Matthew Greene

By Matthew B. Greene, JD

Copyright 2007, 2009 STILAS International Law Services, P.A.

All International Rights Reserved.

Matthew Greene is the founder of STILAS, originally a government contractor for international economic security. Matthew Greene is a former Chief of Special Operations in anti-organized crime and anti-corruption, and is an international legal expert and career strategic advisor to governments, agencies and ministries in various countries.

This article is a brief extract from one of a series of expert reports developed by Matthew Greene and STILAS, in cooperation with certain federal law enforcement and national security agencies of multiple countries, for protection of national critical infrastructure in the private sector.

Introduction

Depositors, investors and clients are frequently attracted and seduced by the fraudulent proposals that lure them away from the safe and real transactions. It is impossible for any honest business to "compete" with fraudulent scams. The only task of fraudsters is to promise anything and everything that they think people want to hear to give up their money. The challenge of legitimate professional services is to truthfully and accurately report the realities (and limitations) of their genuine capabilities and targeted results. The expected yields and assurances of results, in compliance with licensing obligations and a multitude of national and international laws, can never compare to the outrageous claims and clever deceptions of experienced fraudsters. Compounding the problem is the fact that such fraudulent proposals are "infectious", often "contaminating" legitimate practices through confusion and distraction, primarily because they are so widely and aggressively promoted and circulated.

Dangerous Trend of Copied Standard Fraudulent Documents

Every day, intermediary brokers and financial advisors worldwide are exposed to high volumes of fraudulent proposals. Most do not have the benefit of specialized training to detect fictitious terms in the many documents, or the investment banking experience to know what transactions are possible to close on or not. As a result, brokers, and even lawyers, become immersed in a false world of imaginary terminology invented by creative fraudsters, who are masters in the art of winning confidence (the origin or the term "confidence man" or "con-artist").

Inevitably the brokers and lawyers begin to believe that they know something about the transactions, and come to adopt the false language of fraudsters, bringing those fantasies into other legitimate transactions. This causes great confusion, making it difficult to assess the validity of any proposal, and hard to distinguish whether a broker or advisor is a co-conspirator in a fraud, has been deceived by a fraud that he is unwittingly promoting, or simply has developed a bad habit of using the infectious fictitious terminology even when describing a legitimate transaction.

The Metropolitan Police Service of London (founded in 1829, traditionally known as "Scotland Yard", and now located at "New Scotland Yard"), explains that "some of these terms may be correct banking expressions or close derivations of them. Some may be just meaningless or nonsensical however they have been used so many times over the years that they themselves have gained some history and credibility." (Metropolitan Police Service of London, Specialist Crime Directorate (SCD) Operational Command Unit (OCU) on "Economic and Specialist Crime" ("SCD-6"), Standing Fraud Alert - "High Yield Investment Fraud".)

The majority of lawyers, financial advisors, brokers and clients have been systematically overexposed to an excessive volume of fraudulent documents, consistently using the same false terminology and misleading instructions, for decades. Making the situation much more dangerous, since the majority of brokers and clients avoid the involvement of hired licensed legal counsel to draft professional legal instruments for transactions, they predominantly copy from the many fraudulent documents that are in wide circulation internationally. Such copying usually involves an entire proposal or contract, but can also inadvertently copy only one damaging part, such as instructions for a fictitious or misleading procedure.

As a result, there is now a large body of standard contracts, all derived from fraudulent scams that are known to national and international law enforcement agencies, that are being circulated worldwide to all who enter the financial sphere, and being unknowingly copied by those attempting to promote similar but lawful transactions.

The US Federal Trade Commission (FTC) emphasizes that "The materials are fakes, according to enforcement officials, and the contracts the scam artists ask consumers to sign are worthless." (US Federal Trade Commission (FTC), FTC Facts for Consumers, The Truth About Advance-Fee Loan Scams, May 2005.)

