January 2008 Fraud Terminology Topics
Blanks, Equity Fine, Flash Wad, IQEX,
Microstructuring, and Piggyback Credit Scam.
 

Fraudsters use microstructuring and ATMs to
rapidly launder money and transfer millions of dollars
out of the country each month.
 

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

 

Blanks

Unlabeled, unadorned apparel that is legally imported into the United States by a counterfeiter. The quality and design of the blanks might be equal to or less than the higher-priced name brand clothing they intend to copy. However, the blanks don’t have any “identifying elements” to trigger an “IPR seizure” by U.S. Customs for violating intellectual property rights. The imported blanks are moved to Los Angeles or New York for finishing at a later date.
     Identifying elements include designer clothing tags, labels, Levi’s tabs, Gucci belt buckles, metal clasps, and unique embroidery. The identifying elements are shipped separately from the blanks to avoid seizure by U.S. Customs. Both shipments are low-valued since they are only components.
     The IPR scam artist contracts with small independent factories that hire low-wage workers to attach the identifying elements to the blanks. The street value of the finished counterfeit merchandise increases substantially from the imported value. The consumers believe they are buying original designer goods at bargain prices.
     China, Hong Kong, Korea, Singapore, and Taiwan are top exporters of IPR-infringing goods.
Moving Up on the Outside, It’s IPR Seizures, U.S. Customs Today, May 2002.

 

Equity Fine
An alternate type of fine that calls for a convicted corporation to issue special shares of equity securities. An equity fine is a share dilution. The special shares are placed with a victim compensation board administered by the government. The board can liquidate these shares when the securities realize a maximum return.
     An equity fine permits a more severe penalty against the company than a cash fine. To deter continued illegal activity, an equity fine can be graduated, so the fine increases with each additional criminal conviction. An equity fine punishes the corporation owners and shareholders, but it avoids a liquidity crisis that a cash fine might create.
Report 102 (2003) – Sentencing: Corporate Offenders, Law Reform Commission, New South Wales, Australia, www.lawlink.nsw.gov.au/lrc.nsf/pages/r102chp07.

 

Flash Wad
A large amount of currency carried in a pocket and quickly displayed to impress someone. The currency is carried in a roll or folded in half with the largest denominations on the outside. To make the money easily visible, it might be bound in a rubber band or a money clip, instead of concealed in a wallet, purse, or envelope.
     Undercover law enforcement officers might be issued temporary flash wads from their agency’s funds to convince fraudsters that they have enough money on hand to buy detailed information from confidential informants, large quantities of narcotics from street dealers, or fraudulent identification documents from illegal manufacturers. The flash wad is intended to entice the suspect to act quickly and to show the suspected criminal or accomplice that they have enough cash to complete the transaction immediately. To provide better court evidence, the flash cash might have recorded serial numbers or be secretly marked with commercial ink that is only visible under ultraviolet light.
     Some people use a flash wad to impress their dates, boss, coworkers, friends, family, or business clients. Others display a flash wad in an attempt to get better deals or better service at a ticket agency, store, restaurant, bar, or hotel. Some use a flash wad to make other persons believe that they are wealthier than they truly are.
     Flashing a lot of cash in public can be dangerous. Anyone who sees someone carrying a lot of money might view the person as an easy target for theft or a fraud scheme. Tourists are especially vulnerable in vacation areas where they are paying more attention to the sights than their pockets.
     Some flash wads are fake. The outside of the flash roll or flash bundle might have a few high denomination bills, but the inside of the pack is filled with low denomination bills or newsprint cut to size.

 

IQEX
The International Qualification Examination (IQEX) is taken by qualified accountants in Canada, Australia, Ireland, and Mexico who want to earn the Certified Public Accountant (CPA) designation in the United States. The exam assesses their competence in accounting principles, auditing standards, commercial law, income tax law, and professional ethics unique to the United States.
     The American Institute of Certified Public Accountants (AICPA) prepares the computer-based test that can be taken outside the United States, instead of taking the Uniform CPA Exam within the United States. The International Qualification Examination is administered by the National Association of State Boards of Accountancy (NASBA). Agreements for reciprocal licensing of accountants have been established with the AICPA, NASBA, state accountancy boards, and credentialing organizations in various countries.
     Public accountants in Mexico with the title of Contador Publico Certificado (CPC) and CPAs in the United States who want to earn professional reciprocity in Canada can take the Chartered Accountants Reciprocity Examination (CARE).
     International reciprocity simplifies cross-border practice and enhances the prestige of professional accountancy. Many accountants have earned an additional international designation – Certified Fraud Examiner.
IQEX, www.nasba.org/nasbaweb/NASBAWeb.nsf/
wpeip?openform, June 23, 2007.

