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March 17, 2003
Subject: US ALERT STATUS - MOVING TO RED SOON
SCG sources report that the United States will move from Alert
Status HIGH (Orange) to Alert Status SEVERE (RED) shortly.
Intelligence reports that terrorist WILL attempt attacks within
the US once fighting breaks out with Iraq. The move from ORANGE
to RED is due to this report.
Currently the US is at High Condition (Orange). A High Condition
is declared when there is a high risk of terrorist attacks. Federal
departments and agencies should: Coordinate necessary security
efforts with Federal, State, and local law enforcement agencies
or any National Guard or other appropriate armed forces organizations;
Taking additional precautions at public events and possibly considering
alternative venues or even cancellation; Preparing to execute
contingency procedures, such as moving to an alternate site or
dispersing their workforce; and Restricting threatened facility
access to essential personnel only.
The move to Severe Condition (Red) reflects a severe risk of terrorist
attacks. The following general measures shoulbe be taken: Increasing
or redirecting personnel to address critical emergency needs;
Assigning emergency response personnel and pre-positioning and
mobilizing specially trained teams or resources; Monitoring, redirecting,
or constraining transportation systems; and Closing public and
The principle threats are from Iraqi agents, Iraqi surrogate groups,
other regional extremist organizations and ad-hoc groups or disgruntled
individuals who may use this time period to conduct terrorist
attacks against the US.
Security personnel should be on guard against attacks by suicide
bombers and to closely inspect train, buses and subway cars as
well as city-run ferries for explosives.
SCG will continue to monitor the situation and report as necessary.
ICI operatives have actively investigated fraudulent financial
instruments world wide for years, the follow senate hearing confirms
the fact that every company or institution must remain diligent
when conducting business in the International market. Even though
the report is dated 1997, nothing has changed, in fact the criminals
are more active today then ever in the past.
Senate Banking, Housing
and Urban Affairs Committee
Hearing on Financial Instruments Fraud Prepared
Testimony of Mr. Dana Brown
Deputy Special Agent-in-Charge
Financial Crimes Division
United States Secret Service
10:00 a.m., Tuesday, September 16, 1997
Mr. Chairman, Members of the Subcommittee, thank you for the
opportunity to address this Subcommittee concerning the subject
of recent trends in the area of financial crimes and the Secret
Service's efforts to combat these crimes.
My name is Dana Brown, and I am representing the United States
Secret Service in my capacity as the Deputy Special Agent in Charge
of the Financial Crimes Division of the Secret Service.
Since its inception in 1865 the Secret Service has been involved
in the investigation of counterfeit monetary instruments which
affect the integrity and well being of this nation's monetary
and economic systems. As a law enforcement bureau within the department
of the treasury, the secret service has undergone an expansion
of its investigative authority commensurate with the evolution
of payment systems from cash to plastic and electronic media.
To combat problems relating to evolving global payment systems,
the Secret Service has jurisdiction in the areas of credit card
and other access device fraud, fraudulent identification, and
financial fraud in relation to computer access. The recent trends
in criminal activity have taught us that these crimes are often
committed simultaneously and in conjunction with other fraud related
activity as well as more violent crimes. We in the Secret Service
have developed a visual aid entitled "the circle" (which is attached
to this testimony) which we use to illustrate the correlation
between some criminal activities and the global economy.
It would be difficult to fully explain
our complete investigative mission in the area of financial crimes
with the time allotted. Instead, we have chosen to concentrate
on four areas of particular interest to the committee. These areas
are fictitious negotiable
instruments, desk top publishing,
identity fraud through use of the internet, and advance fee fraud, often referred to as 4-1-9 fraud.
I would first like to discuss fictitious negotiable instruments.
Of Fictitious Instruments
When one hears the term "fictitious instrument," it brings to
mind a myriad of phony instruments such as: the U.S. dollar bond,
the Indonesian promissory note, the Japanese yen bond, the Philippine
victory note, the German war bond, the gold dore certificate,
the Georgian IMEX bank certificate, and most recently the comptroller
warrant as well as the Republic of Texas warrant. These instruments
are either completely fictitious or have long since been de-monetized
by the issuing governments. Individuals with these instruments
and supporting fraudulent documentation are approaching financial
institutions in alarming numbers in an attempt to negotiate such
instruments. In the past, these phony instruments have been negotiated
successfully in a myriad of criminal schemes. I would like to
give some examples of these schemes.