As New Scotland Yard points out, the contracts or "letters are often littered with spelling mistakes and bad grammar. This is a deliberate ploy by the fraudsters to induce the potential victim to believe that he is dealing with uneducated people who would not have the ability to defraud him / her. Nothing could be further from the truth! The majority of victims prove to be professional business people, doctors and lawyers." (Metropolitan Police Service of London, "SDC-6" Economic and Specialist Crime, Standing Fraud Alert - "419 Fraud / Advance Fee Fraud".)

The unfortunate consequence of the above factors is that many lawyers are mislead or deceived into "approving" or "endorsing" proposals and contracts that are directly derived from fraudulent documents. This inadvertently causes even more damaging confusion, as it leads third parties, as well as the principals themselves, to further believe in the effectiveness, safety and credibility of documents that should have been identified by experts as based upon and copied from risky and fraudulent documents that can cause damages and liabilities.

The US Treasury Department identifies the primary cause of losses by criminal theft, and the main enabling factor of the mechanisms that accomplish that theft, as the common type of unprofessional contracts, containing fictitious terms that have no financial or legal meaning, that are copied from known fraudulent schemes, and widely circulated among intermediary brokers. In particular, it blames "ambiguous wording in the documentation" that results from misuse of banking terms or the use of fictitious and meaningless terms. (Office of the Comptroller of Currency (OCC) of the US Department of Treasury, OCC Alert on Fraudulent Investment Programs, Alert 2001-3 of March 30, 2001, issued to US national banks, State banking authorities and federal regulatory agencies, signed by Brian C. McCormally, Director of Enforcement & Compliance Division.)

Red Flags Indicating a Document Originating from Fraudulent Schemes

"To give the scheme an air of legitimacy, the promoters distribute documents that appear complex, sophisticated and official." This central goal is primarily accomplished by using fictitious terminology that sounds important and highly technical, but yet is unverifiable to avoid exposure of fraudulent claims. (US Securities and Exchange Commission (SEC), Advisory How Prime Bank Frauds Work, issued October 30, 2003 by the SEC Division of Enforcement.)

According to the FBI: "Certain words and phrases are repeatedly used ... Some have absolutely no meaning in commercial banking or business practices and others are used in ways contrary to standard practices." (Federal Court of South Carolina, Affidavit for Warrant of Arrest, Section 11, sworn statements under oath by FBI Special Agent Paul A. Jacobs in the "Sweet Tea Masquerade" case, Affidavit filed March 7, 2003.)

Misrepresentation of International Chamber of Commerce (ICC) documents is a "red flag" on the majority of law enforcement lists. ICC itself "issued a warning to investors" about fraudulent programs "falsely quoting its name and rules." According to Eric Ellen, Executive Director of ICC Commercial Crime Services (CCS), the proposed investment instruments "are falsely said to conform in all aspects with the Uniform Customs and Practice for Documentary Credits as published" by ICC. "Reference is made to ICC Publication 500, the current version of the documentary credit rules that came into force in 1994." (International Chamber of Commerce (ICC), Banking Instrument Scam, Paris Advisory of May 7, 1998.)

Some terms seem to come from completely different spheres of life that have no rational relation to banking, finance or law. For example "rolls and extensions" are used in a hair salon, and "good clean and clear" better describes a skin treatment at a beauty salon. Con artists seem to use absolutely any available words to push the right emotional and psychological buttons to give their targeted victims a false sense of confidence in the offering, and a false sense of importance and sophistication of the transaction. Having a whole world of their own terminology also supports the deception that the fraudsters are experts in something serious and complex that requires trusting them to bring profits to the mere layperson.

Matthew Greene and STILAS avoid accepting any business from the general public. Consultation is generally provided only to government agencies and banking institutions. Provision of services to the private sector may be considered only upon introduction through trusted partners or colleagues of Matthew Greene and STILAS.

By Matthew B. Greene, JD

Copyright 2008, 2009 STILAS International Law Services, P.A.

All International Rights Reserved.

Matthew Greene is the founder of STILAS, originally a government contractor for international economic security. Matthew Greene is a former Chief of Special Operations in anti-organized crime and anti-corruption, and is an international legal expert and career strategic advisor to governments, agencies and ministries in various countries.

This article is a brief extract from one of a series of expert reports developed by Matthew Greene and STILAS, in cooperation with certain federal law enforcement and national security agencies of multiple countries, for protection of national critical infrastructure in the private sector.

