Joint Financial Crimes Unit

Joint Financial Crimes Unit

Trends & Typologies

Sanitised case 1

A TCB client advised he was to sell his half of a property (which he co-owned with his brother) in Russia for US$7m. The disclosing institution was told that two payments, one of US$1m and one of US$1.8m, for this transaction would come from independent third party accounts located in Cyprus to his account with the disclosing institution (a third payment would be made directly to his account in Russia). Two days after receipt, the funds with the disclosing institution would then be remitted to the client’s own account in Russia, as part of the payment for the purchase of a new property.

The client’s brother had acquired this property five years previously from a majority shareholder of a major Russian company for the equivalent of approximately US$500k. The brother had recently “donated” his half to the client, the relevant deed stating a current market value equivalent to approximately US$60k, despite independent market valuations indicating a value of between US$3m and US$3.5m (this being in marked contrast to the proposed proceeds arising from the sale of only half of the property).

Some form of laundering was suspected for the following reasons:-

• Clear discrepancies between values attributed to the transfer deed, current independent valuations, and proposed sale price
• No credible explanation was provided as to why the purchase consideration was to be in three tranches, with two of these going indirectly to the client’s Russian account via Jersey
• Despite being told of the proposed purchaser, the client was evasive with regards the identities of the third party funds from Cyprus
• Concerns as to legitimacy of the original acquisition of the property in the 1990’s
  

Sanitised case 2

The disclosing institution was approached by an existing client to set up and administer a fiduciary structure for the general manager of a Russian company, their client being a major shareholder in this company. The proposed structure was to facilitate the transfer of approximately 5% of company shares as a reward for many years of loyal service and management of the business.
During their due diligence checks they became aware that the general manager was wanted by Interpol as facing allegations of fraud, money laundering, organised crime and transnational crime in relation to him.
They also established through open source research on the allegations a connection to their client’s father who they learned was also wanted on suspicion of involvement

in similar forms of criminality, although it is unclear as to how far such allegations may have been politically motivated.

Some form of laundering was suspected for the following reasons:-

• Increased concerns had emerged as to the provenance of the client’s source of wealth and significant company shareholding in a company
• The proposed share transfer as recognition for commercial performance and loyalty increasingly lacked credibility in the circumstances
• The client was clearly connected, and appeared to be acting as an intermediary between two alleged major criminals
  

Sanitised case 3

A Jersey company owned a private luxury yacht which had been acquired for US$20m. About 30% of the acquisition was financed from bank loans, the remaining 70% was believed to have been privately funded from the two beneficial owners of the company. A recent letter from a Middle Eastern construction company identified that this company had actually financed the 70% but as a “deal had not materialised” they sought recovery of the funds. Further investigation revealed another discrepancy in that the funding was purportedly commission payments to one of the company’s beneficial owners.
Enquiries into the majority shareholders of this construction company revealed contradictory information, discrepancies over the company letterheads being used, doubts concerning county of incorporation, and apparent back-dating of letters.

Whereas the disclosing institution originally understood that the funds were from the Jersey company’s beneficial owners, it was then purported that the funds were some form of advance commission payments for deals that did not materialise. Significant doubts arose however as to this alleged provenance of funds and concerns were raised that this was some form of layering exercise.

Sanitised case 4

Cheque kiting exploits a system in which, when a cheque is deposited to a bank account, the money is made available immediately even though it is not removed from the account on which the cheque is drawn until the cheque actually clears.

An example of this is if a deposit of £1000 is placed in one bank, the fraudster then places a cheque with that amount in another bank. The fraudster now on paper has £2000 until each cheque clears. Therefore cash exists in-transit or non-existent cash is briefly recorded in multiple accounts. A cheque is cashed and before the bank receives any money by clearing the cheque, the money is deposited into some other account or withdrawn by writing more cheques. In many cases, the originally deposited cheque is a forgery.

An example of ‘cheque kiting’ locally was when the suspect submitted a forged cheque to the value of £350K from a Saudi Arabian Bank to a Jersey Bank. He had

already placed £5k legitimate cash into this account therefore reducing suspicion. Before the Jersey bank received confirmation that the cheque was a forgery, the

suspect transferred via IT banking £150K to pay off gambling debts. The funds were transferred to a Casino in London.