Fictitious instruments are being used to underwrite loans; they
are being sold to individual investors and they are being sold
to pension fund and retirement accounts. Unfortunately, these
instruments are being produced with high monetary values, and
losses suffered by financial institutions and other investors
are well into the millions of dollars.
In the case of the comptroller and Republic of Texas warrants,
we have seen such instruments presented as a form of payment by
self proclaimed anti-government groups such as the "freemen" and
members of the "Republic of Texas."
Fictitious Instruments Investment Schemes
A fictitious instrument scheme referred to as "prime bank instrument"
fraud, occurs when criminals present fictitious instruments such
as standby letters of credit, prime bank guarantees and/or prime
bank notes to fraudulently collateralize loans. These instruments
are completely fictitious and are not endorsed by any financial
institution yet they purport to guarantee the bearer has credit
in the amount stated on the document that would be backed by the
financial institution which is also named on the document.
From the criminal's point of view, prime bank instruments are
extremely successful products. Through "desk top publishing,"
they have succeeded in creating a fraudulent product that not
only appears financially attractive, sophisticated, and secretive,
but can be marketed worldwide.
Recently, to further disguise their fraudulent schemes, criminals
have used genuine terminology to describe these instruments in
an effort to achieve the appearance of legitimacy (i.e., bonds
and certificates of deposit).
Not only are individuals, pension funds, retirement funds, and
financial institutions targeted by the criminal element and suffer
large monetary losses, but charitable organizations, because of
their monetary assets, have been targeted as well. These organizations
have sustained losses into the millions of dollars. Often times
these organizations are sold worthless fictitious instruments
such as the U.S. dollar bond, the Indonesian promissory note,
the Japanese yen bond, the Philippine victory note, and the German
Georgian IMEX International Bank Letter Of Credit
Since the break up of the former Soviet Union, there have been
numerous appearances of fictitious instruments allegedly issued
by the governments of the resulting new states. As I mentioned
earlier, one of the more notorious is alleged to come from the
republic of Georgia. This instrument is called the Georgian IMEX
international bank letter of credit and is usually accompanied
by a confirmation letter as well as a confirmation of blocked
assets letter. These instruments are ornate and official in appearance,
and use similar terminology to that used in the prime bank instrument
The usual scenario would be for the individual to obtain some
form of legitimate documentation (such as a safe keeping or escrow
receipt) from an established financial institution in an attempt
to "authenticate" the fictitious documents and thereby make it
attractive to the victim investor. This is usually accomplished
by correspondence or a message from a "bank" in another Russian
Republic stating that the letter of credit is fully backed by
gold on deposit at that particular bank. With "documentation"
in hand from an established, legitimate financial institution,
these individuals are then well on their way to successfully defrauding
someone or some other financial institution out of a great sum
In most cases, these letters of credit are "issued" in large
dollar amounts such as five hundred million dollars.
Domestic Anti-government Groups/Fictitious Instruments
Other groups active in the manufacturing and distribution of
fictitious negotiable instruments have received a great deal of
publicity for other reasons. These groups, and others like them,
i.e., "posse comitatus," "we the people," "w.d. mccall," "l.a.
pethahia," "mount calvary baptist," "the central dominion trust
bank," "Republic of Texas," and the "freeman", are well known
for their activities as militia groups and their anti-government
philosophy. What is not known is their criminal activities in
the area of fictitious negotiable instruments. The philosophies
of these groups are generally similar, however, each group has
its own unique beliefs. Some groups argue that banks and credit
companies do not loan money, only credit, and contend that their
phony certified money orders and bankers checks are therefore
"credit money" and legal tender.
These groups argue that the real money is in gold and silver
and not in the Federal Reserve System, again maintaining that
the instruments they use are as good as federal reserve notes.
Groups such as the freeman, hold seminars and instruct individuals
on how to become "sovereign citizens." This belief is allegedly
based on common law and thereby precludes them from paying taxes.
Additionally, they claim to have multi-million dollar liens against
various federal, state, and local government agencies.
For a fee, some of these groups give seminars on how to create
"comptroller warrants" and instructions on how to use them. These
instructions include overpayment on each check issued, with the
overpayment being shared with the organizers of this scheme.
As with other fictitious negotiable instrument schemes, all of
these groups also use "official" looking documents and correspondence,
citing non-existent laws and uniform commercial codes in an attempt
to confuse and intimidate individuals, financial institutions,
private companies, and law enforcement.