The financing industry is often highly aggressive and adversarial. Commonly, efforts that would help to avoid fraud if done properly are abused and mishandled by unqualified persons, some of whom also make misrepresentations to justify their role in "due diligence" or "evaluating" a legitimate licensed professional services firm.

Most commonly, lawyers undertake this role, often making misdirected and even unethical criticism of other lawyers and law firms. Such situations are a serious disservice to the client, resulting in damaging an otherwise effective, safe and licensed representation. Commonly, they also cross over a line, entering into the territory of unlawful interference and false unlawful defamation, at the same time directly violating their own fundamental license requirements as lawyers.

Most importantly, but all too frequently ignored, the practice of lawyers defaming other lawyers is actually a direct violation of the requirements and prohibitions of licenses to practice law, such that a lawyer misusing amateur "due diligence" to defame a competitor firm runs a very real risk of violating its license, and possibly having it suspended or revoked.

The American Bar Association (ABA) Model Rules of Professional Conduct ("ABA Rules"), and United Kingdom (UK) Solicitors Code of Conduct (2007) of the Solicitors Regulation Authority (SRA) ("UK Code"), and the relevant analogous licensing laws of other jurisdictions internationally, generally and universally provide for the following specific violations in common situations of abusive "due diligence" by a lawyer or law firm:

Conflict of Interest - Giving advice to a client about whether to retain or cooperate with another licensed professional services firm, under the pretense of evaluating the other firm's services or capabilities, necessarily involves the lawyer's role as a potential competitor with a vested interest in working on the same client matter (which will inevitably result in billable hours, commissions and/or continued advance retainers). Such biased "advice" directly violates the lawyer's license prohibitions against "conflict of interests". (ABA Rule 1.7(a)(2), UK Code, Rule 3.01(2)(b)).

Unqualified Due Diligence or Opinion - Some lawyers may purport to conduct "due diligence" on another firm's services or capabilities, implying that an investigative background check or conclusive determination of fact will be provided, but instead merely state an "opinion" based upon speculation or subjective interpretation of limited open source information taken out of context. Some lawyers will undertake to evaluate the services or capabilities of another law firm or services firm that is recognized as specializing in structured financing, where the lawyer is not sufficiently qualified to understand or evaluate, let alone practice, that specialty. Both such abuses violate the lawyer's license obligation to refuse to give advice on matters where the lawyer lacks sufficient "legal knowledge, skill, thoroughness and preparation reasonably necessary" (ABA Rule 1.1). or "knowledge, qualifications or expertise" required for the matter. (UK Code, Rule 2.01(b) and Guidance 6(b) to Rule 2)

Defaming the Profession - Criticizing another lawyer or law firm for charging an advance retainer, merely because the services of that firm are related to the area of financing, using the defamatory term "up front fee" implying and associated with fraud, constitutes a direct attack on the legal profession as a whole. The majority of legal services are provided based upon advance fee retainer payments, most likely including many of the services of the same lawyer making such criticism. Such defamatory statements made against another law firm, offered as "legal advice" to a client, violate the lawyer's license requirement "not to diminish the trust the public places in the profession". (ABA Rule 8 "Maintaining the Integrity of the Profession", as enacted by various US State Supreme Courts as codified law, UK Code, Rule 1.06). Such violation undermines and "damages the ability of the profession as a whole to serve society" for all matters related to financing, a regulated area in which qualified legal representation is important and necessary. (UK Code, Guidance 10 to Rule 1.06).

Violating Legality and Best Interests of Client - For a lawyer to advise a client to intentionally breach a valid binding contract that the client has already signed violates the lawyer's license requirement to "uphold the rule of law". (ABA Rule 1.2(d), UK Code, Rule 1.01). This also violates the license obligation to "act in the best interests of the client" (UK Code, Rule 1.04), as it causes them to incur liability for breach of contract, possible additional consequences and damages to their creditworthiness or credit rating if dealings with a licensed financial institution are involved in the breach, and deprives the client of licensed professional services needed for a highly regulated sphere.

