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State of Financial Crime 2023 Report

Europol Dismantles Franco-Israeli Crime Network Behind €38M CEO Fraud

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In a joint action supported by Europol, a Franco-Israeli organized crime network has been dismantled following its involvement in a cyber-enabled financial scheme that defrauded multiple companies of more than €34 million. Law enforcement agencies across six European countries were involved in the year-long operation, including France, Croatia, Hungary, Israel, Portugal, and Spain. 

The investigation involved five action days that took place between January 2022 and January 2023. The result of these action days included asset seizures valued at about €5.5 million, eight house searches, and the arrest of eight suspects – six in France and two in Israel. 

CEO Fraud Scheme

CEO fraud, also known as business email compromise (BEC) fraud, are scams that usually target employees with access to company finances, organizations working with foreign suppliers, and firms that regularly perform wire transfer payments. Europol reiterated its commitment to tackling CEO fraud in 2019 due to the rapid year-on-year increase in global losses. According to the FBI, global losses to CEO fraud increased 65 percent from 2019 to 2021, totaling over $43 billion

In this case, the criminal network targeted businesses based in France, spanning industries from metallurgy to real estate. In each instance, the fraudsters impersonated high-ranking personnel or consultants to trick the companies into making urgent and confidential payments. 

In one scam that occurred in December 2021, the crime network impersonated a group of lawyers to defraud a Parisian real estate developer. After gaining the victim’s trust, the group persuaded the company’s Chief Financial Officer to transfer almost €38 million over a few days. These funds were then quickly moved through a pre-existing money laundering scheme that distributed the payments through various jurisdictions before ending up in Israel.

Detecting and Preventing CEO Fraud

According to UK Finance, CEO fraud is among the eight main types of fraud attacks targeting businesses and consumers. As with most cyber-enabled financial scams, CEO fraud can be difficult to spot. However, being aware of the following red flag indicators can help firms stay protected:

  • Last-minute changes in wire instructions or recipient account information.
  • Request for absolute confidentiality.
  • Communications conducted only via email and refusal to communicate via telephone or online voice and video platforms.
  • Threats or unusual flattery/promises of reward.
  • Requests for advanced payment of services when not previously required.
  • Requests from employees to change direct deposit information.
  • Unexplained urgency.

In addition to highlighting these red flags, Europol provides firms with tailored advice to combat multiple fraud typologies. Regarding CEO fraud, Europol encourages firms to:

  • Coach staff to approach payment requests with caution.
  • Implement internal protocols concerning payments.
  • Establish reporting routines for managing fraud.
  • Review information posted on your company website, restrict information, and show caution with regard to social media.
  • Implement a procedure to verify the legitimacy of payment requests received by email.
  • Upgrade and update technical security.

Key Takeaways

The fraud schemes perpetrated by the Franco-Israeli crime network demonstrate the importance of having a “FRAML mindset” when it comes to fighting financial crime. For compliance staff, this means ensuring that their firm’s fraud and anti-money laundering (AML) operations are aligned. By coordinating the two functions and analyzing the intersection between money laundering and fraud, firms can reduce false positives, increase the speed of customer onboarding, and better identify potential risks earlier in the customer lifecycle.

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Originally published 23 February 2023, updated 23 February 2023

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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