These groups attempt to intimidate those who refuse to accept
these instruments as payments and those in law enforcement who
are tasked with investigating these cases, with threats of liens
on personal property as well as threats of personal harm. Losses
attributed to these fictitious instruments have been incurred
by individuals, financial institutions, automobile dealerships,
and the U.S. government.
Recently, three individuals were arrested by agents from our
Jacksonville and Oklahoma city field offices and were later indicted
by a middle district of Florida federal grand jury for possession
of fictitious financial instruments (18 USC 514). These three
individuals were offering two fictitious certificates of deposit,
supposedly worth $95 million and $50 million, as collateral to
secure approximately $47.5 million in loans.
These certificates were drawn on Japanese and Indonesian banks.
After a week long jury trial, all three defendants were found
guilty. It should be mentioned that this was the first indictment
of 18 USC 514 (possession of fictitious financial instruments)
by any federal grand jury.
Unfortunately, in most of the examples that I have already cited,
we are a victim of our own advancing technology. This technology
has devised software which can create high quality fictitious
I would now like to speak about desktop publishing. During the
past several years the Secret Service has seen a dramatic increase
in the number of investigations specifically relating to the counterfeiting
of checks and other related instruments. The suspects in these
investigations range from the lone individual to highly organized
groups who target financial institutions and businesses nationwide.
As one would expect, the motivation behind these schemes is greed
- the goal is always money. Financial systems are studied by the
criminal and weaknesses are exploited. While arrests and convictions
are a central component to any enforcement strategy, the Secret
Service has always sought to identify and correct systemic weaknesses
thus combining prevention with enforcement for a comprehensive,
cost effective strategy.
While the suspects in these investigations have been traditionally
thought of as white collar criminals we have recently witnessed
the emergence of violent criminals engaging in these unlawful
schemes. The proceeds of these criminal activities are not only
used to support the lifestyles of the suspects, but also to fund
other types of criminal activities, including the sale and distribution
of narcotics and other violent crimes.
Instruments Produced Through Desktop Publishing
The use of relatively inexpensive computers and printers, often
referred to as "desk top publishing," has enhanced the manufacturing
of virtually undetectable fictitious checks, bonds, securities,
an other counterfeit instruments and obligations. These computers,
loaded with sophisticated graphics capabilities, can be purchased
from most computer and office supply stores. A recent American
Banking Association study revealed that "desk top publishing"
poses the largest threat to international finance.
The use of computers and desktop publishing programs has made
this crime attractive to a wide variety of criminal elements.
The crime is low cost as is the risk of being apprehended (as
compared to other types of criminal activity), while the potential
for economic gain is high.
In 1995, the Federal Reserve Board reported overall check fraud
losses to the United States' financial institutions at $615 million.
A similar report in business week reported overall losses to customers
for the same time period to be approximately $12 billion. The
industry noted "this is ...400 times more than 1995 bank robberies."
Additionally, according to a recent aba study, check fraud and
access device fraud account for the greatest losses to financial
Since 1990, when the Secret Service began investigating financial
institution fraud, our cases have evolved to coincide with the
fraud effecting financial institutions, today, the majority of
our financial institution fraud investigations involve check fraud
and access device fraud schemes. Many of these cases entail the
counterfeiting of a variety of financial instruments to include,
currency, commercial and travelers checks, credit and debit cards,
Secret Service investigations have uncovered a wide range of
methods by which various checks and financial instruments are
counterfeited. These methods range from the unsophisticated cut
and paste method to sophisticated desktop publishing techniques.
Today, many businesses produce their own checks using computers,
graphics software, and laser printers. Unfortunately, as this
occurs with many positive technological advancements, there are
those who will use an otherwise useful tool to perpetrate crimes.
In this type of crime, the same desktop software publishing programs,
legally used by businesses, are illegally used to counterfeit
various financial instruments. Criminals simply obtain a genuine
check and scan this check into the computer.
These criminals can then change the date, the payee, the dollar
value of the check, corporate logos, or any other feature. They
then print the check on a printer loaded with check paper, which
can be purchased in most business supply stores.
The result is a high quality counterfeit check which is indistinguishable
from the genuine check. Since there is no standard check design
(each business issues their own checks) a genuine check is no
longer a necessity. Armed with relatively inexpensive technology
and genuine account numbers a counterfeit check can be created.
The mobility of these "printing plants" make these types of crimes
difficult to investigate. When conducting searches of residences,
motel rooms, or vehicles, the secret service has discovered an
alarming trend which we refer to as "one stop shopping" for financial
fraud. "One stop shopping" is one computer used to commit an assortment
of financial crimes to include, check fraud, access device fraud,
and telecommunications fraud among others.