According to studies by the Association of Certified Fraud Examiners (ACFE), the Congressionally authorized regulatory body National Futures Association (NFA), and statistics from the Federal Criminal Investigators Association (FCIA) and the Federal Bureau of Investigations (FBI), the largest category of business fraud is interference with retaining licensed services.

Fraud compromising or preventing the effective acquisition of professional services constitutes 18% of all internal business fraud, resulting in the greatest average losses of approximately $300,000 per year for every company. Most alarmingly, the statistics evidencing that this type of fraud is the most damaging to company operations do not consider the consequential damages and losses due to failure to procure needed legal and security services to defend the company's essential assets and infrastructure at critical times.

According to the FBI, such "corrupt insiders" involved in this type of fraud generally abuse their authority and violate trust from their fiduciary position, to avoid or prevent the hiring of professional legal or security services, interfere with the work of an outside licensed services firm, or undermine the services firm's relations with the client company.

Such unlawful interference, considered by law enforcement experts as "operational sabotage", is usually intended either to avoid detection of their own mistakes or wrongdoing, or to reserve the company's budgetary funds for continued diversion to maintain a level of profits for the "corrupt insider".

Lawyers who are willing to simultaneously violate most or all of the above license requirements, risking losing their own license, are not credible while engaging in such violations, and most likely are not qualified to assist you as well as the licensed services firm they are criticizing as perceived competitors.

Give priority to licensed services firms for representation of your commercial interests. Place trust in valid licenses, and clear and transparent written presentations evidencing a level of preparedness and expertise to perform licensed work, instead of placing blind "trust" in individuals or "friends" who may be abusing your trust as a "corrupt insider".

Be suspicious when employees, partners or your own lawyers attempt to discourage you from hiring qualified professional services to protect your business interests, especially when licensed expert services are involved, and especially when they themselves are not qualified to perform the functions you are seeking to hire.

Matthew Greene and STILAS avoid accepting any business from the general public. Consultation is generally provided only to government agencies and banking institutions. Provision of services to the private sector may be considered only upon introduction through trusted partners or colleagues of Matthew Greene and STILAS.

By Matthew B. Greene, JD

Copyright 2002, 2009 STILAS International Law Services, P.A.

All International Rights Reserved.

Matthew Greene is the founder of STILAS, originally a government contractor for international economic security. Matthew Greene is a former Chief of Special Operations in anti-organized crime and anti-corruption, and is an international legal expert and career strategic advisor to governments, agencies and ministries in various countries.

This article is a brief extract from one of a series of expert reports developed by Matthew Greene and STILAS, in cooperation with certain federal law enforcement and national security agencies of multiple countries, for protection of national critical infrastructure in the private sector.

What is "Due Diligence"?

The term "due diligence" comes from the legal concept that corporate executives have a legal obligation to duly exercise reasonable diligence in researching any potentially adverse facts in a business or transaction.

The phrase "due diligence" was first made popular by multinational law firms. It later became even more commonly used when prominent financial consulting firms began to incorporate the related practices of law firms into their services. As a result of this widespread popularity, "due diligence" is like a diluted trademark, often used as an interchangeable synonym for a "background check", although real "background checks" can only effectively be provided by detective agencies, investigative or security firms. The essence of professional due diligence work is to provide complete, accurate and reliable fact finding, to establish a true and correct representation of a business situation for effective decision making.

Types and Methods of Due Diligence

The Due Diligence methods used by the law and financial firms that made the term popular are generally limited, and are not "investigative" in character. Such professional practice firms generally advise the client on requesting available corporate documents or accounting statements from potential business partners prior to contract closings, and assist the client in obtaining copies of similar publicly filed records declared by the subject of the inquiry.

This method commonly uses "check lists" of documents, licenses, etc. that should be identified and collected as the basis for specific types of transactions, such as mergers and acquisitions, real estate development deals, franchising and product licensing, joint venture contracts, or direct investment. The firm will have different checklists that are used for each type or category of transaction. In addition to identifying and collecting legal and commercial documents, the firm will review them to ensure that documents are properly signed, complete, accurate and otherwise legitimate.

