainly trafficked by cartels across the border and pay around $8,000-$12,000 per victim.

The session then highlighted the methodology of human trafficking investigation along with the sources like OSINT, Social Media through which information about criminals can be obtained.

“With drugs, you can sell it once. With guns, you can sell it once. But if you are selling sex, you can sell a person 10 times a day. Money is always the motivator of a human trafficker.” – Kara Smith, Senior Targeting Analyst at DeliverFund,

The session concluded with a brief look at the Fight Online Sex Trafficking Act (FOSTA) and the Stop Enabling Sex Traffickers Act (SESTA) — which added harsher penalties to sites knowingly supporting prostitution or sex trafficking.

Case Study: West Side City Crips, payment layering through prepaid, crypto

Beyond international organized criminal groups, low level street gangs have also used online ads, and the further complexities of virtual value, to monetize skin and sin.

In April 2016, federal investigators discovered members of the West Side City Crips gang from Phoenix, Arizona trafficking women out of a motel in El Paso, Texas.

Homeland Security Investigations found evidence through one gang member’s mobile phone and Bitcoin wallet that the group was purchasing Vanilla Visa prepaid credit cards, using these prepaid cards to purchase Bitcoin, and using those bitcoins to purchase sex ads on the now defunct online classified site, Backpage.  

Federal agencies seized and shut down Backpage and its affiliated websites in April 2018, with the founders and five others indicted on federal charges of facilitating prostitution and using foreign banks to hide revenues.

The bust roughly coincided with the U.S. government pushing and the President signing a pair of laws — FOSTA and SESTA — that made some listing sites warier with more stringent punishment for deliberate illicit site support.

In some estimates, the specter of the new laws and dominant player Backpage exiting the market led to a drop of more than 80 percent of online sex ad revenue – a gulf that was nearly refilled just months later with revenues rebounding some 75 percent, according to law enforcement analyses and industry estimates.  

Similarly, banks have had to quickly adapt, cognizant that when criminals lose one avenue to sell sex, they quickly find another.

With Backpage’s downfall, other sites, such as “Skip the Games,” among others, have seen a surge in use, allegedly by organized criminal, trafficking and sex worker groups, according to media reports.

The site portrays itself as a dating platform, though it is replete with pics of scantily clad women, some brazen enough to detail the sexual services they are willing to engage in – with nary of mention of pricing.

Prosecutors say the site handsomely profits from sex, while company representatives say they cannot always police the infiltration of illicit trafficking groups due to limited resources, and, to the contrary, routinely help and respond to law enforcement requests for information and assistance.

Why do criminals create synthetic identities? To make them do what you won’t

The session on the use of Synthetic Identities to commit Pandemic related Frauds was conducted by Mr. Steve Lenderman (Director, Strategic Fraud Prevention at ADP).

The session kicked off by talking about the different kinds of pandemic related programs targeted by the fraudsters like Payroll Protection Program(PPP) and the Economic Injury Disaster Loan(EIDL), among others.

The speaker then highlighted the actual meaning of Synthetic ID Fraud which is a fraud that involves the creation of a fictitious identity/entities.

Fraudsters target or make use of IDs that are not actively used, like senior citizens, children and the deceased.

This was followed by explaining the process of creating synthetic identities along with the various sources available online to create such IDs and documents.

The session then proceeded to throw light on the basics of Unemployment Insurance scams and requirements to obtain multiple payments to the same account, along with highlighting the frauds committed due to the complexities of the program.

In addition, the session illuminated some of the challenges to uncovering and prosecuting the frauds, like adequate training for bank investigators and inadequate IT and analytical systems to detect such frauds.

One of the final parts of the session focused on the Small Business Administration (SBA) Paycheck Protection Program that was passed under The Coronavirus Aid,Relief and Economic Security Act (CARES Act), that authorized up to $349 billion in forgivable loans for small businesses to cover their operational expenses.

It also emerged that almost 50% of PPP Lenders in 2021 were financial institutions (FIs) and the average PPP Approval rate was between 28-33 seconds, leading to an increase in PPP-related Frauds.

When AI and AML converge: mass layoffs or cause for hiring optimism?

The debate on Human vs Machine and the impact AI will have on job security has been a long standing issue for fincrime professionals, with some saying these systems will cause mass layoffs for lower-ranking compliance tasks, while others counter, no, banks could see more and better cases from tinkering with technology.

Sharing their expertise in this dialogue session were Ms. Chrissy Park (Senior Director of Product at Quantifind), Mr. David Creamer (Director, AML Solutions Delivery, Scotiabank), Mr. Fnan Desta (Senior Manager, AML, FIU at BMO Financial Group) and Mr. Hudson Martin (Assistant Director, Product Strategy at Bureau van Dijk).

The session commenced with the discussion around how AI will impact job security where the experts stated that AI and machine learning (ML) will aid in enhancing outputs rather than snatching away jobs as machines can never replace the expertise found in human intelligence and judgement.

Hence, effectiveness will come when both work hand in hand.

This was followed by the Dos and Don’ts of adopting Tech by FIs in their FinCrime Detection Programs, like not hiring the wrong skillsets, not implementing an AI/ML program on top of a program with fundamental weakness, among others.

Lastly, the session highlighted the areas where the most promising applications of AI/ML can be found in FinCrime prevention like Risk Assessment, Name Screening, transaction monitoring and data analytics, among others.

In magical mentalist show, a message for fincrime compliance professionals: anyone can be fooled

The human mind is complex and is the most important tool for us FinCrime professionals. Imagine if that is blown away through mere illusion.

That’s exactly what happened through the illusion show by Keelan Leyser, a former Brit who now lives and works in Las Vegas, with a virtual extravaganza of mentalism, digital wizardry and technology savvy.

In his shows, he seems to allow everyone to pick random letters, numbers, names, articles of clothes, regions, famous actors, but somehow guesses a future event, such as Jack Black, flying to Mexico to have chicken-fried rice – by already having a picture of the image drawn and pulled from a closed envelope, with a video predicting as well.