The seizure of computers that were used to generate counterfeit
checks, counterfeit traveler's checks, counterfeit credit cards,
or counterfeit U.S. currency has become commonplace.
These computers also generate counterfeit identification needed
to negotiate these counterfeit instruments and breeder documents
(birth certificates or social security cards) which are used to
obtain other forms of genuine identification for criminal use.
How the Counterfeit Instruments Are Passed
Frequently counterfeit checks are used in concert with false
identification. They are cashed at financial institutions, small
businesses, to purchase items from a variety of businesses through
classified advertisements. The Secret Service has been investigating
a large counterfeit check operation which originated in southern
California and involves an asian criminal group. The "leaders"
of this group obtain copies of genuine checks from a source inside
a financial institution. Checking account information is targeted
and compromised from large corporations, based on the number of
employees, the geographic location of the corporation, and the
These "leaders" direct the activity of the counterfeit check
"manufacturers" and "organizers." The "organizers" coordinate
the travel of the "recruiters" and "drivers." Upon arrival in
a targeted city the "recruiters" recruit persons to cash these
Banks and financial institutions that had a business relationship
with the corporation whose checks had been counterfeited were
targeted. A cell of six to ten persons, directed by the "organizers,"
would cash checks at several branches of the same bank over a
two to three-day period. The counterfeited checks were generally
Identification was usually obtained by the "recruiters." Counterfeit
corporate identification was sometimes provided. Banks would cash
these counterfeit checks for non-account holders because of the
business relationship they have with the corporation. Losses over
this period would average between $20,000 to $40,000 per city.
When last calculated in 1995, losses in this particular investigation
stood at approximately $25 million.
Solutions To Fraud Committed Through Desktop Publishing
Combating these systematic attacks against financial systems
and institutions requires a comprehensive approach. Partnerships
and cooperation is essential amongst federal, state and local
law enforcement, banks, credit card companies, non-banking financial
systems, bank regulators and customers of these entities. Through
these partnerships, a multi-faceted strategy can effectively combat
An integral part of this strategy is a "proactive risk analysis"
of our financial systems. This is accomplished through regular
interaction between law enforcement officials and individuals
in the financial system and industry. This interaction, we believe,
must occur on a local, national, and international basis. There
are a multitude of organizations which have been active in this
Groups such as the International Association of Financial Crimes
Investigators (IAFCI), American Bankers Association (ABA), the
Interagency Bank Fraud Enforcement Working Group (comprised of
representatives from all federal bank regulatory offices and related
federal law enforcement agencies), local state bank security working
groups (comprised of federal, state and local law enforcement
and banks within those regions), just to name a few.
Security procedures and enhancements, such as security check
stock; biometrics; and holograms are but a few of the proposals
which law enforcement agencies have supported and proposed. Security
enhancement proposals made through a similar public/private working
group has proven successful in combating credit card fraud. We
should build upon that success by following a similar strategy.
Security features are only one of the methods that will deter
criminal activity in desktop publishing of counterfeit financial
instruments. Financial institutions and businesses must apply
the same principles which the secret service has been advocating
The "know your customer" philosophy will go a long way in reducing
fraud associated with counterfeit checks. Training of bank and
business personnel to recognize unusual patterns, such as recently
issued driver's licenses or identification cards, and characteristics
of counterfeited identification will greatly enhance the probability
In conjunction with the working groups that are exchanging information
and recommending security enhancements the Secret Service has
created investigative taskforces. This is truly a partnership
approach to combat these types of crimes. The implementation of
task forces has allowed a combination of federal, state, and local
law enforcement officials and prosecutors to pool resources and
draw upon the individual expertise that each agency brings to
the table. These task forces can maintain routine contact with
the industry working group thus creating a complementary dynamic
in uncovering criminal activity.
Because computers are used as a repository of recorded information,
such as the counterfeit documents and proceeds of these crimes,
the retrieval of this data as evidence for prosecution is essential
and requires highly trained personnel and state of the art equipment.
Secret Service agents, highly trained in the forensic examination
of computers and related equipment, are a major component of both
the task force and unilateral secret service investigative efforts.
These agents are part of the Electronic Crimes Special Agent Program
(ECSAP) and are strategically placed throughout the country, to
provide technical assistance to investigators and prosecutors
when needed to retrieve evidence or provide additional technical
services. The Secret Service electronic crimes laboratory possesses
state of the art equipment which is used for the forensic examination
of computers and related investigations.