Legal and management consulting firms do not attempt or purport to meet the standards of the economic security industry for background checks or investigations. This type of Due Diligence is not intended to provide a conclusion as to whether a potential partner is reliable. Accordingly, law and financial firms often hire security firms to conduct economic security investigations as a supplement to the "management consulting" type corporate Due Diligence.

Open Source Research

The most widely used due diligence methods in the security industry are referred to by professionals as "Open Source" research. This type of background checks are conducted on the level of official registered information, such as corporate registrations and business filings, proprietary ownership registrations, mass media articles, publications and broadcast transcripts (called "media search"), licensing records, and similar data that is commonly referred to as "public records".

Taken by itself without any additional methods, however, this type of background check is highly limited in usefulness. There are many "security" companies on the market that offer "public records" and "open source" research, providing only unverified raw data obtained from the most readily available computerized databases. While this approach is popular for its minimal cost, it most often cannot address the most valuable information upon which clients must make important business decisions. At worst, limited "public records" checks can overlook critical facts and mislead decision makers. At best, they usually raise many more questions than they answer.

Background Check Investigations

A professional "Background Check" investigation consists of a full and advanced "open source" investigation, enhanced by extensive verification and analysis of data. Conducting effective "open source" background checks for use in due diligence investigations is both an art and a science.

For reliable results, it is necessary to use experienced professional investigators who know exactly what factors and indications to look for, can quickly assess or verify the validity of information discovered. For results to have practical value and benefit for the client to use in real-world business situations, the investigators must also be able to fully explain and interpret the significance of information, and make practical recommendations.

Guidelines for Conducting Due Diligence

The most effective approach, although perhaps counter-intuitive, is to directly engage the subject company in the process, asking for "voluntary disclosure". Tell them that you need to do "due diligence" and want to verify or have a record of certain things that are important to you as a potential customer or partner.

This approach has three primary benefits: First, it will automatically filter out most fraudulent companies, who will quickly stop talking to you, while legitimate ones will gladly mutually engage to facilitate the process. Second, you let the subject do most of the work for you, minimizing both time and cost. Third, the subject is aware that you will undertake verification of information provided, so they will be more careful to avoid misrepresentations and give accurate information.

The following is a list of recommended information, materials and documents that you should ask the company to provide. The absence of any of these items does not constitute any "fraud flag" by itself, and some may not apply, but these are the most effective things to ask for and verify.

•1. Articles of Incorporation - If you are considering working with an individual partner or hiring an individual professional, and the individual can reasonably be expected to effectively perform the work alone, then the existence of a registered corporate entity is not necessary. For all other businesses and transactions, a corporate registration is the cornerstone and basis for legitimacy, as it requires the business to rely upon its corporate name, image and reputation.

•2. Certificate of Good Standing - This is useful to show that the company continues to exist and operate as a legal entity, and has not been dissolved and/or reincorporated under another name. It is not necessary to obtain the most recent Certificate of Good Standing. Most companies that actively engage in business with serious clients will have one that is relatively recent, and obtain a new one from the State Corporation Commission every 1-2 years.

•3. Bank Account for Transferring Payments - The purpose of this information is to verify that your payments will create a "paper trail" as evidence to ensure that the corporate entity that owns the receiving account will have legal liability for proper use of the funds. This should not be confused with an intrusive request to show their primary assets bank account. You only want to know the bank account that you can make wire transfer payments into, that they will have to disclose to you anyway when it comes time to pay them. Ask for the beneficiary name, bank name, account numbers and SWIFT code.

•4. Licenses or Certifications - Ask for a copy of licenses, permits, registrations or certifications if they are directly related to and required for the specific work the company must perform for you. If copies are not available (often professional licenses are too large to copy or scan), request the number and issuing authority of each document, and the year and place of issuance.

•5. Web Site Addresses - Beware of companies that tell you they do not have a web site or "don't need one". Legitimate companies always make efforts to allow clients or partners to keep in touch with them, receive notice of changes of office address, e-mail addresses or phone numbers, reminders of services offered or updates on new services.

