Law enforcement are trying out a new method of disrupting investment fraud in B.C. by issuing warning letters to people acting as middle men between victims and criminals.
A federal RCMP unit and the B.C. Securities Commission together hand-delivered 10 such letters to British Columbians in Metro Vancouver on May 29, who knowingly or unknowingly have been acting as "money mules" for overseas criminal organizations.
Fraudsters use money mules as a kind of protective barrier between themselves and their victims. Instead of transferring the funds from scam victims directly to themselves, fraudsters ask money mules to receive the money and then send it forward.
“It's done to make it more difficult to get to what I would describe as the head of the snake,” said Supt. Adam MacIntosh, the officer in charge of the RCMP's financial integrity program, speaking Monday (June 10).
In some cases, the money mules are fully aware of what they're doing and receive payment for their work, but in other cases people are tricked into making the illegal transfer.
Fraudsters use the same tactics to fool people into becoming money mules as they do to convince victims to put money into fake investment opportunities. They'll reach out over social media, dating apps or by text message, sometimes making a fraudulent offer up front, but more often taking the time to slowly build a relationship of trust over weeks or months before persuading the person to invest in something.
"Once the victim sends a substantial amount of money or crypto, the scammer abruptly cuts off contact. In other cases, when the victims ask for their money back, the fraudster agrees to do so as long as they pay additional funds, supposedly for taxes and other fees and then disappears.
"After the loss becomes apparent, the victims are often approached by a new person or organization who offer to help recoup their funds in exchange for a recovery fee. These offers are also fraudulent," the B.C. Securities Commission explained in a March 27 alert.
In the case of tricking money mules, fraudsters will sometimes also pose as employers who are asking an employee to make a money transfer for them.
Sammy Wu, the manager of investigations at the B.C. Securities Commission, said investment fraud – especially involving cryptocurrency – has been a growing problem in the province since at least 2020. Last year, British Columbians reported $46.4 million in such losses to the Canadian Anti-Fraud Centre, a number estimated to only capture about five per cent of overall incidents.
One of the main challenges BCSC and law enforcement face in tackling the issue is that the criminal organizations running the scams are doing so from outside of Canada.
Wu said the majority of bad actors in 2020 were based in Eastern Europe and Nigeria, and that most are now in Southeast Asia.
The BCSC and police have been working with international law enforcement agencies to try and target the crime groups, but have had to employ different tactics in B.C. Wu said they are working with crypto exchanges on how to identify fraudulent transfers, as well as with internet service providers to shut down fraudulent websites.
Targeting money mules with warning letters is a new tactic.
Wu said issuing the letters to those people doesn't allow law enforcement or BCSC to monitor their activities, but they hope it acts as a deterrent. Anyone who continues to act as a money mule could be criminally charged for possession or laundering the proceeds of crime, or handed regulatory penalties.
For people who were making the illegal transfers unknowingly, it also saves them from being victimized, Wu said.
“Whether it's gonna be effective or not, we'll see. But if it's not, I don't think we have anything to lose. We try and then we can find something else and try again.”
MacIntosh said RCMP don't know exactly how many British Columbians are acting as money mules for investment scams, but that it is "a lot."
He noted that criminals go wherever they can make a profit. By educating British Columbians both on how to avoid becoming the victim of an investment fraud or an unwitting money mule, MacIntosh said police hope B.C. will become less of a target.
RCMP suggest people never move money on someone's behalf if they haven't met them in person and ignore unsolicited emails or social media messages that promise quick money for easy work. Police say people should also be wary if an employer asks them to receive money and then "process" or "transfer" it as part of their job.
Anyone who thinks they may have been used as a money mule is told to immediately contact their bank or credit union and report it to the B.C. Securities Commission or RCMP. The more data they receive, the easier it is for police to target the problem, MacIntosh said.