The Secret Service has also established the counterfeit instrument
database. This database contains specimens of counterfeit instruments,
including payroll checks, bank checks, travelers checks, and other
financial instruments, which enable the secret service to associate
and link investigations based on common characteristics unique
to each instrument. This tool has enabled us to identify specific
equipment used to counterfeit these financial instruments and
greatly enhances our ability to investigate these crimes.
Training of the law enforcement community and the public is always
a crucial element to any comprehensive enforcement strategy.
The secret service believes that law enforcement officials must
be kept abreast of the ever-changing technology that enables criminals
to commit financial crimes.
Police officers should be able to recognize potential evidence,
such as computers, software, and related equipment, which is easily
transportable in a vehicle. Routine traffic stops have led to
the suppression of counterfeit check printing operations and such
efforts are directly attributable to the police officer's awareness
of the tools of the crime.
The public, especially businesses, must be made aware of how
counterfeit check schemes operate. The ability of individual bank
tellers and support personnel to recognize the counterfeit check
schemes is vital. These individuals are law enforcement's first
line of defense. Banks should ensure that they have established
policies and procedures to prevent check fraud and that these
policies draw from the experiences in the banking and law enforcement
communities. Financial institutions should ensure that bank employees
are required to adhere to all internal policies, which are in
place to prevent financial instrument fraud. We believe that the
financial community and law enforcement are committed to enhance
these efforts, and many of these types of deterrent measures are
available to banks through the FDIC and ABA. (back)
Identity Fraud Through
I would now like to discuss identity fraud perpetrated through
the internet. The secret service has found that in general the
major Internet Service Providers (ISP's) are constantly updating
security measures and have been receptive in establishing liaison
with law enforcement in its goal to preserve the integrity of
Discussions are currently underway between government and the
internet service provider community to establish an association
similar to other partnerships designed to share concerns and discuss
issues amongst its members and law enforcement.
However, we all must realize that the internet has vulnerabilities
which can allow confidential business information and sensitive
personal information to be compromised.
The present day United States financial community makes 3.5 billion
electronic payment transactions per year utilizing various telecommunication
systems. Private industry has indicated its desire to utilize
the internet to conduct electronic commerce which may revolutionize
the way business is conducted and continue to lead us into a global
How Your Identity Can Be Compromised On The Internet
Some projections indicate that by the year 2000, there could be
one billion users on the internet. This equates to one billion
potential customers. The internet is accessible by anyone with
a computer, modem and access through various service providers.
Presently, various banks are implementing the use of the internet
to allow on-line banking. In addition, many retailers are using
the internet to allow customers access to goods and services in
exchange for payment by credit card. This equates to the electronic
transfer of not only credit card numbers but also the subscriber's
personal information. Unfortunately "hackers" have demonstrated
their ability to access and download this information for purposes
of perpetrating account takeover schemes and other similar fraud.
It is a frightening thought that an individual can literally take
over one's credit card and/or bank account, and as a result, their
credit history, without the subscriber knowing it.
The idea of someone fraudulently using personal information belonging
to another person to perpetrate a separate fraud can have a negative
impact on one's credit history as well as thwart law enforcement's
ability to investigate such activities.
As a result, banks and credit card associations have been developing
methods of encrypting credit card numbers and the attached biographical
information to facilitate safe internet payments. However, individuals
with access to internet access codes can still perpetrate a myriad
of fraud using the identity of someone else. An investigation
into an account takeover scheme conducted by the Secret Service
resulted in the arrest of a bank employee after it was learned
that while working online, using the company's internet access
code, the employee was retrieving clients' accounts, changing
their mailing addresses and sending newly issued credit cards
with their true identities to himself.
The Prosecutive Role
Traditional federal statutes such as title 18, united states
code, section 1028 (fraudulent use and production of identification
documents), section 1029 (access device fraud), section 1030 (computer
fraud), section 1343 (wire fraud), section 1831 (economic espionage),
and section 1956 (money laundering) are currently in use to prosecute
fraud on the internet.
Instances of Identity Fraud Through the Internet
Just recently, a popular internet service provider stopped direct
access in Russia, after it found people signing on to the service
using stolen credit card numbers and passwords. The obvious crime
here is misuse of an access device. However, many additional crimes
could have been committed on the internet while acting under the
identity of someone else.
