As we close in on the one-year anniversary of the formal declaration of the COVID-19 pandemic as a national emergency in the United States, it is impossible to deny the exponential rise in diverse criminal activity of the cyber variety and the new wave of ploys seeking to capitalize on the “stay at home” phenomenon. Unlike the novel Paycheck Protection Program (PPP) fraud, unemployment fraud, and new identity theft/phishing schemes covered by Global RADAR over the past year, the latest trend in the realm of white-collar crime is a tad more unorthodox. The pandemic has had a significant and truly unique impact on social interactions – both in the workplace and in the general public – as strict social-distancing requirements and remote operations seen across America and abroad are likely to continue for the foreseeable future. Devoid of the daily interactions that were once a staple of pre-COVID life, many around the world have found themselves isolated, depressed and clamoring for a sense of normalcy in their social and romantic lives. This desperation can lead to letting one’s guard down, opening avenues for criminals to capitalize at the expense of unsuspecting individuals – and capitalize they have.
A study recently released by the United States Federal Trade Commission (FTC) found that reported losses related to romance scams reached record numbers in 2020. In the United States alone, nearly 33,000 scams accounting for a whopping $304 million were reported lost altogether (with unreported totals likely exceeding this figure), with an average individual loss of approximately $2,500 per person.6 Altogether, from 2016 to 2020 reported total dollar losses increased more than fourfold, and the number of reports nearly tripled, however the total reported for 2020 is up nearly 50% from 2019 values, demonstrating the impact of coronavirus-related restrictions on white-collar crimes of this nature. Arguably the most troubling aspect of this trend is the fact that it has the power to affect much of the developed world given the growing reliance on cyber-processes and the increasing availability of potent technologies to the masses. Also contributing to the rise in romance-related crimes is the fact that the previous stigmas surrounding internet dating have all but disappeared over the past decade. Gone are the days where online dating was reserved solely for elder divorcees and widows seeking a second chance at love. The growing societal shift towards technology has opened new doors for individuals of all ages to connect with others across the globe via social media applications, networking sites and online dating platforms such as Tinder, Bumble and many more. In 2019, over 30.4 million Americans used online dating platforms, with nearly 27 million registered for smartphone dating app services5 – again a number that likely skyrocketed in 2020. This sharp increase in exposure has also led to a notable increase in susceptibility to improprieties of the financial kind.
While comprehensive global data on the true scope of these crimes is unavailable, it is fair to wonder just how significant this global trend has become. In other jurisdictions such as the United Kingdom (UK), bank transfer fraud linked to romance scams went up 20% in the UK in 2020, compared to the previous year. The UK’s Action Fraud – a national reporting center for fraud and cybercrime – found that £68 million was collectively lost across the country last year as a result of romance scams, also a significant increase over 2019.9 Canada’s Anti-Fraud Centre (CAFC) too is reporting massive cases of romance fraud, with more than $18.5 million lost last year alone2 – losses that would likely be avoidable under more normal circumstances. However, with emotions often overcoming sound reasoning and judgment, vigilance is left by the wayside.
Many of the most successful romance schemes seen today have seemingly-innocent beginnings. In fact, a significant portion begins on social media sites with just a simple friend request or direct message. Regardless of whether the scams began on social media or dating apps, these ploys generally follow the same premise where fraudsters will build up fraudulent profiles (most often using photos that are not their own) and use them to interact with legitimate users actually looking to meet someone. Unfortunately for the unwary victims, the “meeting” portion of this interaction never comes to fruition. Some of the more common lies told to keep face-to-face contact from taking place include military deployment, a distant work assignment, or the bad actor having a chronic illness. In 2020 and 2021, travel restrictions and health concerns have created legitimate excuses for bad actors to avoid these meetings. The one constant in all of these scenarios however is that at some point or another, the topic of money will arise. While some of the more easily snuffed out ploys involve the guilty party asking for money (i.e. to purchase a phone/SIM card to continue talking, for transportation to meet the victim, or even for medical expenses – especially during the COVID-era), some of the more successful ploys will see the criminals claim to have sent the victim money first (although they never did).
Some romance ploys even mimic longstanding tactics utilized by other criminals operating in employment fraud schemes where they will actually send inexplicably large, fraudulent checks to the victim and ask them to deposit them or make purchases on their behalf. They may then ask for a portion of these fraudulent funds to be sent to back to them or forwarded to another individual before the check clears. Unfortunately, these lucrative checks never clear and the victims send their own hard-earned funds to the fraudsters and their associates who are then never heard from again. While check-cashing tactics are prevalent, the FTC reports that the most popular form of transferring illegal funds from victims is with gift cards – a method that spiked 70% from 2019 to 2020.4 The use of alternative payment forms (even including crypto-currencies which help maintain anonymity for all parties involved) cuts down on the paper trail that could lead to apprehension by removing the need to use bank accounts or money transfer services like Venmo or PayPal to receive cash from victims.
