Fraud Investigation

Matrix Intelligence Featured In "The Mirror" Covering Fraud

Matrix Intelligence's Stuart McDonald covers fraud in a featured article for The Mirror, "Fed-up with the lack of police results, victims of fraud are going private".

Companies and individuals hit by frauds are losing faith that the police will help and are instead turning to private investigation experts.

A briefing for finance industry insiders heard how just 3% of fraud cases result in charges or prosecution.

Stuart McDonald of corporate investigations company Matrix Intelligence also cited figures showing a 20% increase in online shopping and auction fraud last year, and a 61% increase in remote banking fraud.

“Depressingly, fraud is now the most likely crime that members of the British public will become a victim of, with more than one in three of us being affected, but just over 1% of police resources are dedicated to dealing with it,” he said.

“That is probably the most depressing statistic of them all.”

“Very often when we have someone come to us we direct them to the police and they simply come back and say they realise that they’re going to get no satisfaction via that mechanism and ask could they pay to potentially investigate privately.”

“It’s not ideal but it is something that we do if the client has the resources and we deem there’s a likelihood of successful recovery.”

“If there isn’t, then it’s about management of expectations and saying to the client we believe they should cut their loses.”

Click here to see the full article in The Mirror.


Fraud Investigation

New York Law Firm

“We engaged Matrix to locate an individual suspected of participating in an international fraud scheme. The engagement required enquiries in Russia and the UK in connection with prosecuting legal claims in the US. Matrix produced results in a format submissible to the court on a very tight deadline. Matrix was a pleasure to work with under difficult circumstances and the work product was invaluable.”

Partner


Global People Tracing

Global People Tracing

We were engaged by a multinational legal firm to assist with global people tracing those wanted in connection with a multi-billion Euro fraud against the German government.

The information provided for each individual was minimal, dated back several years and involved traces in: Australia, Dubai, Germany, Ireland, Switzerland and the UK. The turnaround time was incredibly tight, as the case had been running for a number of years and there was a fast expiring deadline for serving the Subjects.

Outcome

We commenced our search using OSINT (open source intelligence), however; whereas this provided partial indicators for some of the Subjects, we had to progress almost immediately with the conduct of HUMINT (human source intelligence) enquiries and more traditional techniques such as: visiting last known addresses, known acquaintances and employers. One individual in particular had gone to great lengths to conceal his whereabouts, however; we were able to track one of his private planes to an airport in the Middle East and then obtain a copy of the aircraft registration certificate which listed his address.

We successfully traced every subject within time and added another very impressed client to our personal contacts.

Working with Matrix Intelligence

At Matrix we understand the difference between intelligence and evidence required for use in a Court of Law and have extensive knowledge of the legal system, enforcement regimes and cultural practices within those jurisdictions most commonly associated with hidden assets.

Please contact us directly for more information regarding our cross-border investigations, global people tracing capabilities and bespoke services.


Fraud Investigation

Fraud Investigation

We were engaged by a New York based lawyer to assist with a fraud investigation against a Russian Citizen. The fraud was committed in America and it was believed the suspect subsequently moved to the UK.

The nature of the fraud investigation was very niche and our sole task was to obtain a copy of the Subject’s signature, so that our client could verify whether or not it matched the signature on a document in their possession.

Outcome

We traced the individual to the UK, however; there was no lead which could plausibly take us towards obtaining a copy of their signature. We therefore switched focus and conducted enquiries in Russia. We briefed a trusted source with whom we work and we discussed the methods by which a copy of the Subject’s signature could legitimately be obtained through publicly accessible documentation.

Our source conducted multiple local enquiries in Moscow and was able to secure a copy of the Subject’s signature on official documentation. Comparative analysis verified that the signature was indeed the same and their enabled our client to proceed with a prosecution against them.

Working with Matrix Intelligence

Matrix Intelligence are regularly engaged by legal firms, litigation funders and HNWs to undertake risk analysis, due diligence and pre-litigation profiling to ascertain an individual’s: estimated wealth, background, corporate affiliations and discover any reputational red flags. Experts in this field, with over a decade’s experience, we are perfectly placed to advise and assist with high-end disputes and litigation.


