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Shakedowns, blackmail and scams: Fraudsters quick to exploit soft spots in cashless economy

The jobs that fall to his teams are considered highly complex, catastrophic in impact, transnational or multi-agency. The schemes vary from the ingenious, where specific individuals are targeted and duped, to blanket phishing that involves bombarding thousands to hook a few.

When you consider that less than 15 per cent of all frauds are reported it is fair to say this category of crime is second only to drugs in its cost to the community.

Panadol packets were removed from shelves in 2000 after an $1 million extortion attempt.

Panadol packets were removed from shelves in 2000 after an $1 million extortion attempt.Credit:Peter Rae

The complex cases are staggering. In just one investigation police used more than 100 search warrants and produced over 3000 court exhibits. In the days of paper briefs of evidence, the squad needed vans and multiple trolleys to transport the material to hearings. In one complex (non-fraud) case police spent $17,000 on photostatting alone. Now fraud investigators use electronic briefs (just to clarify this relates to court documents, not underwear).

One of the byproducts is the difficulty in having these complex, detailed and excruciatingly lengthy matters heard before a jury. Many years ago, respected philanthropist Sir Andrew Grimwade was charged with fraud over documents involving the JetCorp company. The first trial was abandoned after seven months and he was found guilty after a second lasting nine months. The verdict was overturned because the proceedings were considered so confusing it was impossible to reach a sensible conclusion.

But not all jobs are financial Rubik’s Cubes. The extortion side requires urgent action, Bowd says: “It can lock down the whole squad.”

Bernie Madoff, the mastermind of the world’s biggest Ponzi scheme, was able to continue to years without scrutiny from US government watchdogs.

Bernie Madoff, the mastermind of the world’s biggest Ponzi scheme, was able to continue to years without scrutiny from US government watchdogs.Credit:AP

There are drug shakedowns, personal blackmail and multimillion-dollar threats to sabotage whole industries using inside information.

The most dangerous cases are product contamination, such as placing needles inside strawberries – with about 60 such cases in Victoria alone.

In 2000 a man demanded $1 million each from two pharmaceutical companies that produce over-the-counter pain products.

To bolster his threats, Dennis Fountain laced packets of tablets with strychnine. The recall cost millions and resulted in the products returning to the shelves in tamper-proof packets. Fountain took his own life in prison.

Berry Obsession was, one of the strawberry brands recalled over sewing needle contamination fears.

Berry Obsession was, one of the strawberry brands recalled over sewing needle contamination fears.

As we have moved from a cash economy, bank and payroll robberies have become virtually obsolete and so the crooks moved into serious organised scams. There is a small cafe near the palatial Naked City office that has a sign saying “no cash accepted”. When their swipe machine died, staff bunkered down like Emperor Penguins in a blizzard.

Bowd gives the example of organised gangs of eastern European crooks entering Australia on false passports to install sophisticated skimming devices on ATMs that could read and record card numbers. Fraud investigators eventually found some of the offenders, who were sentenced to up to eight years’ jail.

More importantly, police and the banking industry worked together to tighten security and electronically protect the ATMs. ‘‘There has been a massive reduction in these offences. It is called ‘target hardening’, when you work with stakeholders to make it more difficult to commit these sorts of crimes.’’

Another vulnerable spot was the theft of replacement credit cards posted by banks. Thieves were targeting multiple mailboxes in apartment buildings. Now these boxes are usually kept in a lockable CCTV-covered area giving access only to residents.

The fraud squad is one of our oldest and was established in 1934, showing that naked greed is not a recent trend. (I remember when their office was stuffed directly above the police garage in Russell Street, which means they lived almost exclusively on salt and vinegar chips from their vending machine and petrol fumes from police Studebaker Larks being tested downstairs.)

As we have moved from a cash economy, bank and payroll robberies have become virtually obsolete and so the crooks moved into serious organised scams.

