"Viewed by law enforcement, there is no line between money laundering and fraud; the distinction is the underlying activity." That was Dan Wager's opening remark to his discussion of fraud convergence during the 7th Annual Terrorism Financing and Money Laundering Forum hosted in Cary, North Carolina. Wager is Senior Vice President and Head of Global EDD at TD Bank, but the vast majority of his career was spent in law enforcement. He brought the two career learnings together to talk about how public and private partnerships could work to fight financial crimes.
When looking at FINCIN statistics, Wager said that the majority of SAR (suspicious activity reports) filings are money laundering. But, he says, the final crime is usually fraud. "Money laundering is often only the means of hiding the proceeds of fraud. Money laundering is almost never charged without citing a specific unlawful activity (SUA). One of the most common SUAs? Fraud."
Wager shared a couple of real cases to illustrate how important it is to share signs of suspicious activity with law enforcement. According to Wager, financial services firms have access to information that can't be gathered any other way. For instance, institutions should report customer behavior that is outside of the norm - new or unusually large payments coming into or out of an account, new accounts under a different name but the same social security number or ID, or addresses that are high-risk such as Mailbox Etc.
According to Wager, this is where convergence of your fraud and AML teams is important. "If your institution is siloed - divided - as it pertains to fraud and AML, can you adequately defend against and investigate situations where fraud crosses over to money laundering?" he asks. "For instance, a customer opens an account in his name and two in fake names. He enters the bank and deposits a counterfeit check in one of the accounts that was opened with a fake name. Is that fraud or money laundering? Which department will handle the investigation? Law enforcement sees it as fraud and money laundering."
Another benefit of convergence is the ability to follow the thread and stop losses before they happen. Wager says that siloed teams rarely collect and share information such as IP addresses of would-be fraudsters or shell accounts. Converged enterprises can use that information to stop fraud and money laundering holistically and share it with the authorities.
