Page 26 - ACAMS-Today-V20N3

[ AML CHALLENGES ]
• The broker company usually has an address in a posh neighborhood in London or some other financial capital. However, Googling the address would usually show, at best, a nondescript office building but more often a residential property or a school.
• The “brokers” advertise aggressively on social media and online, often using techniques such as constant calling, stressing the urgency of the offer and scarcity of shares.
• The scammers often claim “expertise” such as “having worked” in big investment firms such as Goldman Sachs or BlackRock, and sometimes they even have carefully crafted LinkedIn profiles to back this up. Needless to say, all information is heavily distorted or simply fabri- cated. Curiously enough, the individuals almost never come up as brokers with active licenses. Consumers can best protect themselves by checking publicly available resources like Australia’s Financial Advice Register,8 the BrokerCheck9 registry provided by the Financial Industry Regulatory Authority (FINRA) or the U.K.’s Financial Services Register.10
It is best to keep in mind that the next time some tech unicorn’s pre-IPO shares appear on Facebook, if it sounds too good to be true, it probably is.
Initial coin offerings
Initial coin offerings (ICOs) are another relatively recent fraud phenomenon. While they can be legitimate, unfortu- nately they have been linked to fraud in several cases. Similar to how equity works, an investor is offered a coin with the promise that the coin will increase in value as the firm grows. This taps into the excitement surrounding cryptocurrency while also targeting more vulnerable investors who are unfamiliar with cryptocurrency and do not know how to vet firms operating in this industry.
In a recent U.S. Justice Department case, an individual was indicted for collecting funds for a soon-to-launch crypto
Typical ICO scammers use international payments and the fascination around crypto to target individuals
exchange who instead ran off with the funds. They used traditional fraud methods such as inflated claims of return and false identities.11 Typical ICO scammers use international payments and the fascination around crypto to target individuals. Some go as far as building credibility, such as releasing a fake news story purporting the entity was being purchased by a Russian firm.12 Even if victims attempted to validate the claims independently, they would see what appeared to be a legitimate source claiming the firm was authentic.
But how can one protect themselves and their institution from serving scammers?
The following red flags can be found in almost all recent crypto Ponzi schemes:
• The website: If possible, look at the creation date and expiration date of the website; this can reveal that the website will expire just within a few months.
• Advertising: The scheme is heavily advertised on social media and on blogs that seem to have few followers or have very few blog posts. Often the website and those blogs have similar design features and scripts, clearly indicating that these are made by the same people. Also, be wary of the “investment opportunities” using tactics of affinity fraud, which targets people within the same groups (e.g., church groups, clubs,
retirement homes, extended families and political affiliate groups).
• Review the team behind developing the coin: Google their pictures and their names and really go through their LinkedIn profiles to see if the experiences they claim actually add up, and if they have the following and endorsements they claim. Sometimes people use entirely false identities, like Kristijan Krstic, who pocketed $7 million in investor funds from B2G and Start Options. He was known to his investors under the alias “Felix Logan.”13
• Documentation: Do not trust companies that have not even posted a white paper of the project. Even the ones that have a white paper and good online presence may still end up selling false promises like the three Canadians behind the PlexCoin ICO scam, who ended up raising $8 million from unknowing investors.14
• Look out for any adverse media:
There is a good chance that the founders are connected to earlier failed investment schemes or similar ICOs that did not go anywhere.
• Connected brands: These schemes often claim connection to trusted crypto exchanges or known players in financial services. Often at least part of their revenues actually come from various crypto exchanges.
26 [ JUNE–AUGUST 2021 ]