Hidden Assets

How Do People Hide Their Assets?

There are various tactics which individuals can employ for hidden assets in an attempt to put them beyond the reach of the courts, or creditors. Typically, this will involve spreading their wealth across a variety of asset classes and the use of offshore jurisdictions.

An asset is defined as “an item of property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies.”

Criminals or fraudsters will have hidden assets in an attempt to prevent paying taxes, avoid civil forfeiture, or apprehension. At a basic level they will employ friends or family to assist them, or if they are more creative, they will use worldwide offshore accounts which are disguised by shell companies.

It is not just criminals who go to such lengths and Spouses who are undergoing or preparing for divorce proceedings often have hidden assets by: placing cash in a safe place, underreporting income or tax returns, deferring salary or receipt of a work-related bonus, transferring stock, or setting up a custodial account.

The various asset classes which people utilise to hide wealth include:

  • Cash at bank - Most people are attracted to the accessibility of cash and use accounts in high street accounts or offshore banks to hide at least part of their money. The account will be opened utilising fake credentials or a third party, which makes it incredibly hard to trace.
  • Moveable assets - This include items such as cars, high-end paintings, expensive wine, jewellery, yachts or airplanes. Much like cash, this form of asset is highly desirable, as it is typically easy to move and conceal (either physical, or its ownership) and pleasure can also be derived from it.
  • Real Estate - This encompasses: residential, commercial, industrial and land. People can invest in a classic residential property, commercial property, such as an offices or restaurants, industrial warehouses, or purchase a plot of land and hide their ownership by doing so through a third party, or subsequently transferring ownership to family members.
  • Equities - Equity is purchased in a company and individual ownership is concealed by utilising a company registered in an offshore jurisdiction to make the transaction or by subsequently transferring the holding to family or friends.
  • Cryptocurrencies – The newest and perhaps most significant new asset class in recent years is cryptocurrency; a virtual currency which can either held as an asset in its own right, or utilised to make online transactions. The best-known example of a cryptocurrency is bitcoin and this is well known to be utilised by criminals in order to hide money. As bitcoins are virtual assets, this enables an individual to easily conceal their ownership in a virtual wallet, which is incredibly hard to track; in part facilitated by the lack of worldwide legislation to regulate the industry.

Offshore Jurisdictions

Offshore jurisdictions can be used for perfectly legally for activities such as tax avoidance, however; they are more synonymous with illegal activities such as tax evasion (non-residents evading tax in their actual country of residence) and money laundering (returning criminal/illegal money back into circulation). The prime reason they are attractive to criminals, is their inappropriately high level of client confidentiality; enabling criminals to operate within them with relative impunity.

Individuals and companies alike exploit offshore jurisdictions and as a general rule, the wealthier they are, the more embedded they are; with some having hundreds of offshore subsidiaries. In 2017, it was estimated that individuals had hidden $8.7 trillion. Whereas much of this money may be clean, a sizeable amount could be considered dirty and is doubtless being laundered by criminals who are exploiting the secrecy of offshore jurisdictions for illegal activities such as money laundering. In sophisticated cases, they do so by utilising complex mechanisms, spanning several countries, with a chain of intermediaries and a network of shell companies, offshore structures and nominee arrangements to mask their activities and hide the identity of ultimate beneficial owners (the person/s who invest in, control, or otherwise benefit from an asset, such as a bank account, real estate property, company, or trust).

What can be done to find hidden assets?

Asset Tracing is the process whereby investigators conduct specialist financial enquiries to determine a subject's wealth, their assets and where and how they are held. It is a highly complex series of protocols that requires expert professional support in any jurisdiction.

The process is often far from simple and can be highly complex and time-consuming and it is especially difficult for those working in the context of failed states, widespread corruption, or with limited resources. Other challenges include navigating data protection laws, treaties and jurisdiction specific legislation.

Matrix Intelligence understands the difference between intelligence and evidence required for use in a Court of Law. We have extensive knowledge of the legal system, enforcement regimes and cultural practices within the jurisdictions that we most commonly operate.

