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Financial Crime Wave – Conviction in $600 million healthcare fraud, Bitcoin and pot sector, and more

Thursday, June 15, 2017   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
June 15, 2017

In this week’s Financial Crime Wave, a federal jury convicts a psychologist for part in $600 million healthcare fraud, the mushrooming pot sector finds savior in Bitcoin to ease banking woes, Trump travel ban causes wave of remittances to home countries, potentially obscuring interwoven illicit transactions, and more.


Federal jury convicts psychologist for role in $600 million healthcare fraud, faces decades in prison

A federal jury Monday convicted a former clinical psychologist for his role in massive healthcare fraud scheme involving a judge, kickbacks and more than a half a billion dollars in losses to the U.S. government. After a one-week trial in federal court in Lexington, the jury convicted Alfred Bradley Adkins, 45, of Shelbiana, Kentucky, of one count of conspiracy to commit mail fraud and wire fraud, one count of mail fraud, one count of wire fraud, and one count of making false statements. He faces more than 30 years in prison at his September sentencing. In the scheme, Adkins conspired with former SSA administrative law judge David Black Daugherty and former Kentucky lawyer Eric Christopher Conn to defraud the U.S. Conn and Adkins submitted false medical documentation to the SSA, and Daugherty awarded disability benefits based on the same, in order to have the SSA pay claimants’ current, future and retroactive disability benefits.

During the nearly eight-year scheme, Conn received more than $7.5 million of taxpayer dollars in attorney’s fees, and paid more than $600,000 to Daugherty, and approximately $200,000 to Adkins. In the scam, Adkins performed perfunctory evaluations of claimants referred to him by Conn and used boilerplate reports to detail conditions to support disability findings. He also altered his findings on signed forms prepared by Conn purporting to show that claimants qualified for disability benefits, whether or not they did. Conn then submitted these artificially disabling reports and falsified forms to Daugherty and other administrative law judges in support of disability determinations, (via the U.S. DOJ).

FDIC warns on 10 major frauds targeting bank customers, in bid to cool summer scammers

Banks customers must be warier than ever of random calls, emails and messages pressuring them to give up their bank account numbers or pay a fine for some imagined crime from people stating they are from the U.S. government. That is one of the key messages from the Federal Deposit Insurance Corp., one of the country’s chief financial institution regulatory agencies. In a bid to help customers not get too hot under the collar from summer scammers, the agency released an overview of the 10 schemes that banks need to be aware of, such as supposed government officials or investigators, like the Internal Revenue Service, attempting to scare a person into paying a fictitious fine – with a major giveaway being that payment must be done in prepaid cards and other wonky methods. The missive also illumines consumers and bank customers on basic defenses for everyday life to thwart fraudsters, particularly when dealing with strangers through e-mail, phone or Internet, (via the FDIC).


Trump travel ban has prodded migrants to send billions of dollars back home, opening the doorway to criminal groups moving illicit cash

Even while U.S. President Donald Trump’s travel bans have faced legal snags at every corner, the initiative combined with the stricter stance on immigration, has already resulted in migrants wiring billions of dollars back home, a move that could open the doorway to criminal groups trying to weave their dirty cash into the legitimate, now swollen remittance stream. As for Trump’s most recent iteration of the travel ban, the policy suffered another defeat after a US court upheld a decision blocking the revised ban on people from six mainly Muslim countries. In the revised executive order, the 90-day ban was to apply to people from Iran, Libya, Syria, Somalia, Sudan and Yemen. While the bill has not been absorbed into law as of yet, the repercussions of the executive order have been felt by minority groups across the US. One particular effect of the bill has been a surge in family remittances to several Latin American countries - with more than £55billion being sent home in 2016.

The increase during the first quarter of 2017 has been especially notable in remittances to Dominican Republic, Honduras, El Salvador and Guatemala - which have all registered increases of between 10 and 15 per cent over the same period of the previous year. While in Mexico, the year began with average figures but by March, the country saw a surge of 15.1 per cent. And many are putting this rise down to the “Trump effect” as immigrants fear the expulsions of undocumented migrants or the imposition of fees - such as those which Donald Trump has claimed will build his Mexico border wall, At issue, however, is that international organized criminal groups will use any surge in global remittance patterns – particularly involving higher risk countries – to attempt to more easily move illicit assets, hoping they won’t get picked up by bank anti-money laundering monitoring systems that are overwhelmed with the gushing of overall remittances, (via the U.K. Express).