Hackers have been known to recruit dishonest company employees
to obtain information regarding computer security implemented
by that corporation in furtherance of committing fraud on the
internet. In one instance, a hacker obtained access to an on-line
service and while a legitimate user was on line, the criminal
sent a message claiming provider service problems. The hacker
requested and received the password of the user. The user, was
subsequently bilked out of $1,100 of internet service.
In an intrusion/extortion case the secret service recently investigated,
individuals hacked into an Internet Service Provider (ISP). This
ISP provided internet service to approximately 10,000 customers
in south Florida. The hacker was able to compromise the system
and shut down 8 of the 10 servers on the provider's system.
In addition to the disruption of the service, the hackers also
obtained the personal information and credit card numbers of the
10,000 customers. Communication between the owners of the internet
company and the hackers was conducted via e-mail. Using some traditional
and some technically sophisticated investigative methods, the
secret service was able to determine the hackers were communicating
through the compromised accounts.
The hackers sent a message, demanding $30,000 in exchange for
the customer information and security information regarding their
internet servers. The hackers demanded the money be delivered
to a mail drop located in Germany. Working with the German authorities
through our office in Bonn, surveillance was established at the
mail drop. After the pick up, one individual was arrested. Two
other individuals were consequently identified and all three confessed
to the hacking and extortion.
Personal and sensitive information about on-line subscribers
and shoppers are at times innocently stored in unsecured databases
which can be accessed through poorly protected web sites. Web
site architecture and design often vary allowing differing degrees
Methods of Addressing Identity Fraud on the Internet
Bank customers who find the idea of online banking appealing
should be aware that the internet is a public medium to conduct
transactions and that the prospect of unauthorized access to personal
information by internet abusers is real. Certain controls that
exist to address privacy concerns in the context of credit cards,
credit agencies, and banks can and should be applied to electronic
Varying measures have been adopted by those seeking to conduct
business and communicate on the internet to minimize internet
fraud and protect sensitive information. Many merchants and others
who transact business on the internet have successfully designed
and implemented systems which reasonably ensure the integrity
of sensitive information and transactions.
In addition to providing "firewalls," or protected compartmentalization
of data, encryption and other useful tools enhance the safeguarding
of sensitive data such as credit card numbers and other personal
Steps toward addressing internet fraud should start with the
commitment to provide for the security of information and transactions
while avoiding unnecessary risks.
In addition, Internet Service providers should not establish
and instantaneously authorize an account or e-mail address for
their customers based solely on a credit card number provided
by that customer over the telephone or transmitted via computer.
The ISP should authenticate the credit card and the user prior
to allowing access. Merchants conducting business on the internet
should know their customers, and service providers should take
steps to know their merchants.
The Secret Service recognizes the Internet as an attractive target
or venue for fraud: a balance must be struck between the respect
for personal privacy as it relates to electronic communications
and the preservation of the integrity of corporate and personal
home based computer operations.
Law enforcement should be familiar with what is on the Internet
and be capable of using it as an investigative tool. This is also
the fastest way for law enforcement to stay current with new technological
schemes that are being passed from one criminal to another. (back)
The last topic I would like to discuss is the issue of fraud
perpetrated by some members of the west african population living
inside and outside of U.S. borders. The Secret Service distinguishes
between structured, traditional organized crime and what are now
commonly referred to as organized criminal enterprises. Many of
these groups do not follow prior patterns associated with organized
crime in relation to structure. However, these groups do support
themselves internally through national association while externally
creating enclaves or cells for criminal enterprises on a domestic
and international scale. An example of this would be the nigerian
criminal groups which I have been asked to speak about.
In 1984, after the Secret Service received additional jurisdictional
responsibility for credit card fraud and false identification,
we began to engage the Nigerian criminal element on a regular
basis. Prior to this, Nigerian criminals had come to the attention
of the Secret Service due to their involvement in the counterfeiting
of U.S. currency, most of which they claimed was purchased on
the black market in Nigeria.
Nigerian organized criminals are heavily involved in the manufacture
and use of false identification. Through the use of false identification
many are entering the united states illegally and have proven
adept at developing complex schemes to systematically defraud
Our investigations have shown that Nigerian criminals are gaining
unauthorized access into credit bureau reports, social security
files and other sources of personal and financial information
of unsuspecting victims. Using this information, Nigerian criminals
apply for additional lines of credit or take over existing accounts.
The resultant fraudulent activity ultimately is reported as derogatory
information on the credit report of the unwitting victim.