Before we accept any case, we first require sufficient details to enable us to conduct a preliminary investigation (at no cost to our client). Only then are we able to propose a coherent and phased strategy to meet both the client’s requirement and budget. We value integrity and if we believe that a case has little likelihood of a positive outcome (time and cost-efficient), we will advise accordingly.

Having conducted extensive multi-jurisdictional and cross border complex investigations, we are experts at assisting with commercial and high-end litigation.

We deliver reliable and actionable intelligence for lawyers, financial firms, corporate clients, third party funders and HNW individuals – worldwide. We operate internationally and have exceptional capabilities in Eastern Europe and all offshore banking jurisdictions. For more information, contact us at: info@matrix-intelligence.com or online at www.matrix-intelligence.com


Know Your Customer - KYC - Matrix Intelligence

Do You ‘Know Your Customer’?

The term ‘know your customer’ or ‘KYC’ is sometimes mentioned with careless abandon, however; as the process by which companies verify the true identity of their clients and any associated potential risks, it is vitally important. Customer and third party due diligence should form the foundation of a every company’s compliance program.

Companies and financial institutions of all sizes use KYC as a tool to combat fraud and money laundering. It is also a helpful due diligence tool to protect companies from entering into potentially fraudulent or illegal transactions. It can be conducted against an individual, or a company/organisation (Subject/s).

The key components of a KYC check will include:

  • Verification and authentication of a Subject’s identity.
  • Review of address history.
  • Screening against all sanctions lists, watch lists and politically exposed persons (PEP) lists.
  • Verification of a Subject’s business profile; including occupation and corporate affiliations (past and present).
  • Verification of all relationships within the organisation and its subsidiaries.

To counter potential fraud, the above checks should leverage third-party data and sources, such as credit reports, to help validate the information provided by the client.

Know Your Customer For High-Risk Clients

Know Your Customer can also include ‘Enhanced Due Diligence’ (EDD) for clients that may pose a higher risk; either due to their personal profile or association with a high-risk jurisdiction.

The initial risk assessment of a Subject will determine the requirement for additional due diligence, if any. Those deemed ‘Low- risk’ may be screened through a simplified due diligence process; often the minimum required under the given jurisdiction’s AML regulation. Publicly traded companies are a good example of ‘low- risk’ clients.

Those deemed ‘High-risk’ should go through an enhanced due diligence (EDD) process that includes:

  • Verification of source of funds and wealth.
  • Beneficial ownership identification.
  • Additional investigation into the information supplied by the client; utilising multiple sources.
  • Verification of all business activities through human source intelligence.

Even after an initial report has been conducted into a ‘high-risk’ Subject, Companies should establish periodic reviews of the data to ensure that their profile remains within their risk profile.

Know Your Customer High-Risk Jurisdictions

Certain jurisdictions are universally recognised as ‘higher risk’ due to their opacity, high levels of corruption, links with money laundering or unstable governments. When conducting business within such jurisdictions, or with people who are linked to them, companies should take extra care to help protect themselves and their clients against fraud, money laundering, corruption or terrorist financing.

Examples of sources that can help verify if a country is deemed to be high risk include Transparency International’s “Corruption Perceptions Index” and the US State Department’s annual International Narcotics Control Strategy Report (INCSR), which rates countries based on their money laundering controls and corruption.

It is also prudent to check if a given jurisdiction is a member of Financial Action Task Force; and whether or not there is a high incidence within the country of activities such as financial crime, or drug trafficking.

Matrix capabilities

Whether it is pre-transactional, or financial due diligence, we provide our clients with the intelligence they need to understand the risks they face and make fully informed decisions to further their stated aims.

Our KYC checks can be performed as a standalone service, or as part of an overall due-diligence task, and our standard report includes:

  • Passport verification, including ID and current residence on customers, clients and suppliers.
  • Litigation; historical and current.
  • Corporate affiliations.
  • Reputational screening, with a focus on red flags.
  • Evaluation of any potential risks to your business.
  • Screening against Sanctions and Politically Exposed Persons (PEP) lists, Relatives and Close Associates, and Special Interest Persons & Entities.