 

Microstructuring
A money-laundering scheme that uses automatic teller machines (ATMs) to make many small deposits and withdrawals to evade suspicion by banks and law enforcement. Small amounts ranging from US$500 to US$1,500 are deposited so they pass as ordinary ATM transactions. In large cities such as New York, microstructuring deposits are made into hundreds of accounts in multiple banks. Withdrawals are made quickly from ATMs in another country in the local currency. One money-laundering suspect kept track of more than a thousand bank accounts.
     Microstructuring is used by organized crime rings, terrorists, and drug traffickers. One organization moved two million dollars a month through ATMs. Banks are updating their ATM software to detect money-laundering patterns for smaller transactions. Microstructuring is a variation of smurfing, a scheme that split deposits into amounts of less than US$10,000 to avoid deposit-reporting requirements.
     The International Monetary Fund (IMF) estimated that up to US$2.4 trillion is laundered world-wide every year through a variety of schemes. Money-laundering is a process in which assets obtained or generated by criminal activity are moved or concealed to obscure their link with the crime.
     The IMF is taking a growing role in anti-money laundering (AML) and combating the financing of terrorism (CFT). The IMF is comprised of 185 member countries and is headquartered in Washington, D.C.
Mark Schoofs, ATMs Used to Launder Drug Money, The Wall Street Journal, September 21, 2007, www.azcentral.com/business/consumer/
articles/0921biz-ATMs21-ON.html.

 

Piggyback Credit Scam
A service offered by a credit-repair company that promises to improve the credit score of a client in 90 days or less. The company advertises its service using the Internet or flyers placed under windshield wipers of vehicles. A client tries to raise his own credit score by riding piggyback on the shoulders of someone else’s good credit.
     A client with a poor credit rating pays the company a service fee of US$900 to US$1,000 by cash or money order to be listed temporarily as an authorized user on the credit card of someone else who has a healthy credit rating. Sometimes the company offers the client a payment plan, and collects small amounts each week until the full fee is paid.
     The credit-repair company pays a commission of US$150 to US$200 to an accomplice with a good credit score. The accomplice lists the client as an authorized user on his credit card or revolving line of credit. The credit card has a solid history of two to 20 years of timely payments, and a credit limit as high as US$50,000. After three to six months, the name of the client is removed as an authorized user. As part of the deal, the client never meets the accomplice, and never receives a plastic card or the full account number.
     The client’s credit score might increase 45 points while he is listed as an authorized user because some credit-scoring companies rate an authorized user the same as the original cardholder. The card’s good payment history becomes part of the client’s credit record forever. If the client needs a 200-point boost, he might request to become an authorized user on five cards by paying discounted service fees of US$700 per card. Multiple accomplices might “rent out their accounts” and collect additional commissions from the credit-repair company.
     The credit-repair company is “gaming the system” and might be a fraudster because it can’t guarantee the client’s credit score will improve. The credit-repair company or accomplices might be involved in identity theft. The client might be a fraudster if he falsely manipulates his credit score to get a better rate on a loan, a higher mortgage limit, or additional credit cards in his own name.
     Engineer Bill Fair and mathematician Earl Isaac founded Fair, Isaac and Company in 1956. They developed FICO scores that measure of credit risk, and are the most widely used credit scores around the world for financial service providers, consumer credit reporting agencies, banks, mortgage brokers, insurance companies, credit card issuers, and telecommunications companies. Recently, Fair Isaac Corporation and other credit scoring companies started changing their mathematical models to ignore or give less weight to additional authorized signers on credit card accounts because of the increase in piggyback credit scams.
     In the early days of credit cards, the spouse and children of an original cardholder were added as authorized signers to establish a good credit history for them.
Russ Wiles, Piggyback Credit Lift Won’t Work Anymore, Arizona Republic, July 22, 2007, page D5.

 

ã Copyright 2008 Larry C. Adams. All rights reserved.
 

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