Virtual currencies

Bitcoin helping pot operations with inability to open, keep bank accounts, having too much cash

Most people want to have more green, particularly if your business is ensuring your marijuana crop is verdant, and bringing in more greenbacks. But the industry – legal in a growing number of states for medical and even personal use, but illegal at the federal level – has been challenged in gaining and keeping bank accounts, which are vital for commerce. In most cases, once a bank finds out the company is a dispensary, or somehow connected to the cannabis sector, they immediately drop all accounts and ties – because, federally, that bank would be engaging in money laundering, moving the proceeds of a specified unlawful activity. But now, Cannabis companies are turning to the world’s most popular digital currency in an effort to get rid of all that cash. Enter bitcoin, the cryptocurrency that consists of digital coins “mined” by computers solving increasingly complex math problems.

At least two financial-technology startups, POSaBIT and SinglePoint Inc., use the cryptocurrency as an intermediate step that lets pot connoisseurs use their bank-issued credit cards to buy weed. Legal cannabis was a $6 billion industry last year and is expected to grow to $50 billion by 2026, according to Cowen & Co. Here’s how it works: Once a customer decides on which marijuana product to buy, an employee asks if he or she would like to use cash or digital currency, Lai said. If the buyer prefers the latter, the Trove employee explains that the customer can use a credit card to buy bitcoin through a POSaBIT kiosk, with a $2 transaction fee tacked on. The customer, who would now own bitcoin equal to the value of the purchase, can then redeem the currency in the store. Or the buyer can keep their bitcoin and use it anywhere else that accepts the currency. If the customer finishes the purchase in the store, POSaBIT, which pockets the transaction fee, then sends the value in U.S. dollars to Trove’s bank account, (via Bloomberg).

New AML bill looks to require virtual currency tallies at border crossings

A new bill currently working its way through the U.S. Congress would, if passed, add key terms such as digital currency, prepaid access device and exchanger or tumbler of digital currency to attempt to make it more difficult for criminals to move illicit cash into and out of the United States. The bill, S. 1241, dubbed the, “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017,” adds a bevy of other key changes to U.S. anti-money laundering (AML) laws, including granting federal prosecutors the ability to tack on money laundering changes in cases of tax evasion, and making it explicitly illegal to launder money through hawala and other informal networks. The bill doesn’t detail how the federal government would screen the virtual currency assets of individuals and businesses going in and other of the country, but is calling on other agencies to analyze how best to do this without slowing down global trade, commerce and tourism, (via the Bitcoinist).


Taiwan more aggressively taking on bank AML non-compliance

Taiwan’s financial regulator is getting more aggressive in penalizing banks for anti-money laundering failures, this week hitting Taipei Fubon Commercial Bank for more than $33,000 and, earlier this year, fining Chang Hwa Commercial Bank nearly double that figure. The violations center around failing to file reports of large cash transactions, a key indicator of potential financial crimes, (via Focus Taiwan).

Tax evasion

Australia prepares for CRS regime, Fatca on steroids

Australia prepares for the new Common Reporting Standard (CRS) regime, will apply to most managed investment firms starting next month, requiring operations to gather more details from new investors and overlay additional scrutiny and monitoring on current investors to look for indicia that they are foreign nationals, (via Hall & Wilcox).


Latvian scareware scammer faces U.S. justice

The U.S. government has extradited a Latvian cybercriminal who used “scareware” to cause millions of dollars in losses to individuals, businesses, (via the U.S. DOJ).

Cyber prankster impersonates corporate leaders, jaws with top bank execs

In a rare, more mirthful view of cyber attackers, an email prankster gets jibber-jabbering with top banking officials posing as their compatriots, (via Reuters).


Featured story: Transparency International takes a graphic look at country adherence, progress on FATF AML rules

In looking at the latest ratings by global anti-money laundering (AML) watchdog, the Paris-based Financial Action Task Force (FATF), while many countries tout improvement, overall the numbers are pretty bleak, according to Transparency International (TI). The anti-corruption body noted that, when analyzing the latest data points of largely compliant – the highest rating – to non-compliant – the lowest rating – overall country compliance is a paltry 25 percent across 30 countries assessed in the most recent round. The latest FATF country evaluations are more telling than past reviews as they focus more on the effectiveness and implementation of laws, such as assets seized and cases closed, rather than just technical compliance of having regulations on the books. But while 25 percent is definitely an improvement since 2011, when full compliance across 160 countries was at 12.3 per cent, taking 27 years since the standards were introduced to get to a 25 per cent compliance level “cannot exactly be called rapid progress,” according to TI, which offered the data in various charts and graphics.   

