1. Rubus Group Fraud as a predicate crime to AML The perspective of Corporate Intelligence CCOBIN Conference June 2014 Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

2. AML = Fighting Crime Core Strategy: Detect, Investigate, Prosecute, Recover Strategic Themes: Systemic Response AML regime criminalises ML, and facilitates detection of abuse of financial infrastructure – STR’s Hong Kong Moscow United Kingdom South Africa www.rubus-group.com Act(s) of Fraud Proceeds of Crime Legitimate

3. AML = Fighting Crime Banks a site of struggle; your STR’s build intelligence picture of criminal networks, and investigation leads FATF coordinates global enforcement of AML regime: 1.Compliance creates a ‘safe zone’ – within which criminals are inhibited from profiting from proceeds of crime 2.Economic implications of Non Compliance Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

4. Case Examples Project Collar (direct investigative response following STR) Client: UHNW who had identity used in offer of soft loans in Argentina Brief: Find and prosecute person using his identity in suspected advanced fee fraud Rubus reports to UK police who took control of the investigation - deemed it a serious AML concern targeting control of UK Bank – use Rubus us as a resource for international research to disrupt and convict. Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

5. Case Examples Project Majestic (STR’s feed intelligence picture of systemic fraud) Client: Companies caught up in Carousel Fraud Brief: Identify, trace and profile missing trader in a number of fraudulent trading chains Organised crime exploiting treatment of VAT in European trade, defrauding HMRC of billions in unpaid VAT. This fraud depends on centralised but anonymized control of successive trades in high value goods to obscure the original missing trader before feeding the goods back into the open market. Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

6. Fraud (UK) Fraud is an act of deception intended for personal gain or to cause a loss to another party. ‘Deception’ includes the perpetrator: 1knowingly making false representation 2failing to disclose material information 3abusing their position (of authority/ trust) Hong Kong Moscow United Kingdom South Africa www.rubus-group.com Act(s) of Fraud Proceeds of Crime Legitimate

7. Criminal Code Act (Nigeria) 1.False representation- Chapter 38: Obtaining Property by False Pretences: Cheating (also Ch17 (Telecoms), Ch21 (Morality), Ch47 (Debtors)) 2.Failing to disclose- Ch35: Stealing by Concealment 3.Abuse of position- Chapter 12: Corruption and Abuse of Office Chapter 40: Frauds by Trustees and 0fficers of Companies and Corporations: False Accounting Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

8. How does this inform STR’s Cash Economy and Threshold triggers Internal Intelligence: Frontline staff and KYC Risk Weighting and Alerts: Mine your data to identify key risk areas? Abuse of Position: PEP regime and others External Resources? Hong Kong Moscow United Kingdom South Africa www.rubus-group.com Client Take on Monitoring & Analytics Alerted by Media/Data Sharing

9. Capability Requests Special (humint) Assignments (investigation/DD) Asset Tracing (Recovery) (AML and Financial Crime oriented) Country Risk reports (risk appraisal - reg) Travel Briefing and Risk Reports (risk appraisal - ops) (non-open source) Enhanced (Compliance) Due Diligence in various parts of the world (risk – reg) Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

10. Wider risks faced by banks Environmental Risks (Security) Investment Risks (DD) Litigation Disputes Asset Tracing Operational Risks Vetting RISK MANAGMENT Detect, evaluate, mitigate Investigate, Prosecute, RECOVERY Insider Threats External Threats Hong Kong Moscow United Kingdom South Africa www.rubus-group.com Regulatory Risks (AML, Bribery, Sanctions) Reputational Risks

11. Relevant to Nigeria? Developed economies vs Nigeria: Relative power/influence/budget of Compliance International vs domestic operations Electronic vs cash economies Information Asymmetry Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

12. Enhanced KYC pre-transaction Project Halibut (ID and Source of Funds) Client: publicly listed European bank Brief: Conduct enhanced KYC DD on proposed clients; beneficial owner (Subject A) and legal owner (Subject B) behind transaction to liquidate a substantial position in Venezuelan Govt bonds Subjects provided passports, approach through business introducer known to the bank. Subject A reportedly UHNW with $2bn assets, inherited from his father who made money from commercialisation of oil rights in Nigeria Favourable terms, limited decision-line Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

13. Profiling Project Halibut Identity verification and Aliases: – multiple datapoints; birth, marriages, divorces, children, property register, voter rolls etc - original certification wherever possible – Family background – parents, siblings – ethnic naming conventions, transliteration Confirm residency: site visit, credit records Origin of funds: Background – test the story Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

14. Red flagged by monitoring Project Gemima Client: publicly listed bank Brief: Bank’s internal monitoring system alerted them to name match with media report of indictment for fraud of the Principal of Corporate Client, also UHNW Private Banking Client. Matter was highly politicised – AML concerns plus would it be toxic reputationally In this case client wanted anonymised access to intentions of Government to prosecute Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

15. Origin/ Locate Projects Greenleaf/ Sultans Client: Corporate Finance House/ Large ME Bank Brief: Suspicious routing of funds by key client raises concern over origin of funds/ Suspicions roused by substantial exposure to a particular client, debt rolled over on soft terms, suspected collusion by by senior members of their own credit lending team. These are essentially detailed DD and Asset Tracing cases – profile client, profile business interests and assets Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

16. Asset Tracing & Recovery Projects Direct/ Skeem Client: Retail Banks (UK and ME) Brief: Flawed AML and general DD on clients leaves bank exposed to fraud. Asset Tracing and Recovery: Direct scam to exploit a flaw in online banking rules – succeeded in extracting £150k from UK bank – interbank co-operation lead to apprehending funds and subject 3 days after withdrawal in NZ. Skeem involved an arms dealer who borrowed $100milion from bank to finance are manufactury and service companies – asset stripped them and left empty shells behind. Hong Kong Moscow United Kingdom South Africa www.rubus-group.com

17. Rubus Group Thank you Nicholas Connell nicholas.connell@rubus-group.com Hong Kong Moscow United Kingdom South Africa www.rubus-group.com