Third-party Scams & Money Laundering - A Journey to the Dark Side
S$99 million was lost to scams in 2017. In the first half of 2018, scams on Carousell rose by 136%. How does this money get moved around, out of Singapore, into the hands of the famous Nigerian prince? I was offered a glimpse into the world of money laundering in back in 2017 as a cryptocurrency trader. I'll take you through a journey of how several innocent and honest folks can find their way to be part of the money laundering scheme. Sit tight.
Choose Your Character
To show you how easily one might fall victim to being part of this scheme, the story will be broken down into different facet, as experienced by the different key characters.
The Buyer (feat Mr Gullible)
Mr Gullible was searching through Carousell, online P2P e-commerce in Singapore, for a pair of tickets to a sold-out concert next week. It didn't take him long before he chanced upon a seller for the ticket.
Mr Gullible found the price to be very steep and is pissed at ticket resellers for driving the price sky-high. He started haggling with the seller, citing all kinds of reasons you can find on carouhell. Sure enough, the seller relents and agree to meet his offer in the middle, if he could confirm his purchase and transfer the money to him instantly.
"Someone else is offering me the same price and is ready to pay. Because you came first, I'll let you have it if you can confirm and make the payment now. Do you want it or not?" - Seller
For $200 Mr Gullible gets his concert tickets priority-mailed to him. Except, the priority mail never came.
Mr Gullible, knowing he was scammed, filed a police report detailing his conversation history with the seller and the seller bank account number.
The Bitcoin Seller (feat Mr Crypto)
Mr Crypto is one of the few folks lurking on localbitcoins, a P2P bitcoin trading platform. He buys bitcoin from people who want to cash out their coins, and he sells it to people who wanted to buy. For each trade, he gets 1-5% margin and he has been trading for a while now.
Mr Crypto takes extra precaution to know who is he trading with for KYC & AML reasons. He requests for a copy of the ID of who he trades with and ensure that buyers pay using their own bank accounts.
One fine afternoon, he receives a trade request from ImNotAScammer for $3400 of bitcoins. As usual, he requested for necessary documents prior to the trade and verified that he is trading with Mr Accountant with his ID.
Mr Crypto requested for ImNotAScammer to send $3400 to his bank account first while his bitcoins on localbitcoins are held in escrow. Within minutes, he verified that he has received $3400 in his bank account from an account belonging to Mr Accountant. Seeing that he has received the payments, he promptly release the bitcoins to ImNotAScammer on localbitcoins.
Mr Crypto has netted himself $170 on this trade.
Weeks later, Mr Crypto was called for an investigation, at CID - Technology Crime Investigation Branch related to the above trade.
The Job Seeker (feat Mr Accountant)
Mr Accountant has recently found himself in heavy financial crisis after he was retrenched from his previous role as an administrative executive. With a family to feed and limited savings, he is under tremendous pressure to reinstate his income.
While scouring through several job boards, he found himself a part-time role in a commerce company as a finance executive. As the owner of the company explained, the company has yet to set up their bank account and they will have to make do with using his account for receiving regular payments. He will need to set up a new bank account specifically for this purpose. He has to send the owner a copy of his ID and regular update on the account balance. From time to time, he is also required to make payment to several suppliers for their goods.
In the first month, he received over $8000 of payments for goods and has paid Supplier A $2300, Supplier B $3400 and Supplier C $1650.
For what he is doing, he gets pay himself $800 monthly, decent pay for an online part time job.
In the second month of his job, he was called down to the CID cantonment complex for investigation, on multiple Carousell and e-commerce scams.
The Puzzle
Before I unveil the last facet of the story, that of the scammer, I would invite you to try to guess what actually happened. How did Mr Crypto and Mr Accountant get themselves involved in scamming Mr Gullible and laundering the money out to Nigeria? What is the scammer's side of the story?
The Scammer (feat Nigerian Prince)
The scam has begun long Mr Gullible has found the concert ticket. In fact, Mr Gullible is not alone. With him, there were multiple victims of other types of scams. Let's walk through how the Nigerian Prince moves all these money out of Singapore into another country.
Setting Up the Money Mule: Step 1 - 2
The scammer post multiple job offer for finance executive (or the likes) and have victims set up a bank account for the scammer. This prevents the ill-gotten money from getting transferred directly to the scammer bank account (if the scammer is local) or establishes a local presence (if the scammer is a foreigner).
The money mule, Mr Accountant, provides his identification documents to the scammer to assure that he will not run away with the money in the bank. This gives the scammer access to a fake identity related to a bank account that he controls indirectly through the money mule.
The Scam: Step 3 - 5
A victim falls prey to the scammer through various scam methods. To name a few:
- love scam
- sex scam
- hostage scam
- failed delivery scam
- police/law enforcement scam
- e-commerce scam
The money from the victim is transferred to the money mule, to be aggregated with those from other victims.
Going Dark: Step 6 - 9
Upon receiving multiple sums of money, the scammer will exfiltrate the money through P2P cryptocurrency trading. He creates a trade with Mr Crypto and verified himself with Mr Accountant's identity. Following which, he instructs Mr Accountant to send the money to Mr Crypto for an alleged payment to a supplier.
Upon verifying the payment and the source of fund matches the identity, Mr Crypto releases the bitcoins in the escrow to the scammer.
Once the scammer receives the bitcoin, he can easily move his ill-gotten gains across borders and possibly launder it through another ring.
That is the end of the last facet of the story, showing a complete overview of how the scammer makes use of different parties to execute a scam and launder money out of the country.
Footnote
As you can guess, I was involved in not one, but two, of these scams - in the shoes of Mr Crypto. Both cases involve fraudulent funds (in the thousands) being transferred through my accounts, resulting in two of my accounts being frozen while the investigation is underway. Although one of the cases took more than a year to finally conclude and my account unfrozen, the investigation officers (IO) at CID handled the cases professionally.
An encounter with my bank's relationship manager(RM) inspired me to tell this story. The RM was complaining to me about the previous customer being very troublesome. The customer was looking to create a new bank account and insisted on physical bank statements although the bank no longer provides a physical bank statement for that type of account. Something told me something is wrong with that man. I began telling the RM about this story and how that man could have been Mr Accountant.
I decided to tell this story once more on my blog in hope that there will be one fewer Mr Gullible, Mr Crypto or Mr Accountant falling prey to the Nigerian Prince.