This makes the offence extremely hard to prove because;

1)No face to face business, difficult to prove he was the actual account holder or someone using his name. Due diligence hard to achieve for the bank.

2)The cash transferred via IT banking incurs the same problem.

3)The suspect because of previous frauds is aware of the requirements of cross border investigations and difficulties

Sanitised case 5

A TCB advised that through open source research they had become aware of some adverse information on the beneficial owners a company they administered. The information being that the beneficial owners had been arrested in Russia for smuggling high value yachts into the country via the UK.

One of the beneficial owners was also awaiting trial in the UK for human trafficking, whereby, he had facilitated the travel of teenage females into the UK for use in the sexual exploitation industry.

Both beneficial owners were considered respectable through their numerous business interests in Russia.

The SAR was submitted by the TCB on the basis on the above adverse information they had discovered and the subsequent underlying suspicion that the bulk of their customer’s wealth had been accumulated as a result of criminal activity.

An enquiry conducted with the Russian authorities was met with a positive response and request for further information. The information disclosed in the SAR was shared on an intelligence basis to assist in the live investigation into the pair.

Sanitised case 6

A SAR was submitted due to concerns raised by a member of staff during the KYC/KYB update process on one of their customers.
A close relative of the customer had written in advising that the customer was away and couldn’t be contacted but will furnish the requested documentation as soon as possible.

On researching the customer, it appeared that he had been unobtainable for a number of years, his income and wealth did not match up with his stated occupation and there was a suspicion that the actual customer did not exist and was a fictional name created for the purpose of a scam due to the lack of KYC/KYB information.

Enquiries were conducted with two Police forces and another law enforcement agency in the UK with nothing adverse being established on the customer, however, those enquiries were able to verify that the customer did actually exist.

The information contained within the SAR did initially appear suspicious to the case officer in JFCU, however, enquiries eliminated any direct criminality and consent to exit the relationship was granted to the disclosing institution as requested.

Sanitised case 7

A TCB submitted filed a SAR based on updating their KYC/CDD. It was noted that their client had previously been prosecuted for postal offences in the US.

The TCB became aware that the client was still conducting the same type of business. Further investigations by the JFCU with the Canadian & US law enforcement agencies revealed that the client was subject to an investigation by the US & Canadian, where there is an arrest warrant in place on the client.

Sanitised case 8

A TCB was conducting an overview of PEP accounts when a Russian PEP was identified. Following checks conducted by the disclosing institution it was revealed that the subject was wanted by the Russian authorities. Following lengthy enquiries by the JFCU it was established that all the charges against the subject were eventually dropped and could well have been politically motivated.

Sanitised case 9

A local institution filed a SAR based on suspicions arising initially from account activity not being in keeping with expectations, an account set up for personal reasons. The account was being used for third party payments to and from Russia, where the client was based and employed. The client stated these payments were loans to friends and repayments. He was employed in the industry and should have been aware of his obligations and had refused to comply with updated KYC/CDD.

This client was using his account as a business to avoid the local legislative issues in place in the jurisdiction he was employed, assisting his clients, which is against what was originally proposed.

Sanitised case 10

A local institution was approached by a walk in client looking for safe custody services for bearer instruments the client was in possession of. It transpired that these bearer instruments were subject of much controversy and the business declined. The client then tried several other local institutions that also declined the take on.

Sanitised case 11

A local disclosing institution became aware of persons trying to test the account opening procedures and possibly to fraudulently obtain Corporate information in order to clone or defraud the said institution. All attempts were thwarted and no fraud occurred as a result of staff vigilance.

Sanitised case 12

A disclosing institution received a request to open two individual accounts for two brothers whom were resident in the UK. Two large credits were received into these accounts shortly after from Guernsey. The clients then subsequently requested the funds to be transferred to the UK, without an adequate explanation for the reasoning behind this. The funds were transferred but it was suspected the clients were layering the funds in order to disguise the original source of the funds.