In 1986, the Senate permanent subcommittee on investigations
determined that a formidable criminal network was forming within
the large community of Nigerian nationals living in the United
In fiscal year 1992, the Congress of the United States appropriated
funds to the Secret Service which were ear- marked for a Nigerian
task force initiative.
The Secret Service has taken a proactive approach to the Nigerian
organized crime problem by establishing and maintaining task forces
throughout the United States whose main focus is the investigation
of financial frauds committed by Nigerian nationals and their
Membership in these task forces includes representatives from
the U.S. Customs Service, U.S. Immigration and Naturalization
Service, U.S. Postal Inspection Service, U.S. Drug Enforcement
Administration, Internal Revenue Service, Department of State,
Bureau of Diplomatic Service, bank investigators from the private
sector, as well as numerous local, county and state police agencies.
This diverse membership is indicative of the multitude of fraudulent
activities being perpetrated by Nigerian organized criminals.
These fraudulent activities include credit card fraud, bank fraud,
check kiting, various types of insurance fraud, entitlement fraud,
false identification, passport and visa fraud, marriage fraud
to obtain U.S. citizenship, vehicle thefts, theft of services,
counterfeiting of U.S. currency, and counterfeiting of corporate
checks and other obligations.
In addition to their involvement in financial institution fraud,
Nigerian organized criminals are recognized as one of the top
importers of heroin into the United States.
Evidence indicates that portions of the proceeds of financial
fraud are used to support the trafficking of narcotics and other
Nigerian criminal cells have become experts in their many fields
of endeavor. In short, they do their homework on financial systems
and identify weaknesses that allow them fraudulent access to enormous
sums of money. These attacks on our nation's financial system
are often the result of careful planning, precise execution of
the scheme, and ultimately taking advantage of financial systems
designed to be consumer or customer friendly.
Advance Fee Fraud (4-1-9)
Since 1990, Nigerian "advance fee fraud," known internationally
as 4-1-9 after a section of the Nigerian criminal code, has emerged
as one of the most lucrative fraudulent activities perpetrated
by organized criminal elements within the Nigerian community.
Worldwide financial losses associated with advance fee frauds
are conservatively estimated in the hundreds of millions of dollars
annually, with victims in the U.S. accounting for a significant
percentage of the total. The most common forms of these business
proposals fall into seven main categories:
- - transfer of funds from over-invoiced contracts
- - benefactor of a will
- - contract fraud (c.o.d. of goods or services)
- - purchase of real estate
- - currency conversion scams
- - sale of crude oil at below market prices
- - extortion
The most prevalent form of Nigerian advance fee fraud is the
over-invoiced contract scheme. A company or individual typically
receives an unsolicited letter by mail from an individual claiming
to be a senior civil servant in one of the Nigerian ministries,
usually the Nigerian National Petroleum Corporation. The letter
informs the recipient that the government official is seeking
the assistance of a reputable foreign company into whose bank
account he can deposit funds ranging from 35-60 million U.S. dollars.
These funds are alleged to be the results of over-invoiced government
The intended victim is instructed to provide his Nigerian partner
with company letterhead, business invoicing, bank account information,
and telephone and facsimile numbers.
The target is advised that the completed contracts will be submitted
to the Central Bank of Nigeria for remittance. Upon approval,
the monies are then to be wired into the bank account provided
by the foreign partner. The foreign partner is promised up to
35 percent of the monies received for his participation.
The initial contact letter sets the stage and is the opening
round of a two-layered scheme. The criminal will eventually reach
someone who, while skeptical, desperately wants the deal to be
Victims are often convinced of the authenticity of advance fee
schemes by the forged or false documents bearing apparently official
Nigerian government letterhead and seals, as well as false letters
of credit, payment schedules, and bank drafts.
Once the trap has been set an alleged problem concerning the
deal will suddenly arise. An unforeseen tax or fee payable to
the government of Nigeria will have to be paid before the money
can be transferred. These can include licensing or incorporation
fees, or various forms of taxes and attorney fees. Each fee paid
is described as the very last fee required. Invariably, errors
and oversights are discovered by the nigerians, necessitating
additional payments and allowing the scheme to be stretched out
over many months. The foreign partner will then be provided with
a bank account into which these fees should be transferred.
Recognizing the extent of the problem, the Secret Service initiated
a project known as "operation 4-1-9" designed to combat advance
fee fraud on an international basis.
It should be noted that these advance fee schemes emanate solely
from within Nigeria, though our investigations indicate that Nigerians
and non-Nigerians based in the United States, Great Britain, and
other countries, are acting in complicity to further these schemes.
