September 2006 Fraud Terminology Topics
Aboveboard, Accommodation Address,
Colorable Transfer, Debt, FINTRAC, Lulling,
Norazi Agent, Phantom Regulator, and Unsub
 

Bankruptcies, divorce cases, and business dissolutions
can uncover transfers of assets that appear to be true
and valid, but the transfers were intended to deceive.
 

Fraud In Other Words™
Professional Jargon and Uncensored Street Slang
by Larry C. Adams, CFE, CPA, CIA, CISA

 

Aboveboard
A gambling term indicating all the players’ hands, cards, chips, markers (credit slips), and “I owe you” slips (IOUs) are kept above the game board or table. Nothing is being concealed. It is a fair game, in contrast to playing with gamesters who put their hands “under the table” and exchange cards or money. Honesty is more likely and cheating is much more difficult when everything is kept in plain sight. Aboveboard first appeared in print in 1616, the year playwright William Shakespeare died. An aboveboard businessman is considered honest, straightforward, fair, calm, unsurprising, moral, law-abiding, and truthful.
Robert Hendrickson, QPB Encyclopedia of Word and Phrase Origins, Facts On File, Inc., New York, 1977, page 3.

 

Colorable Transfer
A sham transfer of an asset, property or right that has the appearance of authenticity. A pretend transfer. A colorable transfer appears to be true and valid, but the conveyance is intended to deceive. According to the illusory-transfer doctrine, an “inter vivos” gift is disregarded by law if the donor retains so much control that there is no good-faith intent to relinquish the transferred property during the conveyor’s lifetime. The doctrine is usually applied to inter vivos trusts in which the donor retains an excessive control or interest. The donor who sets up the trust might retain the income for life, the power to revoke, and substantial managerial powers. The intent of a colorable transfer might be to shift the income tax burden or avoid estate taxes. Divorce cases, bankruptcies and business dissolutions can uncover colorable transfers of property.
Brian A. Garner, Black’s Law Dictionary, Eighth Edition, Thomson West, St. Paul, Minnesota, 1999, pages 282, 357, 764, 840, 1405 and 1535.

 

Accommodation Address
The premises where a fraudster initially receives correspondence and mail, but the fraudster doesn’t live there or operate a legitimate business there. An accommodation address is often identified by a customer service representative or a data entry validation program when numerous bank or credit card customers appear to be changing their address to the same address. Law enforcement and postal inspectors use surveillance at the accommodation address to nab the crooks and accomplices. A fraudster uses an accommodation address to receive fraudulently obtained items such as checkbooks, credit applications, credit cards, monthly statements, and credit reports. A fraudster uses the items to withdraw cash from the victims’ accounts or make quick purchases. Victims of phony investment schemes have remitted payments to these intermediate addresses. An accommodation address often is an anonymous mail drop or a forwarding service from a mailbox rental service. The address may include a suite number, flat number, apartment number, or an “in care of” line (c/o). The deceptive address might be in a prestigious building on a prominent street in a major financial district. The accommodation address might in another city, state or country, so the victim does not know the fraudster’s true address. A fraudster might use a series of accommodation addresses to delay attempts to discover his schemes. Sometimes an accommodation address includes a small office with telephone service that can be rented by the hour, day, week, or month. A fraudster uses an accommodation address because it can be easily and quickly abandoned.
“Fraud and Financial Crime Glossary,” CIFAS Online, www.cifas.org.uk/fraud_glossary.asp, June 20, 2006.

 

Debt
An obligation for services or goods already received. High personal debt is a common financial pressure to commit fraud. At the time of the Norman Conquest (1066), cloisters of monks controlled the way a language was written. Scholarly monks adopted the Old French word “dette” into the English language and shortened the spelling to “det.” A century later, the monks realized the word was derived from the Latin word “debitum,” so they added a silent “b” to change the spelling to debt, and they continued to pronounced it as det.
Hugh Rawson, Devious Derivations: Popular Misconceptions and More Than 1,000 True Origins of Common Words and Phrases, Castle Books, Edison, New Jersey, 2002, pages 61 and 62.

 

FINTRAC
An acronym for the Financial Transactions and Reports Analysis Centre of Canada, based in Ottawa, Ontario. FINTRAC was created in July 2000 as an independent federal government agency. It assists in the detection, prevention, and deterrence of money laundering and the financing of terrorists activities. The Centre collects information, analyzes and assesses it, and then appropriately discloses the information to law enforcement and intelligence agencies. FINTRAC receives reports from banks, savings and credit unions, caisses populaires (people’s banks), cooperative credit societies, and trust and loan companies. Similar reports are submitted by life insurance companies, brokers, independent agents, securities dealers, real estate brokers, accountants, casinos, foreign exchange dealers, and the general public. FINTRAC obtains reports from money services businesses that sell money orders and travelers’ cheques, and alternate money remittance systems such as a hawala, hundi or chitti. The operation of a hawala involves a hawaladar (broker) delivering money from his cash reserve at the request of a counterpart hawaladar in another country who is serving a client. Hawalas are popular in the Middle East, Africa, Bangladesh, India and Pakistan. A hundi is a bill of exchange for a trade or credit transaction, popular in Pakistan. In India, chitti is a Hindi word for a note or certificate given to a servant. British colonialists introduced chit systems in China in the 19^th century. FINTRAC monitors suspicious transactions, terrorist property, large cash transactions, electronic funds transfers, and currency transported across the border.
www.fintrac.gc.ca, June 28, 2006.

