DOJ convicts four individuals in $18M global investment fraud scheme

A group of four men have been convicted for leading a global investment fraud and money laundering conspiracy that defrauded victims of over $18 million. Known as The Brittingham Group, the defendants misrepresented their business and made false claims about investment returns, claiming investors would see a 200-300 percent return on investment within 20 to 30 days. The group also forged letters from financial institutions to reassure the victims that their money was safe.

Each defendant has been convicted of conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering and faces a maximum of 20 years in prison on each count. 

The Brittingham Group

Founded by defendant John C. Nock in 2013, the Brittingham Group claimed to have a proven investment strategy involving the purchase of guarantees and other financial instruments from banks. According to the indictment, over the course of eight years, Nock and his co-conspirators convinced their victims to pay large sums upfront, under the guise of fees or start-up costs, so they could profit from the underlying instrument. 

To obfuscate their conspiracy, Nock and his co-conspirator Brian Brittsan instructed victims to send their funds to bank accounts controlled by other individuals involved in the scheme. Once the conspirators received the money, they transferred it through a complicated network of international bank accounts.

Investment fraud on the rise

Investment fraud has become the most expensive form of fraud in the US in 2022, according to a report by law office Carlson Law. The paper reveals that a staggering $3.82 billion was stolen in 2022 – a significant increase from the previous year’s $1.6 billion. While the number of investment fraud offenders has decreased in the last five years, the US Sentencing Commission has reported that median losses incurred have increased significantly to over $2,880,000. 

The rise in investment fraud can be attributed to a combination of traditional and modern tactics, with cryptocurrency-related scams being the biggest contributor to this surge. Our 2023 global compliance report echoed this trend, with investment fraud emerging as a top concern for firms worldwide. 

Implementing effective fraud risk management strategies

Compliance teams can refer to the following steps as a list of best practices to enhance their firm’s fraud risk management programs:

1. Assess risk and vulnerabilities.
2. Establish clear policies and procedures.
3. Implement internal controls.
4. Conduct regular fraud awareness training.
5. Establish monitoring and detection mechanisms.
6. Respond to and investigate fraud incidents
7. Continuously evaluate and enhance the program.

Equipping firms with the right tools to detect and prevent fraudulent activities is crucial in the fight against fraud. The Financial Action Task Force (FATF) has identified artificial intelligence (AI) and machine learning (ML) as effective tools that can help firms detect abnormalities, prioritize alerts, and set fraud transaction monitoring thresholds. Furthermore, forensic and behavioral analytics can be used to connect seemingly unrelated data in a customer’s profile, including across multiple accounts (known as identity clustering).

Key takeaways

In the United Kingdom, the 2023 Financial Conduct Authority (FCA) Handbook provides a list of best practices that financial institutions (FIs) should follow when screening for investment fraud. Firms in the US should take note of these tips, which include: 

• Considering fraud loss during regular risk assessments.
• Contacting customers promptly when investment fraud is suspected

Adjusting transaction monitoring rules for investment fraud typologies based on recommendations from subject matter experts.