Addressing Advance Fee Fraud
This type of fraud has become so widespread throughout the United
states and internationally that the Secret Service instituted
a program that tracks these schemes and their victims.
The Secret Service continues to receive approximately 100 telephone
calls and 300-500 pieces of related correspondence from victims
and intended victims each day. In the past 14 months, we have
interviewed over 20,000 of these individuals and have successfully
interdicted over 2,000 individuals from further victimization.
Our financial crimes division has developed the world's largest
database containing information obtained from over 25,000 Nigerian
scam letters. A link analysis of this data has revealed the locations
of the top advance fee criminals in Lagos, Nigeria.
Over the previous year, Secret Service agents have been periodically
assigned on a temporary basis to the American embassy in Lagos.
During this time they have worked closely with the Department
of State Bureau of Diplomatic Decurity and Department of Commercial
attaché attached to the Embassy.
Agents have established a working relationship with the Federal
Investigation and Intelligence Bureau (FIIB) special frauds unit
of the Nigerian national police.
We have provided information in the form of investigative leads
to the FIIB. Utilizing this information, officers of the FIIB,
accompanied by Secret Service agents as observers, have executed
a number of search warrants on the locations of some of the worst
perpetrators in Lagos.
These search warrants resulted in the arrests of a number of
Nigerian nationals. Evidence seized has included telephone and
facsimile machines, forged government and central bank of Nigeria
letterhead, international business directories, scam letters and
envelopes, as well as files containing correspondence from victims
throughout the world.
The Secret Service has adopted a three-pronged approach of investigation,
interdiction, and public education to combat this problem. It
is anticipated that public education will have a significant impact
on reducing the fraud losses associated with these schemes.
As I have previously stated, the financial losses that have been
suffered by individuals, financial institutions, and private corporations
as a result of these criminal schemes are increasing at an alarming
rate. The Secret Service will continue to aggressively pursue
investigations in this area.
This concludes my prepared statement. I would be
happy to answer any questions that you or any other member of
the subcommittee may have.
Senate Banking, Housing and Urban Affairs Committee
- Subcommittee on Financial Services and Technology
Anti-Terrorist Programs for Companies
Terrorist attacks worldwide have been and will be a way of life
for years to come, the most recent attacks in New York City and
Washington D.C. have changed our lives. The public now realizes
that we live in a time of uncertainty. Fear and the loss of our
personal sense of security and control can have a severe affect
on our personal and business lives.
It is very common, in fact normal for people to experience a
wide range of emotional or physical reactions. -NORMAL REACTIONS
TO AN ABNORMAL SITUATION-.
Disasters create tremendous prolonged stress, stress that can
remain for months and even years. Along with ICI
there are many private and government agencies out there to help.
To be prepared for the future possibility of a catastrophic event
is part of the healing process and ICI
feels it is the most important one. Employers need to accept this
responsibility, to see that their employees receive ongoing stress
counseling through group events, or if needed, one on one counseling.
Training for an emergency response is the main key to a successful
program in dealing with stress. Planning and training instill
confidence knowing that everyone is on the same team and is supported
by the management.
Companies large and small are responsible for seeing that their
employees receive the best training and be informed. It provides
peace of mind knowing that highly trained co-workers are among
us as we proceed through our daily activities. Every employee
should know what is going on in their work environment, be prepared
to follow emergency instructions, respond to situations they are
trained for and know that the company has made contingency plans
for themselves and their families.
No longer is it enough to have your security force operating
without proper security training; they must be knowledgeable in
prevention, emergency service, first aid with AED training, detection,
and evacuation. It is important that employees have full knowledge
of your security capabilities, support and emergency response.
Knowledge, training, and prevention will provide you with stable
employees that are once again productive and happy in their work
environment. Train your people and train with them; ICI
experts are available to deal with support, prevention and emergency
ICI training in the following areas:
1. Special response corporation team training.
2. Advance project site and asset survey.
3. Plant facility protection.
4. Emergency and crisis management.
5. Threat assessment.
6. Intelligence gathering.
7. Survival skills.
8. Bomb threat, search and evacuation procedures.
9. Anti-terrorism planning.
10. First aid, CPR, AED training.
11. Riot control/strikes.
12. Unarmed defensive tactics.
13. Legal issues in use of force.
14. Terrorist group profiles.
To arrange for our consultants to visit your facility, please
contact ICI (email@example.com)
or you may call us at 212-582-3115, toll free 866-977-3700