It is easy to see how scammers could use methods similar to these to not only see direct profit, but to also potentially launder ill-gotten funds through individuals whose only crime is that they are desperate for a relationship of some sort. Luckily, global financial institutions and regulators are taking notice, as this trend has put some firms on high alert for suspicious financial transactions. Yet while transaction monitoring and other potent analytical tools available to the modern compliance professional and financial service providers have made identifying evolving tactics and avoiding risk far easier, it remains an uphill battle to educate customers to identify red flags with respect to romance fraud. The FTC is urging dating app and social media users alike to practice due-diligence and follow their guide on romance scams to better protect themselves against these unique challenges.10
Casino Group CEO Resigns Following Release of Regulatory Report
Last week Global RADAR reported on the drama surrounding Australia’s Crown Resorts Ltd following the release of an eye-opening report published by a prominent casino and gaming industry regulator. The report highlighted ties between the gaming group and both local and foreign organized crime organizations and once again accused Crown of allowing money laundering activity to proliferate in its casinos The head of the investigation into the group’s misconduct, Patricia Bergin, ultimately called for leadership changes to be made within the company to help resolve these issues moving forward, citing poor corporate governance and deficient risk management as pressing issues that needed to be addressed.
Less than a week after the report’s release, it appears that sweeping changes are already underway as Ken Barton, the longtime CEO of Crown Resorts announced his resignation last Monday. Barton was heavily criticized in the document, with Begin noting that the ex-CEO and former CFO showed a “breathtaking lack of care” when dealing with money laundering allegations at the company over the better part of the last decade.1 Clearly Barton was pressured to abandon his post, as Crown Chairman Helen Coonan has publicly stated that the group is taking the report seriously and is taking significant steps to address these identified shortcomings. We will see if further personnel decisions are on the horizon for Crown, but at the very least this latest scandal increases the pressure on Australia’s gaming industry to continue their efforts to combat illicit financial activity and report suspicious activities to the country’s primary financial intelligence agency, AUSTRAC.
Hong Kong to Expand Scrutiny Over Politically Exposed Nationals
The government of the Hong Kong Special Administrative Region recently announced its intentions to expand scrutiny on the financial flows and transactions carried out by Chinese officials. Bloomberg, citing a recent publication on anti-money laundering and counter-terrorism financing legislation proposals in Hong Kong, reports that both the “Financial Services and the Treasury Bureau is proposing to implement enhanced due diligence on “politically exposed persons” from anywhere outside Hong Kong instead of outside the People’s Republic of China.”3 The government is seeking to improve compliance with all current AML regulations across the major metropolitan area before the Financial Action Task Force and other international organizations in the coming years carry out technical assessments on the effectiveness of the respective program’s of Hong Kong’s world renowned financial firms.
The renewed focus on compliance builds off of ongoing national efforts to thwart corruption amongst government officials and corporate executives. In aligning their AML priorities, the goal will be the continued prevention of illicit financial activities from occurring in the region which will perhaps inspire confidence in foreign investors that China’s most densely-populated city is both safe and open for the influx of legitimate funds. Aside from the shift in focus onto the activity of politically exposed persons (PEPs), the proposals also indicate that “Hong Kong seeks to tighten requirements for virtual asset trading operations and introduce a two-tier registration regime for business dealings in precious-asset-based instruments, according to the consultation paper.”3
Credit Suisse Pays Hefty Settlement in Securities Case
Global financial services firm Credit Suisse Group AG has agreed to pay $604 million to settle a lengthy court case with credit insurer MBIA Inc. centered on mortgage-backed securities that crumbled during the 2008 financial crisis. MBIA originally sued Credit Suisse in 2009 for breach of contract over claims that the bank grossly misrepresented the quality of loans in securities MBIA insured dating back to 2007. The Wall Street Journal notes that MBIA allegedly relied on Credit Suisse to carry out proper due diligence to vet the quality of the loans, and had to pay out hundreds of millions of dollars in claims on the securities due to the mass defaults that ensued shortly thereafter.7 In January of 2021, a New York state judge finally ruled against Credit Suisse, though the firm stated they planned to appeal the decision. In reaching a post-trial agreement however, there will be no subsequent appeals trial. The WSJ article continues, noting that the agreement “comes as Credit Suisse Chief Executive Thomas Gottsein tries to clean the slate on misconduct and other problems at the bank. He told investors in December that the bank was tackling its legacy litigation and would try to avoid new lawsuits by being more disciplined.”7
- “Australia: Casino Group CEO Steps down amid Money Laundering Scandal: DW: 15.02.2021.”COM, Deutsche Welle, 15 Feb. 2021.
- Bianchini, Elisabetta. “Scam Alert: Romance Scams Targeting Canadians Isolated Due to COVID-19.” Yahoo! News, Yahoo!, 19 Feb. 2021.
- Chan, Cathy. “Hong Kong Plans Money Flow Scrutiny of Chinese Officials.”com, Bloomberg, 14 Feb. 2021.
- Cimpanu, Catalin. “Losses to Romance Scams Reached a Record $304 Million in 2020.” ZDNet, ZDNet, 16 Feb. 2021.
- Clement, J. “Topic: Online Dating in the United States.” Statista, 26 Oct. 2020.
- Fletcher, Emma. “Romance Scam Reports Over Time.” Federal Trade Commission, 10 Feb. 2021.
- Patrick, Margot. “Credit Suisse to Pay $600 Million to Settle Securities Case.”The Wall Street Journal, Dow Jones & Company, 12 Feb. 2021.
- “Romance Scams Take Record Dollars in 2020.” Federal Trade Commission, 10 Feb. 2021. https://www.ftc.gov/sites/default/files/u50873/romance_scam_2020.png
- Wakefield, Jane. “Romance Fraud on Rise in Coronavirus Lockdown.” BBC News, BBC, 10 Feb. 2021.
- “What You Need to Know About Romance Scams.” Consumer Information, 10 Feb. 2021.