Organized crime trends

1. Organized crime trends • No longer predominantly homogeneous ethnic groups with distinct rules of conduct, ie: Godfather film • OC is now best understood as small, loosely structured, multi-ethnic networks that adapt quickly to any opportunity in the market place • Regroup, merge, disband on a regular basis due to police intervention, competition and other opportunities. 21st Annual ECI Conference

2. OC in Canada • No single dominant OC group in Canada • A number of significant criminal organizations, operating out of keys areas: Vancouver, Toronto and Montreal. • Within past 5 years, number increased from 600 groups to 900 groups (better collecting info) 21st Annual ECI Conference

3. Criminal specialists and niche skills • Where critical skills necessary to facilitate criminal activities are absent within a criminal group, skilled outsiders are recruited or exploited to provide this service. The individual may be considered an outside contractor or part of the criminal network. Services can range from accountants, lawyers, hackers and cyber criminals, money launderers and those with access to vast quantities of financial data. 21st Annual ECI Conference

4. Global Trends and Opportunities • Rapidly Growing Economies – such as China and India will continue to grow their middle classes as industry and commerce expand. OC will flourish in these environments as well as legitimize their proceeds and industries. Also potential to undermine the political mechanisms of such countries through corruption and manipulation of the economy. 21st Annual ECI Conference

5. The Counterfeit food industry • Worth an estimated $49 Billion a year and the demand for inexpensive food virtually guarantees the problem will persist and grow. • e.g.: In 2008 in China milk adulterated with melamine (a chemical that makes the milk appear to have a higher protein content) caused 900 infants to be hospitalized for kidney problems, 6 of whom died. 21st Annual ECI Conference

6. The Counterfeit Goods Industry • A wide range of counterfeit products, of varying quality, have infiltrated the N.A. marketplace. Counterfeit goods are smuggled into N.A. from Asian countries, particularly China, although major sites are also located in Thailand, Turkey and Russia. OC groups will continue to capitalize on opportunities to expand the availability of counterfeit goods via the Internet through fraudulent online stores, unregulated pharmacies and loosely monitored auction and classified ad sites. 21st Annual ECI Conference

7. The European Union Emission Trading Scheme • Largest multi-national greenhouse trading system in the world, worth about $140 Billion • Companies in Europe that produce emissions like carbon dioxide are given an allowance to emit without penalty, if company exceeds its limit it must buy emission credits from companies that produce less then their limit. • Europol reports that between Oct. 08 and Dec. 09, $7B was defrauded by EU OC. • 2012 – Western Climate Initiative is scheduled to take place in N.A. 21st Annual ECI Conference

8. Reducing Emissions from Deforestation and Degradation • UN backed effort to Reduce Emissions from Deforestation and Degradation (REDD) will provide opportunities for fraud. REDD aims to offer billions of dollars to developing countries to conserve and restore their forests by allowing them to earn carbon credits that can be sold to developed countries that need credits to meet greenhouse gas emission reduction targets. Fraudulent schemes could claim carbon credits for non-existent forests. 21st Annual ECI Conference

9. Smartphones • Becoming more and more common and their use has expanded with the ability to manage finances and contain records of all types of personal information. In Japan they have essentially become the new wallet, allowing users to buy food, drinks and transit fare, among other things. Many of these new technologies are becoming available in N.A. and are opportunities for criminals to target to steal information and money. 21st Annual ECI Conference

10. Cloud Computing • Refers to software and resources that are accessible on the Internet and that were previously stored on company and individual computers. • This method of storing and accessing data is expanding and being spearheaded by companies such as Google (e.g. Google Docs allows users to store documents online and access them from any computer). • Provides opportunity to acquire all manners of personal and business info from centralized locations rather than millions of individual computers 21st Annual ECI Conference

11. Securities Fraud (AKA: investment or stock-market fraud) • Current global economic conditions exposed several large-scale investment frauds (e.g.: Ponzi Schemes) as investors sought to withdraw their cash only to discover it was no longer there. Building on investor fears and mistrust of the major banks, fraudsters see an opportunity to represent fraudulent investments as being “secure and highly profitable”. Re-victimization. 21st Annual ECI Conference

12. Ponzi Schemes • Commonalities/trends seen in recent cases: • Tended to rely on infinity fraud – targets religious groups, business groups, senior’s groups, ethnic groups, social clubs. Fraudster was either a member, know someone in the group or posed as a member. • People less likely to question advice that comes from someone they know • Victims also often reluctant to report them to authorities or testify against them • Unregistered financiers offering impossible returns 21st Annual ECI Conference

