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Criminal Markets

Financial Crime

Mass Marketing Fraud
Canadian-based mass marketing fraud operations gross over $500 million per year, according to the Canadian Anti-Fraud Call Centre (CAFCC). The top reported mass marketing schemes last year included: prize, sweepstakes/lottery and gift, advance fee loans, service, job opportunities, Internet auctions, vacations, and merchandise. Counterfeit or altered financial instruments (e.g. cheques or money orders) are increasingly being used by organized crime to commit mass marketing fraud. Canadian-based criminal organizations not only target consumers in Canada, but also consumers in other countries, primarily the US and, to lesser extent Australia, Switzerland and the Caribbean. Conversely, Canadians are targeted by foreign-based fraudsters and the CAFCC identified 105 different countries that are believed to have targeted Canada in 2007.

Mortgage Fraud
Mortgage fraud in Canada is estimated to result in losses amounting to hundreds of millions of dollars annually. Organized crime groups undertake a variety of techniques to avoid detection while committing mortgage fraud. Schemes often involve fraudulent mortgage applications, which contain fabricated information about the prospective buyer or property, through the use of false appraisals and employment records. In order to insulate themselves from detection, criminal groups also recruit nominees, which can include family members, close associates or other ineligible buyers, to submit fraudulent mortgage applications. The movement towards remote application processes (whereby in-person applications may not be required) is also facilitating anonymity for those engaged in mortgage fraud.

Payment Card Fraud
Payment card fraud remains a prevalent form of fraud and has a global impact on consumers, as well as financial and retail industries. The availability of wireless technology, such as Bluetooth, is enabling the extraction and transmission of payment card information in real time. As information is relayed from point of sale terminals to vehicles positioned in close proximity, it is transferred almost instantly to ‘card factories’ which can be located worldwide. This technology, coupled with the growth of payment card use and online shopping activity, provides both anonymity and access to extremely lucrative markets for organized crime.

Card factories are locations where payment cards are manufactured illegally.

COMMISSIONER WILLIAM BAKER, CANADA REVENUE AGENCY
“The Canada Revenue Agency ensures that income derived from criminal activity is subject to Canadian income taxes. Our role complements the efforts of police forces to combat illegal activity and organized crime. Together, we contribute to the security and well-being of all Canadians.”

Securities Fraud
Securities fraud is a complex criminal activity that requires specific financial knowledge and expertise. Technology has facilitated organized crime’s ability to commit securities fraud and has increased their operational reach. In particular, the use of electronic money transfers has resulted in the blurring of geographical borders. Securities fraud may originate in one jurisdiction and result in losses to numerous investors located in several other jurisdictions. In addition, spam e-mail is used to promote stocks in microcap companies as high-yield, low-risk investment opportunities in order to conduct ‘pump and dump’ schemes.

Microcap companies are smaller companies that often have limited assets, and trade on over-the-counter markets that have fewer regulations than the major stock exchanges.

‘Pump-and-dump’ schemes involve the touting of a company’s stock (typically companies with small numbers of stock) through false and misleading statements to the marketplace. After pumping the stock, fraudsters make huge profits by dumping their cheap stock in the market, which results in investors losing money.

Criminal Markets - Contraband Tobacco