Working with Matrix Intelligence

Matrix Intelligence undertake Know Your Customer (KYC), risk analysis and Due Diligence investigations prior to acquisitions, joint ventures or investments. Ideally, we are engaged at an early stage before legal costs and other professional fees are incurred; as this will mitigate the impact if adverse legal, financial or operational issues come to light.

We provide detailed and cost-effective reports, prepared by a team of specialists, to enable our clients to make informed and timely commercial decisions.

Please contact us with any queries about our services.


KYC Checks

KYC And Red Flag Reports On UK Borrowers

Matrix Intelligence are regularly tasked by a UK-based Bridging Finance Company to conduct bespoke pre-transactional KYC checks / Red Flag Reports on potential borrowers.

To satisfy our Client’s requirements, we conduct Open Source research to ascertain the profile of the Borrowers and their affiliated companies; with particular focus on potential or active litigation (both criminal and civil). Our aim in doing so is to identify any Red Flags, authenticate provided documentation and inform our Client of any risks they may be facing.

The scope of our report includes:

  • Passport and ID Verification (including global ID and address confirmation).
  • Confirmation of property ownership.
  • Compliance and financial checks.
  • Civil litigation, criminal & court searches.
  • Corporate affiliations & red flags.
  • International fraud / sanctions.
  • Email verification & fraud check.
  • Risk profiling/adverse media search.
  • Searches are conducted in the UK & any other specified jurisdictions.

Outcome

Our reports enable our Client to make informed decisions on potential borrowers and mitigate their exposure to potential reputational damage and financial losses at a very early stage.

Working with Matrix Intelligence

Matrix Intelligence undertake risk analysis, KYC and pre-transactional Due Diligence investigations prior to acquisitions, joint ventures or investments. Ideally, we are engaged at an early stage before legal costs and other professional fees are incurred; as this will mitigate the impact if adverse legal, financial or operational issues come to light.

We provide detailed and cost-effective reports, prepared by a team of specialists, to enable our clients to make informed and timely commercial decisions.

To discuss our KYC / Red Flag Report checks, please contact our London office on +44 (0) 203 873 1089, send us an email to info@matrix-intelligence.com or visit our website at www.matrix-intelligence.com.


KYC & Red Flag Reports

Bridging Finance Company

“In the current environment (where fraud is not only increasing in prevalence, but also sophistication), relying on basic KYC procedures, or even insurance, is simply not an option. Our partnership with Matrix ensures that we are fully informed of any risks we face and that we can grow our business with confidence. Although cautious, their process is slick and their reports are always delivered on time and in a concise manner.”

Company Owner


Identity Fraud

Fraud – What Has Changed Since The Arrival Of Coronavirus?

There has been much coverage of ‘Covid-related’ fraudulent scams since the emergence of the virus, however; until statistics are available to allow a historical comparative analysis, it is too early to say whether or not this is very much business as usual for fraudsters, or whether there has been a genuine increase in general fraud and identity fraud activity.

There has been much coverage of ‘Covid-related’ fraudulent scams since the emergence of the virus, however; until statistics are available to allow a historical comparative analysis, it is too early to say whether or not this is very much business as usual for fraudsters, or whether there has been a genuine increase in activity.

It is probable that many of the scams committed have been perpetrated by the same individuals who were responsible for ‘pre-Covid’ fraud and the differing modus operandi simply illustrates their ability to rapidly switch tactics to adapt to and exploit a changing environment. Specifically, reacting to the fact that people were forced to stay at home and were driven online for everyday activities from dating to shopping. Overnight, the number of people who suddenly became ‘targets’ for online fraudsters increased significantly.

A recent article in the Times claimed that almost all crime rates fell in 2020 because of the pandemic, however; fraud is now the most common offence in England and Wales, with fraud overall up to 4 percent and online fraud up by 70 percent.

An article in the Telegraph claims that online scams rose to record levels last year and that £479 million was stolen from people in ‘push-payment’ schemes; in which people are tricked into transferring money. This represents a 5 percent increase on 2019 and the largest loss ever recorded, with almost 150,000 people being impacted. The largest single type of scam involved investment fraud, with sites promoting fake investment opportunities such as cryptocurrency.

Other scams included impersonation fraud, with criminals posing as broadband or TV streaming providers, or in some cases, even as a bank’s fraud investigation team and romance scams, with lonely and sometimes vulnerable individuals being targeted.