The few areas in which there is high compliance across countries include basic measures such as making money-laundering a criminal offence (Recommendation 3 – 87 per cent of 30 countries rated compliant or largely compliant), and requiring financial institutions to report suspicious transactions to the authorities (Recommendation 20 – 83 per cent of countries rated compliant or largely compliant). On the other hand, areas where the majority of countries are rated “partially compliant” or “non-compliant” include requiring firms to carry out due diligence in non-financial fields such as real estate, law and accounting (Recommendation 22 – 63 per cent of countries rated either partially or non-compliant) and making sure the authorities can identify the real owners of corporations to avoid the abuse of anonymous shell companies (Recommendation 24 – 73 per cent of 30 countries rated partially or non-compliant), (via Transparency International).

Want to lower overall AML costs? First, get to know the three main cost drivers, says analyst

To better understand and manage AML-compliance costs, financial institutions should look to cost drivers such as transaction-monitoring systems, customer due-diligence files, dashboards, etc., and focus on the core fundamentals necessary to create an environment with a robust AML-control structure that will add enterprise value. This initiative starts at the top with top executives and the board of directors, follows through with training up smart bodies, not just plying more bodies persistent and emerging problems and includes taking a more thoughtful, analytical approach to de-risking, according to one analyst, (via the International Banker).

Human trafficking

Bank alliance looking to identify, halt human trafficking with new training toolkit, “red flags” case studies

Bank financial crime compliance employees will have more tools to uncover and counter the scourge of human trafficking thanks to an alliance between top U.S. and foreign banks. The toolkit and related case studies, developed by the European Bankers Alliance and other groups – will be shared confidentially across the alliance, which was established in 2015 by the Thomson Reuters Foundation and includes Barclays, HSBC, Western Union, Standard Chartered, Deutsche Bank, Santander, UBS and Commerzbank.

The initiative also involves non-governmental organizations (NGOs) and law enforcement agencies in a joint response to rising concerns about the growth of trafficking rings operating across Europe. Nearly 46 million people globally are living as slaves, forced to work in factories, mines and farms, sold for sex, trapped in debt bondage or born into servitude, according to the 2016 Global Slavery Index by rights group Walk Free Foundation, (via


Group creates “RegTech” association, hoping to link regulations, technologists

Following associations on AML, fraud, financial crime, regulators, and others, group forms regulation technology, or “RegTech,” association, (via Bloomberg BNA).


Largest U.S. MSB on track in AML upgrade

Western Union hit key milestones in broad compliance upgrade to better counter financial crimes, (via pymnts).

Information sharing

Indian FIU struggling to capture, analyze, share detail on financial crime due to staffing shortage

India’s financial intelligence unit (FIU), which, like other countries, was created to capture details on suspicious activity, analyze the data, and get intelligence to law enforcement, has not been able to share any details on any potential cases of money laundering that is has uncovered for more than a year due to having less than half of the staff it needs. The FIU was positioned to be a critical piece of the government’s plan to monitor the movement in and out of the country of black money transactions after the demonetization of certain large denomination bills in late last year. Officials with the Finance Ministry said that the FIU was suffering from a massive staff crunch, due to which it was unable to show results or achieve the purpose for which it was created.

“It is not that they are not working, but they have not been able to justify their presence completely because of reasons unknown. They were created in 2004 with a specific objective to discover and curb black money transactions. However, how much they have been successful in it, especially after demonetization, is unclear,” an official said. “The FIU is working with less than 50% staff. Of the 75 sanctioned staff, only 37 are available as of now. The FIU has been forced to outsource some of its work because it does not have enough officials. Some of them have been hired for a short time on contracts. How do you expect the FIU to function in such circumstances? They deal with sensitive information and yet they have no choice but to share these details with outsiders whom they have been forced to engage with because of lack of regular staff,” another official, who is aware of the development said, (via the Sunday Guardian Live).

Cross-border payments

SWIFT getting swifter

Global payments firm SWIFT creates cross-border payment tracker, enabling international transfers to be tracked in real time, (via SWIFT).

Peer-to-peer transfers

Apple aiming to take a bite out of the money transfer market

Apple launching a peer-to-peer money transfer service, (via the TrueBlue Tribune).

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