Bubble, Bubble...minimum toil...big trouble: The threat of Boiler Room Fraud Investigation Challenges

Transcription

1 Bubble, Bubble...minimum toil...big trouble: The threat of Boiler Room Fraud Investigation Challenges Presented at: Australian Public Sector Anti Corruption Conference November 2015 Presented by: Benjamin Duell Principal Financial Investigator Mitch Castles Detective Senior Sergeant

2 What is a Boiler Room Crime and Corruption Commission 2

3 Video Image of QPS raid of Gold Coast Boiler Room

4 INTRODUCTION Benjamin Duell Definition of Cold Call Investment Fraud Any unsolicited contact, by telephone or internet, made to a person/s in Australia or Internationally by telemarketer/s (cold caller/s) located in Australia on behalf of SOCS, where the salesperson knowingly or unknowingly engages in conduct that is fraudulent, false, misleading or deceptive with the purpose of inducing potential investors to buy or invest in bogus investment products or schemes and where the shares, securities, licences or other investment scheme products being marketed and/or sold are either non existent or essentially worthless. Definition adapted from the Australian Crime Commission & Australian Institute of Criminology s definition of Investment Fraud (ACC & AIC, Serious and Organised Investment Fraud in Australia, 2012)

5 LIFE CYCLE OF CCIF SCHEMES

6 Essential Ingredients Company Vehicle (Stolen Identity or Acquired) Virtual Office Website Bank account with reputable Australian Banks Software Boiler Room & Communications Lead Sheets Sales people

7 ASIC Registered Company Vehicle Identity theft of an existing reputable Company and registering of similar business name. Acquiring of pre existing Shelf Company and backdating of directors Importance provides victim with a sense of legitimacy if they see a ASIC registered company that has been trading for some time with no adverse recordings, when undertaking their due dilligence.

8 Virtual Office Provides a physical presence of the CCIF company. Offices are listed as company headquarters on Websites. CCIF products are not marketed to potential victims who reside with 100 kilometres of office so that they have to contact CCIF company representatives to arrange appointments. Virtual office receives calls and notifies CCIF staff by or diversion of phone calls, no business is transacted at virtual office. Importance provides victim with a sense assurance that the business operates out of an established office building, which can be easily located from a web searches and physically exists.

9 Website Professionally designed. False claims. False testimonials of product success. False Guarantees Restricted members area where clients to access virtual accounts. Importance provides investors with a sense of prestige, exclusiveness, security and 24 hour access to their investment.

10 Bank Accounts CCIF Schemes operate accounts with established Australian Financial Institutions. Victims are told to transfer funds into these accounts as an audit trail rather than make cash deposits. Importance this again provides victims with assurance of schemes purported legitimacy and that their money is safely held in reputable bank accounts.

11 Software Online remote demonstrations of software s success capability to predict results is used to persuade clients. Factitious alleged client virtual investment accounts are show to victims. 3 day Trials are offered for minimal investment ($500) to prove software reliability. Company representatives are marked as being contactable 24 hours to assist with investment and any difficulties/questions faced. Importance this persuasive marketing technique deceives investors into believing the software has worked for others and is a secure investment.

12 Boiler Room & Communications As demonstrated in the video Boiler rooms are non descript (deliberately not advertised) rented office spaces. They use sophisticated communication systems that disguise caller identification details (area codes come up to the state the virtual office is located not O7 of Queensland). and the internet is used once a victim becomes enticed to invest. Mobile phones are provided to staff (often subscribed in false names). Salespeople are encouraged to build rapport with victims through frequent contact and seek future investment through alleged special offers. Importance this provides anonymity to perpetrators, remoteness of victim and inhibits victims recovering their investments when the CCIF scheme collapses or identifying perpetrators.

13 Lead Sheets Lead Sheets contain prospective clients contact details are essential to CCIF. Lead Sheets are purchased from legitimate companies or details are acquired through deceptive marketing practices (sham competitions). Victims are frequently recontacted by CCIF companies and enticed to invest in future schemes or recovery schemes. Importance re victimisation is common and intelligence indicates that lead sheets are traded between CCIF criminal syndicates or reused in future phoenixed fraudulent schemes.

14 Salespeople Persuasive Salespeople are recruited as subcontractors (some use false ABN s) and use false identities. Salespeople receive small retainers ($500/week) but large commissions of every sales secured (between 10% to 30% commissions). Investigations have revealed that salespeople s earnings from CCIF companies can be between $150,000 and $300,000 per scheme. Successful Salespeople are re employed in syndicates next CCIF scheme which is phoenixed from collapse of existing CCIF scheme.

15 Failure Scheme typically operate from 4 13 months and fail due to bad publicity caused from victims unsuccessful attempts to access funds. Web sites close down and are inaccessible to victims. Company mobiles are destroyed. Communication system phone numbers are disconnected Bank account balances are eroded. Shelf companies are voluntarily liquidated and have no assets or sufficient bank account details to fund a procedural liquidation with no detailed investigation. Neither Companies or Puppet Directors have sufficient wealth to compensate victims.

16 PICTURE OF CCIF COMPANY DISTRIBUTIONS

17 Investigation Challenges Growth of Boiler Rooms Boiler room frauds traditionally operated by overseas transnational criminal networks. Intelligence and operational activities has identified the southeast corner of Queensland as the hub of an on shore boiler room industry.

18 Investigation Challenges Perception of Corruption Crime and Corruption Commission 18

19 Investigation Challenges Use of Facilitators Not opportunistic but a calculated, sophisticated and highly organised crime. Require high level of organisation. Use of facilitators such as lawyers, company formation agents and accountants.

20 Investigation Challenges Use of Facilitators Case Study Op Juliet Dynamite 400 victims lost approx. $6million to a Gold Coast based boiler room operation. 14 Nov 2011 surveillance observer money mules attending 5 NAB branches on Gold Coast withdrawing $10k sums. Money mules vehicle intercepted $50k cash located. Telephone Intercept product revealed during the evening of 14 Nov 2011 targets created a fake web site and create fake invoices for the sale of used cars. 15 Nov 2011 lawyer firm sent police a letter of demand for the immediate return of the $50k producing the fake/forged invoices as proof the $50k came from the legitimate sale of used vehicles. Law firm subject to search warrant. The money was not returned.

21 Investigation Challenges Use of Facilitators Case Study On going investigation into 2013/14 Gold Coast based boiler rooms. 770 victims who lost approx. $18million. Investigations identified puppet directors who were paid to be directors of companies and sign hundreds of blank cheques for cash. Puppet directors had no knowledge of what companies purported to do. Targets of investigation engaged law firm to represent all puppet directors not to undertake any cooperation with police. 8 persons currently charged with aggravated fraud and money laundering offences.

22 Investigation Challenges Preparation of Briefs of Evidence 2011/2012 Operation Juliet Dynamite 400 victims 2014 Operation Mike Reflective 39 victims 2014 /2015 Operation Lima Violin 770 victims 2015 Operation North Unwind 440 victims

23 Investigation Challenges Future Trends Boiler rooms operations have evolved over time. No longer just an offshore problem. Operate with layers of complexity designed to give the impression of legitimacy. Exploit legitimate business structures in order to defeat due diligence efforts made by potential victims Operations also use marketing tools to their advantage, creating fake brochures and websites. Like in other areas of organised crime, syndicates operating lucrative boiler rooms will continue to take advantage of new technologies.

24 The threat of Boiler Room Fraud Investigation Challenges Questions