Larry C. Adams, CPA
Certified Public Accountant
Certified Fraud Examiner
Phoenix, Arizona USA
January 2008 Fraud
Blanks, Equity Fine, Flash Wad, IQEX,
Microstructuring, and Piggyback Credit Scam.
use microstructuring and ATMs to
rapidly launder money and transfer
millions of dollars
out of the country each month.
Fraud In Other Words
and Uncensored Street Slang
by Larry C. Adams, CFE, CPA, CIA, CISA
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.
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
Report 102 (2003) – Sentencing: Corporate
Offenders, Law Reform Commission, New South Wales, Australia,
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
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
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
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.
wpeip?openform, June 23, 2007.
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
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,
Mark Schoofs, ATMs Used to Launder Drug Money,
The Wall Street Journal, September 21, 2007,
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
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.
Copyright 2008 Larry C. Adams. All rights reserved.
|This article is in the
January/February 2008 issue of Fraud Magazine,
the Journal of the Association of
Certified Fraud Examiners.
Magazine Article Archive