Sanitised case 13

A TCB made a STR following internet research and lack of due diligence. The client had been involved in a high profile court case in Europe, which involved accepting ‘bribes’ or ‘commissions’ for taking on business without asking any questions. A Trust structure was formed in Jersey which was structured to conceal the original source of funds and as a money laundering conduit. Some time later the Trust structure was then restructured to disguise the original beneficiary and Settlor of the funds and therefore eventually attaining the essential disconnection.

Sanitised case 14

A local disclosing institution became suspicious of a client (Mr X) due to cashwithdrawals and a loan taken out which was not in keeping with the clients profile. Unbeknown to the local institution Mr X had received a scam email and developed a relationship with an African female who allegedly wanted to leave her country and asked for financial help from Mr X. Mr X transferred a large amount of money to the African female and became severely in debt. Amounts continued to be paid and males even visited the island to continue to place pressure on Mr X to continue to pay money until the police became involved.

A number of people fall for the ‘too good to be true’ scams and unfortunately are very reluctant to come forward to report their involvement / losses. Everyone should remain vigilant to this ever increasing fraud.

Sanitised case 15

A couple made arrangements with a local real estate company to view properties on the 1.1k £15m plus bracket. An email dialogue had been exchanged prior to the visit, where Mr. Y spoke of his business activities and alleged source of wealth. Whilst viewing properties a member of staff in the real estate company conducted an internet search on Mr. Y and found a picture of Mr. Y after recently serving a prison sentence for fraud offences. A Google map search also showed the small house in the UK where the couple live. The staff member challenged Mr. Y over the picture

and he claimed that he knew of someone who was impersonating him. No further business was conducted.

Sanitised case 16

A local bank submitted a SAR as they were concerned that funds held in a recently opened account were not from a legitimate source.
The account holder opened the account in 2009, with the intention of paying in savings and income from part time work. The account holder was a student and explained that the income would be £50.00 weekly from family.
The SAR was submitted due to a higher number of cash deposits into the account than expected. In a short space of time following the opening of the account, in excess of £7,000.00 had been paid in.

The cash transactions were clearly not in line with the intended account activity given at the time of the account being opened. The account holder was unable to provide a satisfactory explanation for the source of the cash and was clearly not happy to be asked questions about it.

The information was submitted by SAR and the details of the account holder tied up with a person currently under investigation for drugs trafficking offences.

Sanitised case 17

An example of declined business which led to intelligence being shared with the UK authorities who were investigating these nominals for numerous large scale frauds including mortgage fraud.

This example shows how declined business can lead to significant information for law enforcement.

Applications for new accounts were received by the financial institution in Jersey from both X and Y for separate accounts.

The individuals stated that they were high net worth individuals with millions to invest. The financial institution requested due diligence information and it soon became apparent that these individuals were reluctant to provide any proof of existing banking relationships and were unwilling to evidence the source of their wealth.

Bank statements from the UK were provided and these showed that they held current accounts at a financial institution however it was noted that the accounts had been opened very recently. The nature of the transactions in the accounts and the overdraft facilities suggested that they were retail clients. Minimal information was provided in relation to the business interests of the individuals.

It was indicated that these individuals initially wanted to invest £4 million. The figure was increased to £6 or £7 million during conversations with the financial institution. The individuals seemed to have no interest in the services provided by the financial

institution including interest rates. They specifically required for application forms for cheque books, credit card facilities and guarantee cards.

An error occurred when the financial institution sent credit card application forms to the wrong address and the client showed no concern that confidential information was released.

X and Y approached several financial institutions in Jersey – all applications were different in the requests and it was apparent that X and Y were career conmen.

Sanitised case 18

Information was shared with the overseas jurisdiction which led to a major investigation.

X was introduced to the disclosing institution by an existing reliable contact. He described himself as in the legal profession and lived in an overseas jurisdiction.

X wished to establish an offshore arrangement to be administered by the financial institution to acquire from her certain overseas properties in which he said he had an interest but which were in the names of a family member but were X’s and X wanted them, eventually to be held in the structure for the benefit of himself and his young son.

The properties were mortgaged and these mortgages were financed by sitting tenants. Initially the financial institution were comfortable with the business however after a time period of approximately two years the financial institution became concerned that they were not receiving any rents which in turn led to a severe liquidity problem with the structure and the mortgage interest payments got into arrears.