Red Flags

It's important to know what scams are out there, but also the developing ones that could hit your desk (or account) in the coming months. Who wants to be in the first round of victims of a scam? No one. That's the time when it's new and no one knows what is different or what they ought to be on the lookout for.

Digital terrorists are out there looking for victims.

So, as I perused through the latest FinCEN alert regarding Chinese money laundering, I thought it was a great place to apply some of the keys in the alert to other types of transactions.

In the Alert, FinCEN lays out a number of red flags that could be apparent. It's not all the red flags, but it's a solid list of those that are noticeable in a similar transaction. First, lets see some of them:

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Red Flags Potentially Indicative of CMLN-Affiliated Money Mules

A customer, especially a customer who presented a Chinese passport as identification during the onboarding process, regularly receives funds that are not commensurate with the reported occupation or income, and the source of the funds cannot be attributed to payroll or other legitimate sources of income (i.e., unexplained wealth).

During the onboarding process, a customer presents a Chinese passport and a visa that contain the same photograph despite being allegedly issued years apart.

A customer, especially a Chinese national, creates an account at a financial institution and reports their occupation as a student during the onboarding process. This customer then regularly deposits cash into their account or receives wire transfers notated as “tuition” or “living expenses” that are not commensurate with the reported information. After receiving the funds, the customer may subsequently initiate wire transfers or P2P transactions to unknown individuals who are unrelated to the purpose of the wire transfers or may make credit or debit card payments.

A customer, especially a Chinese national, reports their occupation during customer onboarding as a student, retiree, housewife, or other low-income occupation but has unexplained wealth.

A customer, especially a Chinese national with unexplained wealth, initiates a wire transfer related to a real estate purchase or purchases cashier’s checks made payable to a real estate company. The customer may be accompanied by a real estate agent at the time of purchasing the cashier’s checks.

A customer, especially a Chinese national, regularly deposits large volumes of cash or cashier’s checks, or receives multiple wire, ACH, or P2P transfers for no business or apparent lawful purpose. The customer then subsequently uses the funds to purchase a cashier’s check or disperses the funds to other individuals using P2P and wire transfers, often to other high-risk jurisdictions.

A customer’s account, especially a Chinese national, receives numerous transfers or deposits, and has a significant number of withdrawals or transfers, none of which appear to be related to routine payroll, living expenses, or customer’s stated expected activity.

A customer, especially a Chinese national, has large amounts of cash funding cashier’s checks, which are then deposited at another financial institution.

A customer, especially a Chinese national, is reluctant or refuses to provide information regarding the source of funds deposited or transferred into their account or acts evasive when questioned about the purpose of a transaction or may explain it as repayment of a loan.

A customer that is a U.S.-based escrow company receives funds from an unaffiliated, foreign-based shell company or entity in a disparate line of business that are used to purchase real estate in the United States.

Red Flags Potentially Indicative of CMLN-Affiliated TBML Schemes

A small U.S.-based business in the electronics or real estate industry receives wires from Mexico, China, Hong Kong, and the United Arab Emirates and has no known nexus to these countries.

A customer, especially a Chinese national, regularly receives P2P or wire transfers from unknown individuals and subsequently uses those funds to make a substantial credit card payment. If questioned about the source of the funds, the customer may state that the transfers are from U.S.-based family members of Chinese citizens who are sending the customer funds to purchase goods.

Hong Kong registered trading companies with shell-like characteristics send funds to Chinese nationals residing in the United States, real estate escrow or title insurance companies, and other international destinations with no apparent business or economic purpose.

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So......what did we see in that list? The biggest thing to me is that ALL of the red flags start with a customer or a business acting as a customer or participant. That's right, something no one seemingly wants to talk about is balancing customer service with security.

But, I'm here to tell you, the best way to serve your customers is by keeping them as safe as possible, even if they don't like it or opt to go another direction. A direct and impactful explanation in the beginning is key. Feel free to point to the many examples of fraud, identity theft, impersonation, cyberattack, email compromise, etc. happening all over the world on a daily basis. Let them know almost all law firms have been the victim of these scams, educational institutions in every state, hospitals, financial companies, government at all levels, etc.

So, if all the big boys are becoming victims, what is to stop these criminals from focusing on little ole you and your savings and trust accounts? Nothing. In fact, these criminal networks have cracked the code and have sophisticated planners that devise the scams well in advance of a rollout. By the time you hear about it in your neck of the woods, it's likely been around for many months.

So, remember, take you time in your transactions. Be diligent, and don't break protocol for even your best friend or client. Review the red flags above and decide if any are present, regardless of who is involved.

If you've been the victim of a cybercrime, or you want protection as you enter transactions, reach out to GBW LAW for a fast, focused review and analysis of your options. Every second counts, so even if you don't contact us, reach out for assistance immediately.