Financial instrument fraud – a money laundering nexus

Concern is mounting in law enforcement circles internationally about the rising incidence of “financial instrument fraud” (FIF), in which victims are promised huge returns on securities such as medium term bank notes and debentures, certificates of deposit or standby letters of credit, all of credible-sounding but spurious origin. These scams relieve both individuals and firms of large sums of money and also provide a mechanism for criminals and terrorists to both generate and launder dirty money, says Steve Cullis of i2, the visual investigative analysis software provider. In this article he outlines some of the approaches, which will be followed up in a forthcoming issue of MLB.

As in most areas of criminality new technology is used to enhance the credibility of the fictitious instrument schemes, that purportedly offer huge returns for low or no risk, and the Internet is proving a perfect vehicle for their promotion. Just as in the case of the advance fee frauds (“Dear Sir, I work in a bank and have access to an account containing US$20 million, yes, TWENTY MILLION US DOLLARS. Unfortunately due to problems in our country it is not possible for me to transfer the money through a local bank but if you could send me your account details, 30% of the money is yours…”), the ‘419 scams’ that emanate from Nigeria, and now elsewhere, in large numbers, it is amazing how easily people are hooked into FIF schemes. In response regulators around the globe have even gone to the length of setting up their own websites and pretended to offer exceptional investment opportunities. The potential investor is asked for all sorts of information, both personal and financial, and progresses through the site to discover, finally, that all was not that it seemed. At least with these sites all that the individual receives is a salutary warning rather than a nasty shock in the shape of worthless paper.