Looking for clues when there are none: Part II – How criminals obscure their identities

Donald C. Semesky

The traditional mindset of investigators when it comes to the use of nominees by the subjects of their investigations is connected to the ownership of assets; and that only trusted individuals or companies, that they can exercise some type of dominion and control over, will be used to hold title to their assets.

The logical conclusion to this mode of thinking is that the subject is not going to place valuable assets in the control of people or entities that the subject can’t control.  Many drug traffickers and other criminals have been caught using their family members as nominee owners of assets; because these individuals can never explain where they got the funds necessary to purchase the assets that are registered in their names.  However, as we know all too well, the smart ones learn from the mistakes of others, mainly from studying the investigative methodologies of government authorities.

What if the subjects had money launderers — as in the Wachovia case — that could provide one or more unrelated nominees, who would be willing to open bank accounts or give access to their already opened accounts, for the sole purpose of placing illicit funds into the banking system? Once the transaction is complete the funds are moved, the nominee is paid and has no knowledge as to the identity of the true owner of the funds. Once the funds are in the banking system, they are moved using a series of front or shell companies to their ultimate destination, where they are placed in a financial account usually in another front or shell company name.

To take this scenario one step further, what if, as some sources have claimed, there are individuals who can provide foreign financial accounts in the names of completely unwitting, legitimate people whose identities were stolen? With the free and commercially available search engines on the web, it is hard to open a financial account in a completely fictitious name at any institution that practices even a modicum of due diligence.

If required, identification documents can be easily obtained or forged, especially if the financial institution will accept scanned and e-mailed copies.  This scenario offers the account holder a significant advantage over the traditional front or shell company account, in that there will be no internal due diligence queries about who is the “beneficial owner” of the account. If needed, corporations can be opened using the nominee account identity as the beneficial owner.

Online banking offers further anonymity in banking transactions. If the unwitting nominee owner of the account is located in another country, and there are no local tax ramifications, there will never be a need to contact them.

In the above scenario there is no trail from the subject to the financial account, until he/she attempts to access the account through online banking, ATM withdraw, wire transfer or some other draft or deposit to the account. It is very difficult for the subject not to leave some trail to the account; however, there are a number of technologies that will help conceal online and telephone communications with the institution and the money launderer who arranged the account.

The following are just a few examples of these communications technologies:

Communications through online messaging using virtual game sites, such as Second Life:  Much has been written about the potential for laundering funds through the purchase and sale of virtual money, such as Linden dollars and Bitcoins; however, online conversations carried on in virtual games such as Second Life, are virtually impenetrable.

Blackberry device provider Research in Motion offers messaging outside of normal e-mails and texting: This messaging capability is only available for messages sent between blackberry devices using a unique pin number assigned to each device.  Pin-to-Pin messaging encrypts its messages from the sending device to the receiving device, making interception virtually impossible.  The message is captured and can be stored on the blackberry device; however, it does not appear in any e-mail account.

  • The Tor Network: Tor (short for The Onion Router) is a system intended to enableonline anonymity. Tor client software routes Internet traffic through a worldwide volunteer network of servers in order to conceal a user’s location or usage from someone conducting network surveillanceor traffic analysis. Using Tor makes it more difficult to trace Internet activity, including “visits to Web sites, online posts, instant messages and other communication forms”, to the user.  It is intended to protect users’ personal freedom, privacy, and ability to conduct confidential business by keeping their internet activities from being monitored. “Onion routing” refers to the layered nature of the encryption service: the original data is encrypted and re-encrypted multiple times, then sent through successive tor relays, each one of which decrypts a “layer” of encryption before passing it on to the next relay and ultimately the destination. This reduces the possibility of the original data being unscrambled or understood in transit. The software is open-sourceand the network is free of charge to use.Thus, communications with the money launderer through Second Life or pin-to-pin messaging and online banking access using the Tor network would make it very difficult for the investigator or the asset recovery specialist to discover any leads to assets or relationships accessed through these technologies. So how does the investigator or asset recovery specialist overcome these obstacles to track, identify and recover the illicit wealth of their subject? A combination of the following investigative techniques can be employed to overcome or work around most of the road blocks thrown up by subjects in their attempts to conceal their illicit wealth.
  • Search warrant: This is still the best technique for identifying hidden wealth.  The investigation should attempt to locate and document all locations over which the subject exercises dominion and control, as well as the residences of nominee owners, and the offices of professionals and money launderers who provide services to the subject.
  • Electronic surveillance/intercepts: They call it “money laundering” for a reason.  A good money laundering scheme will provide enough cover from falsified or created documents to stand up to scrutiny.  At times, even if the documents are blatantly false, the avenues for obtaining the documentation needed to prove their falsity may not be available to the investigator or asset recovery specialist.  However, people need to communicate their true intentions, even if it is to create false documentation.  Electronic surveillance/intercepts will not be available to the civil investigator.  However, for the criminal investigator, they could provide the leads to the subject’s true hidden wealth and the proof necessary to overcome the nominee ownership attached to this wealth.
  • Physical surveillance: Yes, computer weenies, sometimes you have to hit the streets and see who your subject is meeting with, where he/she is traveling to, where he/she is living, what vehicles he/she is driving, etc.  Surveillance helps place the subject with individuals or in locations which could help overcome the nominee ownership of assets by showing the subject’s dominion and control over them.
  • Global Positioning System (GPS): Most mobile devices are now equipped with GPS capability.  Working with the subject’s service provider, the investigator or asset recovery specialist could track the subject’s travel and stops to augment physical surveillance.
  • Communications: Notwithstanding the communications obstacles cited above, tracking your subject’s communications will develop leads to assets and relationships that will connect him/her to assets, money launderers, nominees, financial institutions, professionals, and co-conspirators.
  • Travel: Aside from being a lead to expenditures and possible financial accounts, a subject’s travel can develop leads to assets and relationships that will connect him/her to assets, money launderers, nominees, financial institutions, professionals, and co-conspirators.
  • Family and close associates: Fully documenting a subject’s family members and close associates is the best lead to identifying nominee relationships.  Oftentimes, when a family member is used as a nominee, the investigator or asset recovery specialist will have to conduct a separate financial investigation into that person’s wealth to overcome their alleged ownership of an asset.
  • Debit cards: Most offshore bank accounts come with debit cards to allow the account holder access to the account through ATM networks or through the use of the card to make purchases.  Tracking down the leads from asset acquisitions or expenditures could provide the lead to a debit card, and thus the lead to the offshore account.

Don Semesky is a member of the ACFCS Advisory Board and the former Chief of the Drug Enforcement Administration’s Office of Financial Operations in Washington, DC.