As we have moved from a cash economy, bank and payroll robberies have become virtually obsolete and so the crooks moved into serious organised scams.Credit:Mayu Kanamori

Most of us have heard of the Nigerian Scam, also known as “419 Fraud”, where we receive an unsolicited email supposedly from Nigeria offering a massive payout in exchange for assisting the writer free a fortune in frozen funds.

This is often presented as a modern, internet-driven trick. But in a list of crime categories from the 1947 Australian Criminal Register, we come across this passage:

“The Spanish Prisoner: This is a well-known trick dating back to 1807, which has been revived periodically. It begins with a letter bearing a Barcelona postmark:

Dear Sir,

Being imprisoned here for bankruptcy I beseech you to help recover the sum of 75,000 pounds I possess in two checks against an important bank of your country.

The usual requests are made with the promise: ‘As compensation I will give up to you the third part of the sum, viz, 25,000 pounds.’”

It looks funny, except it isn’t. Phishing scams tend to exploit the vulnerable, particularly the elderly. Bogus threats from the ATO, fake company requests and official-looking documents target those who haven’t grown up in the computer age and are often unable to seek a second opinion.

“The majority of the victims are aged over 65. You will usually find grammar mistakes and obvious errors,” says Bowd.

He says never click on a link, and look at the address that will have HTTP but not S for secure.

“The impact on victims can be catastrophic. People lose the nest egg they have spent their lives building. We have had victims suicide,” he says.

But it is not just the elderly. Legit-looking emails arrive at companies where the boss may ask the company bean counter to transfer money to another firm. A closer look would show the email address is not quite right.

Sometimes frauds on bigger companies can be seen as “white-collar”, with no one being physically hurt.

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Former prison psychologist and present Parole Board member Dr David Curnow says fraud offenders are usually trusted company employees who find themselves under financial pressure. He says that they begin taking money by rationalising it as a secret loan that will be paid back. Usually the amounts just grow to the point where they can crush the company.

The electronic retailer Clive Peeters collapsed costing at least 1000 jobs after a $20 million insider fraud.

Bowd says the courts are acknowledging the severity and human cost, with offenders regularly sentenced to around 12 years. He says some of the big company frauds involve offenders with massive gambling habits who have VIP status at local and international casinos.

“They can be well educated, clever at what they do and difficult to uncover,” he says. They often hide in plain sight, providing plausible reasons why their lifestyle doesn’t match their known income.

Take the likeable, charismatic and totally bent Bernie Madoff, the mastermind of the world’s biggest Ponzi scheme (a lazy $65 billion). Madoff survived in the US financial world for years when even a basic examination would have shown his claims were unsustainable. Many US stock market experts knew his claimed returns were impossible but he was allowed to continue for years without scrutiny from government watchdogs.

Which is why Bowd says all those involved in protecting big money, financial institutions, police and governments have to work together to “target harden” and try to keep up to date with the latest schemes of the fraudsters.

Right now, fraud investigators are heading into the arrest phase of a $500 million scam where South Korean entrepreneurs were persuaded to invest in a legitimate Melbourne property company. The scamsters set up a fake body that mirrored the real one and then siphoned out the money. So far $300 million has been recovered from civil action. The main suspects are about to be interviewed. Watch this space.

Some crimes seem too bizarre to be true, often exploiting cultural peculiarities. In 2017-18 a total of 76 Chinese students in Victoria were targeted with fake approaches.

Bowd says the targets were told they were under Chinese police/diplomatic/government investigation for crimes including drug trafficking. And unless they paid an agreed amount their visas would be cancelled and they would return to China for prosecution.

Six of the victims were forced to stage “virtual kidnappings” where they fabricated a crime scene that may include broken furniture, tomato sauce used to imitate blood and bogus hostage scenes. The photos were sent to their relatives with demands for money.

The total extorted was more than $6 million. Fraud police sent the information to Chinese police, resulting in up to 1000 suspects being identified.

A recent scam involved payments of more than $1.5 million by one student.

Bowd says as soon as a fraud soft spot is identified, the gangs find another.

“They are always trying to break the system.”

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