A Guide to Anti-Money Laundering for Crypto Firms
A Nigerian national living in Oklahoma has been sentenced to four years in prison for operating a money-laundering network that defrauded elderly Americans to the tune of at least $2.5m.
Between 2017-2019, Afeez Adebara used online dating websites and social media platforms to run a romance scam that preyed on the elderly. Victims were told the scammers were Americans working or traveling abroad, who needed money to complete business projects or return home.
Adebara and six convicted co-conspirators laundered the proceeds of their victims’ retirement funds and savings through several bank accounts, which were opened under false identities using fake passports and other fraudulent documentation. Laundered money was directed back to their own accounts in Nigeria or used to buy vehicles and car parts in order to hide the money trail.
The US Department of Justice said: “This case is part of an ongoing national effort by the Department of Justice to address online fraud schemes, including those based out of Nigeria, that target US citizens and residents.”
The case highlights how AML tools can be critical for detecting fraudulent scams. Earlier this year our State of Financial Crime 2021 report noted that fraud was the top area of AML compliance that firms said they were focused on improving. The report also highlighted the more rapid convergence of faud, cybercrime, and money laundering that we have seen this year.
Canadian regulator FINTRAC noted a similar trend. In her 2020-21 Departmental Plan, Nada Semaan, FINTRAC’s former Director and Chief Executive Officer said: “These are challenging times, as we strive to stay ahead of criminals and hostile actors who aim to exploit our financial system to launder their proceeds from large-scale fraud, trafficking, and corruption.
“At the same time, both FINTRAC and Canada’s broader AML/ATF regime must address the continual pressures of global technological change which affect our society generally and the financial sector specifically.”
Growing digitization of finance exposes new vulnerabilities
In the US, the number of digital fraud attempts rose by 25% in the first four months of 2021, and an increase in online banking and post-pandemic reliance on digital channels will have a knock-on effect on the number of people who will be susceptible to fraud. On a webpage devoted to ‘elder fraud’ the FBI warns that millions of elderly Americans fall victim to financial fraud every year, to the tune of around $3bn.
For compliance staff, vigilance on the ground through frontline bank branch staff who are dealing face-to-face with customers has on many occasions been key to spotting unusual activity on accounts and triggered further investigation. Training for these staff on what they should be looking out for is crucial.
However, as more financial services are delivered online, more fraud causes will likely be detected through money laundering. This means it’s critical for compliance teams to calibrate their transaction monitoring solutions by customer type, in order to help spot elder fraud. The use of adverse media categorization as a KYC tool is also important, ensuring risk profiles are continuously updated. Adverse media checks can also help ensure firms aren’t inadvertently onboarding a new customer who has committed elder fraud in another jurisdiction.
US regulator FINCEN has also compiled a list of red flags that might indicate elder fraud, including sudden changes in banking behavior, changes in an elderly person’s signature, and non-payment of bills.
You can find out more about the financial exploitation of the elderly in our Knowledgebase article.
Originally published September 17, 2021, updated November 18, 2021
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