•6. Resumes of Managers or Key Employees - Ask for resumes (also called "professional bio" or "curriculum vitae" (CV), as used for job applications) of managers or key employees of the company who will be working on your project. This will give you some additional leads and information to verify the company's ability to perform the work promised and general capabilities.

•7. Corporate Brochure or Company Overview - Every company should have a professional and well-developed presentation of their business concept or services. This evidences the level of preparation of the company, and demonstrates whether they have sufficiently developed the capabilities or services they claim to offer.

•8. Detailed Written Presentation of Services Offered - Ask for a detailed written presentation of the proposed business, product or services offered. The key indicator of legitimacy and reliability is the transparency and disclosure of detailed mechanisms of the proposed transaction and methods of work to be performed. The best evidence of a company's experience and capabilities is its willingness to disclose detailed verifiable information in writing, and the level of preparation and quality of its presentation materials.

•9. Reports or Articles Written by Principals or Managers - Ask for any other reports, articles, publications or non-proprietary research memorandums written by principals or managers of the company who are related to proposed work on your project. While not required, such materials can be excellent evidence that the company is actively engaged in the sphere of business that they claim to be, or is an authority on the capabilities that you are considering it for.

•10. Sample or Standard Contracts - Ask them to provide copies of sample contracts or standard agreements related to the proposed transaction. If they do not have a standard contract, then that is an indication that they have not engaged in that type of business before, and may lack experience. Beware of contracts that misuse financial or legal terms, contain ambiguous colloquial wording, or have apparently not been developed with the participation of any lawyers. Unprofessional contractual documents are a risk factor in and of themselves. At worst, they may be intentionally misleading to perpetrate a fraud. At best, they suggest that the company is not properly prepared to engage in the transaction.

Matthew Greene and STILAS avoid accepting any business from the general public. Consultation is generally provided only to government agencies and banking institutions. Provision of services to the private sector may be considered only upon introduction through trusted partners or colleagues of Matthew Greene and STILAS.

By Matthew B. Greene, JD

Copyright 2005, 2009 STILAS International Law Services, P.A.

All International Rights Reserved.

Matthew Greene is the founder of STILAS, originally a government contractor for international economic security. Matthew Greene is a former Chief of Special Operations in anti-organized crime and anti-corruption, and is an international legal expert and career strategic advisor to governments, agencies and ministries in various countries.

This article is a brief extract from one of a series of expert reports developed by Matthew Greene and STILAS, in cooperation with certain federal law enforcement and national security agencies of multiple countries, for protection of national critical infrastructure in the private sector.

THE REAL RISKS AND DAMAGES OF BUSINESS FRAUD:

According to studies by the Association of Certified Fraud Examiners (ACFE), the Congressionally authorized regulatory body National Futures Association (NFA), and statistics from the Federal Criminal Investigators Association (FCIA), business fraud which targets and directly affects corporations is valued at over $413 Billion per year, in the US alone. ACFE statistics and FCIA analyses reveal that the average losses due to business fraud are as high as 15% of every company's total annual revenues. An exhaustive nationwide study by the ACFE found that the average annual loss of businesses in private sector industries reached as high as $274,000 per company.

ACFE statistics established that the most costly business fraud violations generally target or occur within organizations with less than 100 employees. This is in part because smaller companies do not reserve adequate budgets for security services, background checks or legal services.

The vast majority of fraud is committed by individuals rather than by businesses. The FBI in cooperation with the National White Collar Crime Center established that 60.1% of fraud cases are perpetrated by individuals only, 22.1% by individuals utilizing business structures or assets, and only 17.8% are perpetrated by a business as a whole. Thus, in most cases specific individuals are committing the fraud, predominantly in cooperation with other individual perpetrators.

FBI statistics also show that 92.2% of all business fraud world-wide was originated by perpetrators in or from the United States.

Fraud compromising or preventing the effective acquisition of professional services by the organization constitutes 18% of all internal business fraud, resulting in the greatest average losses of approximately $300,000 per year for every company. Most alarmingly, the statistics evidencing that this type of fraud is the most damaging to company operations do not consider the consequential damages and losses due to failure to procure needed legal and security services to defend the company's essential assets and infrastructure at critical times.