 

Lulling
Calming someone by deceiving them and giving them a false sense of security. A stockbroker might repeatedly reassure an investor that an account is doing well, when in fact losses are occurring. The purpose of lulling is to placate the investor, with the hope that additional investments will be made on the advice of the stockbroker before the fraud is discovered. Another purpose is to forestall legal action by the client. Lulling can be a fraudulent act when a stockbroker and the firm’s analyst have conflicts of interest and a financial motive to convince a customer to buy a security or prevent the customer from selling it. The U.S. Securities and Exchange Commission has filed civil actions against stockbrokers who lulled defrauded investors by giving them false assurances and preparing false account statements. In their schemes, the stockbrokers were commingling investors funds, failing to purchase legitimate securities, and converting investor funds for personal use. During the Enron trial, federal prosecutor Kathryn Ruemmler outlined the serious financial problems at the company and the actions of Kenneth Lay, Chief Executive Officer. Lay chose to use a very powerful term “to lull” investors, employees and the public and tell them there were no problems at Enron.  Lay said, “There is no other shoe to fall.” Ruemmler said Lay was buying stock because he was lulling them into complacency. Lay bought small amounts of stock before the Enron bankruptcy in 2001, but he also sold $20 million of Enron stock.
Securities Fraud Topics, The On Topic Network,
http://securities-fraud.on-topic.net/
securities_fraud/Lulling, June 28, 2006.

 

Norazi Agent
An import/export middleman who trades in illicit merchandise or gray market products. A norazi agent might trade cargo that has legitimate merchandise mixed in with contraband items that are prohibited by law or a license agreement, such as wine, weapons, cameras, DVDs (digital video discs), electronic devices and parts, and untaxed liquor and cigarettes. A norazi agent might ship cargo to nations that are ordinarily closed to normal commercial channels. A norazi agent doesn’t take title to the goods he sells. Gray market goods usually are legitimate, but they are sold at prices lower than intended by the manufacturer and distributed through unauthorized channels. Manufacturers will refuse to honor warranties for products purchased from gray market sources. Some gray market items are mimics or counterfeits of genuine items. Gray market agents sometimes provide scarce items for quick delivery at a premium price well above the normal market price.
Jerry M. Rosenberg, The Essential Dictionary of International Trade, Barnes & Noble Books, New York, 2004, pages 212 and 297.

 

Phantom Regulator
A phantom regulator tries to lure unsuspecting overseas investors into buying worthless penny stocks from unlicensed brokers or sending money in response to an advance fee scheme. A fraudster creates the name of a phony regulatory agency for a scheme, such as the “Regulatory Compliance Commission,” “International Exchange Regulatory Commission,” or “Global Securities Information Center.” Each of these had official-looking Web sites, listed addresses and phone numbers in the U.S., but none of them had any relation to real regulatory agencies or organizations. Some bogus Web sites use “-gov” instead of “.gov” in their domain name and e-mail addresses. Typically, a phantom regulator claims to be based in the United States because the U.S. securities markets are among the safest in the world. Sometimes a white-collar grifter sets up a small temporary call center designed to provide validation for the scheme. There are several red flags that a regulator is bogus. (1) The phantom regulator endorses or approves of an investment opportunity, stock, or company. Real regulators enforce laws and don’t approve any deal. (2) The bogus regulator tells investors they can pay a fee to release restricted shares of stock. This is a variation of an advance fee scheme. (3) Internet search engines find little or no information about the imitation regulator. (4) Investors are likely dealing with a fake regulator if they talk with other regulators and they never heard of it. (5) Investors can’t find the phony regulator listed on Web sites of real regulators such as the U.S. Securities and Exchange Commission (www.sec.gov) or the International Organization of Securities Commissions (www.iosco.org).
“NASAA Warns Investors to Beware of Phantom Regulators: Con Artists Posing as U.S. Regulators Go Global to Lure Investors,” North American Securities Administrators Association, www.nasaa.org, July 28, 2005.

 

Unsub
An acronym used by law enforcement officers for an unknown subject of an investigation. Unsub also is used in television programs and films about crime investigations.
Urban Dictionary, www.urbandictionary.com, June 28, 2006.

 

Larry C. Adams, CFE, CPA, CIA, CISA, teaches fraud examination at the Keller Graduate School of Management of DeVry University in Arizona. He publishes the book and online editions of “Fraud In Other Words.” His Web site is www.larry-adams.com. His e-mail address is fraudwritr@aol.com.

 

ã Copyright 2006 Larry C. Adams. All rights reserved.
“Fraud In Other Words” is a trademark of Larry C. Adams.
 

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