What is perhaps more interesting though, is whether or not people who would never previously have considered it, have since committed fraud as a direct result of the pressures induced by the virus.

The general hypothesis as to why previously trusted people commit fraud originates from Donald Cressey’s work. In simple terms, it suggests that previously law-abiding people commit fraud when they have a problem which they can alleviate through fraudulent behaviour and which they can rationalise to themselves. This is commonly referred to as the ‘fraud triangle’:

 

Fraud Triangle - Identity Fraud - Matrix Intelligence

 

If we consider the environment created by Covid and superimpose the above, it is easy to see why many ordinary people may have committed fraud.

Pressure - The first component is pressure, which provides the motivation for the crime.

Whereas the government stepped in quickly to offer financial support to many individuals and businesses, the help was insufficient to meet everyone’s needs and a minority of people slipped through the cracks altogether and received almost no help.

This created pressure for many, including company directors who inevitably worried about how they were going to stay afloat and meet their financial obligations; not to mention the moral obligations many felt towards employees.

Opportunity - The second component is opportunity. An individual must identify a means of abusing their position to solve their financial problem and crucially, also believe they have a reasonable chance of not being caught.

The government can only be applauded for rushing out financial help, however; schemes such as Bounce Back Loans (BBLs) were launched with haste, with little requirement for due diligence involved and they were easy to abuse. The scale of the rollout was also such that individuals may have felt that their crime would go unnoticed amongst the many others that were being committed.

Rationalisation - The final component is rationalisation. It is not hard to conceive that some individuals will have felt that the impact upon the economy was unjust and that they should not have had to suffer as a result of something which was completely beyond their control. They were simply honest people caught in a bad set of circumstances.

The two most obvious areas which are likely to have been abused in the last year BBLs and commercial lending.

Bounce Back Loan Fraud

The BBL scheme promised to help small and medium-sized businesses remain trading by providing them with guaranteed loans of up to £50,000, interest free for 12 months.

Although companies that applied for the scheme were subject to KYC checks, banks struggled to cope with the sheer volume of applications and the checks were no more that cursory. HM Treasury now fears that there were numerous successful fraudulent applications.

People have also already been arrested for creating fake companies and supplying faked/forged documentation to secure loans. There is also evidence to suggest that some individuals took loans in the knowledge that they could never pay them back as their business was simply not viable (pre-covid), or, that they took loans and then liquidated their company, with the intention of ‘phoenixing’ their company and trading under a new name post-covid.

An example of BBL fraud cited in the Financial Times, noted a worker in Essex who was arrested for fraudulently stealing £240,000 worth of loans provided by the BBL scheme from his employer.

Covid Recovery Loan Scheme

This scheme was established to help businesses of any size access loans and other types of finance so that they could continue to trade throughout the pandemic and recover afterwards. Up to £10 million was available per business, with the government guaranteeing up to 80% of the finance to the lender and the finance predominantly being provided by British banks.

Again, this channel was vulnerable to fraud, and individuals and companies intentionally falsified information, such as the value of their assets, or performance of their business to secure loans; a criminal offence under Section 17 of the Theft Act 1968.

Combined, the Public Account Committee, believe that fraudulent BBL and recovery loan scheme losses could amount to £26bn.

It will take time before the statistics are released to enable us to state with authority whether or not fraud has significantly increased during the Coronavirus pandemic, or, whether it has simply increased in line with the increasing trend. What is beyond doubt, is that it is a significant problem and it is here to stay.

Fraud is now the most likely crime that the British public will become a victim of and the Office for National Statistics believes that it now accounts for one third of all crimes reported in the UK.

Just one percent of police resources are dedicated to dealing with fraud and fewer than three percent of the cases they investigate end in someone being charged or prosecuted.

What to do if you find yourself a victim of Identity Fraud

If you suspect you may have been a victim of fraud, Matrix Intelligence can assist you by investigating the crime, identifying the individuals responsible and tracing any assets that may be recoverable. For free advice and a no obligation proposal, please contact us on 0203 873 1089 or email: info@matrix-intelligence.com.