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Criminal Markets
Financial Crime
Identification (ID) Fraud
Fake birth certificates, driver's licenses, health cards, social insurance number cards and passports represent a lucrative market for organized crime groups. In August 2008, the Canada Revenue Agency (CRA) issued an alert for taxpayers to be aware of a scam in which letters asking for individuals' personal information were fraudulently identified as coming from the CRA. In March 2009, a similar scam using e-mails was performed in which fraudsters requested personal information, including banking and passport information, to update records and process refund claims.
Criminal groups will continue to employ a variety of methods to gain access to this information to commit ID fraud. Although new security measures to combat ID fraud are continuously being implemented, such as the expected release of electronic chips implanted in passports in 2011, organized crime groups will continue to endeavour to overcome the anti-fraud obstacles and profit from this market.
Mass Marketing Fraud
Mass marketing fraud can be defined as fraud, deception or misrepresentation that uses mass communication media such as telephone, facsimile, Internet, regular or electronic mail. It also uses solicitation methods devised or intended to defraud the public, any person or organization of any property, money, valuable security, service or information.
According to the Canadian Anti-Fraud Call Centre (CAFCC), Canadian based mass marketing fraud operations gross over $500 million per year. In 2008, Canadian victims of fraudulent mass marketing operations based in Canada reported losses of $26.9 million to the CAFCC, an increase of over $2 million from 2007. It is estimated only 5% of actual complaints are reported. The top reported mass marketing schemes last year included: service, prize (e.g. sweepstakes/lottery and gift), purchase of merchandise, sale of merchandise, job, vacation, collection agency and charity.
Advances in technology and software programs have allowed criminal organizations to alter and expand their mass marketing fraud activities. Fraudsters can be located anywhere and are able to target consumers by using Voice over Internet Protocol (VoIP). By not having a fixed location, it becomes extremely difficult for authorities to dismantle these types of operations.
"The best way to effectively combat organized crime is to work collaboratively with both our affected communities and our policing partners. The Calgary Police Service is committed to involving communities as part of the solution, and recognizes that an 'intelligence-led policing model' is critical to our success."
Calgary Police Service, Chief Rick Hanson
Payment Card Fraud
Payment card fraud involves card thefts, fraudulent card applications, fake deposits, skimming or counterfeiting, and is a relatively efficient means for criminals to obtain cash profits. The ease with which payment card fraud can be undertaken and the profitability of this activity make it an attractive market for both opportunists and organized crime groups. Within Canada, this form of criminal activity continues to be concentrated in urban areas of Quebec, Ontario and BC, with a lesser presence in the Prairie and Atlantic regions.
Credit card fraud and Interac statistics provided by the Canadian Bankers Association shows combined annual losses due to debit and credit card fraud in Canada exceeded $500 million in 2008. Recorded losses from debit card fraud in Canada decreased slightly from losses in the previous year, while those from credit card fraud increased. The bulk of credit card fraud losses are attributed to counterfeiting and fraudulent purchases, suggesting an increase in organized criminal operations.
Currently, hackers are targeting online sites and using malware and keystroke-logger programs to steal credit card data in order to bypass the need for skimming activity. This trend is likely to increase as online banking continues to grow in popularity. A transition from magnetic stripe debit and credit cards to ones embedded with microchip technology is currently underway in Canada; however, a complete implementation of the technology is expected to take several years. Furthermore, chip technology has no impact on the security of credit cards when used to purchase items online, by mail order or by phone.
Credit Card Fraud Terminated
In November 2008, Project H23 came to a successful conclusion. The nine-month joint operation in Winnipeg and Calgary focused on sophisticated "skimming" and counterfeiting of credit cards involving street gangs and their associates. The amount racked-up on the credit cards was upwards of $750,000 but the suspects had data with the potential to fraudulently spend in the tens of millions of dollars.
Project H23 consisted of Winnipeg Police and RCMP Commercial Crime Units who collaborated with the Calgary Police Service's Commercial Crime Unit. The investigation resulted in 19 arrests in Winnipeg and two in Calgary with more than 300 criminal charges including fraud, theft, arson, illegal firearms possession and trafficking, robbery with a firearm, and conspiracy to commit murder. As the investigation progressed evidence of other crimes was discovered and confirmed the involvement of street gang members. This included vehicle thefts wherein the vehicles were "re-vinned" and sold for profit.
The investigation was sparked by an incident caught on video tape at a video store in Winnipeg in March 2008 when a customer used a counterfeit credit card as payment. Law enforcement intelligence identified this same individual with a history of being extremely proficient in computers, of forging documents and trafficking in credit cards. After further research, the RCMP became involved and the incident transformed into a full blown operation, dubbed Project H23.
Detectives involved in the operation confirmed that the individual's computer expertise extended well beyond the norm. His group hacked into computer networks, obtaining over 45,000 pages of credit card data from computer websites originating in Europe and the United States. Project H23 also clearly demonstrated that some gang members and associates employ or have access to persons with sophisticated skill sets. Police recognize that this level of sophistication/expertise is becoming more prevalent among organized crime groups.
Project H23 highlighted one of many instances showing how the intelligence cycle operates and how it spurred an important investigation that resulted in safer homes and safer communities.
Securities Fraud
Securities fraud can be a highly lucrative and attractive criminal activity for organized crime groups with the requisite financial expertise. It poses a significant threat to investor confidence and the integrity of the capital markets as it involves illicit market manipulation, high-yield investment schemes or brokerage account hijackings.
Organized crime groups target professional facilitators, such as lawyers, stock brokers, and accountants, to perpetrate securities fraud. They will often use virtual tools, such as e-mail and Internet sites like Facebook and YouTube, to efficiently and anonymously target victims worldwide and issue fictitious promotional material advertising fraudulent investment opportunities.
Current global economic conditions resulting from the collapse of the US sub-prime mortgage industry exposed several large-scale investment frauds as investors sought to withdraw their cash only to discover it is no longer there. Building on investor fears and mistrust of the major banks, fraudsters may see an opportunity to represent fraudulent investments as being "secure and highly profitable."
"Organized crime is responsible for the high amount of drug supply and gang violence plaguing communities across Canada."
Edmonton Police Service, Chief Mike Boyd
Mortgage Fraudsters Infiltrated in Alberta
The disruption of a massive mortgage fraud believed to be the biggest in Alberta history provides a clear example of how intelligence-led policing and greater integration of police agencies disrupt organized crime to create safer homes and safer communities.
The discovery of a criminal organization swindling unsuspecting real estate investors out of nearly $30 million first began in 2003 when an Edmonton police constable working in a derelict housing unit shared information regarding significant discrepancies in the value of property. From this information, Alberta's Integrated Response to Organized Crime (IROC) unit became involved. A team was created that consisted of RCMP and Edmonton police members who worked together for 18 months before charges were laid.
Detectives of IROC's Project Infiltrate laid a total of 142 charges of offences that took place between 2001 and 2005. It involved 125 properties, more than 280 real estate transactions and 19 different lending institutions. The initial purchaser netted $1.8 million in less than a five-year period. Five Edmontonians were recently convicted in connection with the massive mortgage fraud scam.
One of the convictions marks the first time in Canadian history that a criminal is convicted of committing economic crimes for the benefit of a criminal organization. The law under which the accused was charged has primarily been used to convict criminals who commit drug crimes for gangs.
Criminal Market: Illicit Drugs