13. Securities Fraud Cont’d • Starting to see more and more “hybrid market manipulations” – combine elements from several schemes. • Mass Marketing (e.g.:Boiler rooms) are still prolific. However online social networking sites, such as MySpace and facebook, bulletin boards like Craiglist and Kijijij are providing new mediums. • Using VoIP – no fixed address, extremely difficult to locate and dismantle. 21st Annual ECI Conference

14. Securities Fraud cont’d • Using virtual marketplaces, electronic trading systems and wire remittances to access victims, buy/sell data, and transfer funds anonymously through multiple jurisdictions. • Brokerage account hijackings are increasing due to the availability of black-market websites that illicitly sell the tools and services required to hack into secure accounts. 21st Annual ECI Conference

15. Credit Card Fraud • A transition from magnetic stripe debit and credit cards to ones embedded with microchip technology is currently underway in Canada, with a complete implementation to take several years. • Expected to reduce credit card fraud but will see displacement of using Canadian credit data to places without this technology and also when used to purchase items online, by phone or mail order, i.e: card-not-present transactions. 21st Annual ECI Conference

16. Increase in online banking usage • Hackers target online sites and use malware and keystroke-logger programs to steal credit card data in order to bypass the need for skimming activity. This trend will continue to increase as online banking continues to grow in popularity. 21st Annual ECI Conference

17. Mortgage Fraud • Involves the cooperation of mortgage industry insiders, such as bank employees, real estate agents, mortgage brokers, lawyers, credit agency employees, lenders and title insurers. • Knowingly or unknowingly accept false personal or financial info, use inaccurate appraisals, or transfer mortgage funds to an individual knowing they will be misused. • Criminal groups recruit (or coerce) new immigrants to act as nominees on fraudulent mortgage applications. 21st Annual ECI Conference

18. Charity Fraud • Online crooks have become more skilled at masquerading as legitimate organizations soliciting disaster-relief funds • Trying to predict the next big natural disaster and scooping up domain names that sound like charitable donation sites • Unsolicited emails directing them to official looking websites 21st Annual ECI Conference

19. Law Enforcement Challenges • Lack of resources to pursue all cases – limited number of resources and budgets, more and more cases • Investigations span years • Lack of skilled investigators, turnover rate, high competition between units for skilled investigators 21st Annual ECI Conference

20. Law Enforcement Challenges cont’d • Lack of ongoing training – no formalized training courses (except 2 week introductory level course), training is ad hoc • No minimum sentences – maximum sentence in current law is 14 years for fraud over $5000, and 2 years for fraud under $5000, but no minimum sentence, 21st Annual ECI Conference

21. International Roadblocks • Unlike criminal organizations, police are hampered by jurisdictional boundaries • Only a limited number of MLATs in effect • MLAT requests take months • MLAT process is very complex and long • Mistrust between police in one country against another 21st Annual ECI Conference

22. International Roadblocks cont’d • Dependent on the other police organization and may not have the same skill level • Lack of corresponding offences • Refusal to provide assistance • Delay in processing the request by the other police organization (not same priority) 21st Annual ECI Conference

23. 2009 Statistics • Thirty-eight percent of Canadians have been approached with a fraudulent investment, 11% of which actually invested money in a fraudulent investment. Across Canada, 4% of population report being fraud victims. • Canadians are mostly targeted for investment fraud through email (33%), by a stranger on the telephone (28%) or through a friend, family member, neighbor or co-worker (18%). 21st Annual ECI Conference

24. 2009 Statistics cont’d • Twenty-one percent of victims are victimized twice. • Eight percent of fraud victims report being victimized three to five times. • The average amount invested in fraudulent investments was $7,634. Thirty-eight percent invested over $5000. • Most money is never returned to the victims. 70% of victims never recover any money. 21st Annual ECI Conference

25. Victim Profile • Anyone can be a victim of fraud but a recent Canadian study of investor fraud shows that there are certain risk predictors of those who are most likely to invest in a fraudulent investment: • Over-confidence – individuals who don’t share decision-making with someone in the household and are very confident about making investment s • Frequent traders: individuals who trade on a weekly 21st Annual ECI Conference

26. Victim Profile cont’d • Risk-oriented – individuals who consider themselves aggressive, agree that the greater the risk the greater the reward and tend to feel that they must act immediately to get in because they may miss the good opportunity. • Highly educated – of fraud victims surveyed, half have college or university undergraduate degrees, and 10% had postgraduate degrees. 21st Annual ECI Conference

27. Final Thoughts • OC is so pervasive it demands coordination and sharing of information among all government agencies, law enforcement agencies, intelligence agencies, private organizations and the public. • No single organization has the sole responsibility for addressing this problem. We must share information and work together. • OC transcends borders and access over many law enforcement jurisdictions and therefore need better integrated law enforcement, laws and treaties. 21st Annual ECI Conference