Post on 05-Aug-2020
FRAUD INVOLVING EUROPEAN
FUNDS
Dr. Eduard Ivanov
www.iaca.int Slide 2
• Fraud typologies
• Fraud and corruption
• Fraud and money laundering
• The role of inter-agency and international cooperation
• Cooperation with private sector
Fraud involving European funds
SCOPE OF THE DISCUSSION
www.iaca.int Slide 3
• Overpricing
• The use of intermediaries
• Payments for unnecessary services
• The use of front companies and the shadow financial infrastructure
• The use of corporate vehicles
Fraud involving European funds
FRAUD TYPOLOGIES
www.iaca.int Slide 4
OVERPRICING
Public
official
Municipal
patient care
institution Company-
importer of
medical
equipmentMedical
company
Front companies in
offshore zonesEuropean
manufacturers
Private
bank
accounts
www.iaca.int Slide 5
PAYMENTS FOR UNNECASSRY SERVICIES (CASH FUNDS)
1) Payment for
services according
fictitious contract
3) Payments for goods within
the country and abroad
2) Cash
www.iaca.int Slide 6
PAYMENTS FOR UNNECASSRY SERVICIES
(INSURANCE SECTOR)
“Clients” of
the
insurance
companies
Insurance
company
#2
Insurance
company
#3
Insurance
company
#1
Reinsurance
company X
Reinsurance
company Y
Insurance
company
#4
“Client”
Offshor
eReinsurance
company
Reinsurance
company
www.iaca.int Slide 7
Company „A“
Company „B“
Front
company
Payments
according
to fictitious
contracts
(marketing,
consulting,
etc.)
Front
company
Payments “on behalf of the clients”
Tax evasion, money laundering,
shadow economy
THE USE OF THE SHADOW
FINANCIAL INFRASTRUCTURE
www.iaca.int Slide 8
THE USE OF CORPORATE VEHICLES
Governmental
agency
www.iaca.int Slide 9
THE USE OF CORPORATE VEHICLES
Private
accounts
Private
accounts
Private
accounts
Governmental
agency
Offshore
Cash withdrawal
www.iaca.int Slide 10
• Scenario 1. Company´s employee, involved into corruption relationships
(Hiring a person with “good relationships” in the public service)
• Scenario 2. Company´s employee, involved into corruption relationships
(Infiltration of corrupt person in a company)
• Scenario 3. Intermediary, involved into corruption relationships
(licensing, public procurement, private intelligence)
• Scenario 4. Third party, involved into corruption relationships (general
contractor, subcontractor)
Fraud involving European funds
FRAUD AND CORRUPTION
www.iaca.int Slide 11
Fraud involving European funds
HOW PEOPLE PAY BRIBE?
www.iaca.int Slide 12
Fraud involving European funds
DO YOU THINK CORRUPT PEOPLE ARE STILL
PRIMITIVE?
www.iaca.int Slide 13
Distinctive features of modern schemes and typologies:
• Use of all opportunities of the global financial system
• Use of modern technologies and new payment methods
• Use of corporate vehicles to hide real beneficiaries
• Use of numerous intermediaries including non-profit organizations to
cut all the links between corrupt “partners”
• Use of professional consultants to prepare “ideal” documents for the due
diligence
• Planning corruption offences in parallel with following money laundering
Fraud involving European funds
THEY ARE NOT!
www.iaca.int Slide 14
USE OF NON-PROFIT ORGANIZATIONS
2) Financing a publishing
of a book
1) Charitable contribution
3) Payment of
honorarium
www.iaca.int Slide 15
USE OF NON-PROFIT ORGANIZATIONS
2) Financing a publishing
of a book
1) Charitable contribution
3) Payment of
honorarium
www.iaca.int Slide 16
• Use of new payment methods and e-currencies for payments in the
framework of criminal financial schemes
• Groups of professional criminal services providers
Fraud involving European funds
THE USE OF CYBERSPACE FOR CRIMINAL PURPOSES
www.iaca.int Slide 17
Country 2 Country 3
Offshore
2. Payments
for the
construction
work
3. For the
bills of credit
6. Payment
of bills3. For the
bills of credit
6. Payment
of bills
4. For
the
Shares
5. For
the Bills
of credit
Subcontractors
2. Payments for
the construction
work
Bank
Country 1
1. Credit
www.iaca.int Slide 18
• The first line of defense – Identification of suspicious business
associates
• The second line of defense – Identification of suspicious transactions
Fraud involving European funds
LINES OF DEFENSE
www.iaca.int Slide 19
• One person is an owner and director of significant number of companies
• One person is an owner, director and accountant of a company
• The owners and directors of a company are persons under 20-21 years
or over 60 years old
• The company is registered at the address at which registered a large
number of companies
• The apparent discrepancy between turnover on the accounts and the
amounts of tax payments
Fraud involving European funds
INDICATORS OF FRONT COMPANIES
www.iaca.int Slide 20
• The value of contracts of a company exceeds many times the net assets
and equity
• The company concludes mainly framework contracts which do not
contain information about the range, prices of goods, delivery dates and
other terms and conditions
• The company concludes mainly contracts with offshore companies and
uses bank accounts in the offshore banks
Fraud involving European funds
INDICATORS OF FRONT COMPANIES
www.iaca.int Slide 21
• Beneficial owners of legal entities, trusts and physical persons
• EU approach to the identification of beneficial owners
• Various approaches to the identification of beneficial owners in financial
institutions
• Recognizing a CEO as a beneficial owner
Fraud involving European funds
IDENTIFICATION OF BENEFICIAL OWNERS
www.iaca.int Slide 22
• Payments to shell companies
• Controversial incoming and outgoing payments
• Overpricing
• Payments in offshore territories, payments through offshore bank
accounts
• Payments to third parties„ accounts
Fraud involving European funds
SUSPICIOUS TRANSACTIONS. SHADOW
INFRASTRUCTURE
www.iaca.int Slide 23
• Risk insurance under the overestimated insurance rates
• Unusual proportion of insurance premiums and indemnities in an
insurance company
• Reinsurance in offshore "reinsurance" companies
Fraud involving European funds
SUSPICIOUS TRANSACTIONS. INSURANCE SECTOR
www.iaca.int Slide 24
• Payments under framework contracts
• Too high amount of commission, which can include corrupt payment
Fraud involving European funds
SUSPICIOUS TRANSACTIONS. USE OF
INTERMEDIARIES
www.iaca.int Slide 25
• Participation in the control of assets and incomes declarations of civil
servants
• Analysis of financial transactions
• Detection of fraud and money laundering within the financial
investigations
• Detection of financial institutions which provide services for corrupt
officials
Fraud involving European funds
THE ROLE OF FINANCIAL INTELLIGENCE UNITS
www.iaca.int Slide 26
• Support of AML/CFT and Anti-corruption compliance implementation
• Raising awareness
• Training
Fraud involving European funds
COOPERATION WITH PRIVATE SECTOR
www.iaca.int
Thank you for
your attention!