Corrupt insiders involved in this type of fraud generally abuse the authority and weight from their corporate position to avoid or prevent the hiring of professional legal or security services, interfere with the work of a security firm or law firm, or undermine the services firm's relations with the client company. Such operational sabotage is usually intended either to avoid detection, or to reserve the company's budgetary funds for continued diversion or embezzlement to maintain a level of fraudulent profits.

Most business fraud perpetrators act as independent "business consultants," "investment consultants", middle-men, or "deal brokers", and are most often presented as "friends" with "connections" related to urgent needs of the company to be defrauded. Based upon statistics developed by the FBI in cooperation with the National White Collar Crime Center, federal investigative experts conclude that one of the highest risk areas for external business fraud is relations involving an individual "representative" on a foreign territory, entrusted with selection, management or performance of professional services.

PROTECTIVE RECOMMENDATIONS:

A lack of understanding or reluctance to believe the nature of business fraud fuels the opportunities for this criminal industry, and adds to its damages and costs. Executives are often reluctant to believe that fraud is committed by their own employees or independent contractors, and because of the clandestine nature of the offenses, most perpetrators are not even investigated until significant losses are incurred or critical commercial projects undermined.

Criminal investigative experience shows that the most damaging risk comes primarily from corporate insiders, as key enabling players who assist local outsiders in taking advantage of economic security weaknesses of the company.

Accordingly, the most powerful and effective way to protect yourself and your organization against business fraud is simply to carefully analyze and evaluate the individuals whom you do business with. This approach consists of the following 8 elements:

(1) Give priority to firms and organizations for professional services and representation of your commercial interests, instead of placing trust in individuals or "friends" with "connections." Be suspicious when employees or partners attempt to discourage you from hiring professional services to protect your business interests, especially when licensed expert services are involved.

(2) If you are dealing with a representative, call the company to make sure that person really works there or has contractual relations. Verify that the company does what the representative says, and is prepared to back up or follow through on promises made by that individual.

(3) Before entrusting individuals or employees with new or important projects of high commercial value, investigate and analyze their current professional and personal circumstances, to detect pressures that can be motivations or warning signs of a risk of business fraud.

(4) Research and evaluate the person and firm you would be dealing with. Do not be distracted with the quantity, type or prestige of its office locations, and similar superficial criteria which con-artists only take advantage of to give false confidence. Concentrate on its capabilities, ability to clearly and transparently explain its proposed services and methods of providing services, and generally its level of preparedness to perform the work promised.

(5) Do not rely only upon "open source" or standard "due diligence" information, especially from anonymous sources on the Internet, to "investigate" a person or firm who you plan to entrust with an important project. Such information is often superficial, unqualified or even misleading, often falsely provided by competitors. Look further for other relevant information to get a clear and accurate representation of the whole truth.

(6) The most accurate indicator of reliability is that the firm or company relies upon its corporate name, image and reputation, and conducts business under that one trademark identity. Individuals or businesses that maintain multiple corporate registrations under unrelated names, frequently change them, do not use most of them, or do not conduct the majority of business under any one name or trademark, present a risk factor. Legitimate and successful companies actively build their brand, use it, and work to uphold its image.

(7) Closely examine the basis and merits of any proposed business or investment offer, or proposed modifications or extensions of an existing business or investment, preferably with professional legal or financial advisors. A key indicator is the transparency and disclosure of detailed mechanisms of the proposed transaction or methods of work to be performed, prior to signing a contract or making payment. If you hire "secret" services, you are likely to get equally "secret" results.

(8) Continue to monitor the performance of the project, business or investment, giving priority to first-hand professional information, directly from those actually performing the work, instead of relying upon assurances of individual representatives or referral agents.

Matthew Greene and STILAS avoid accepting any business from the general public. Consultation is generally provided only to government agencies and banking institutions. Provision of services to the private sector may be considered only upon introduction through trusted partners or colleagues of Matthew Greene and STILAS.

By Matthew B. Greene, JD

Copyright 2007, 2009 STILAS International Law Services, P.A.

All International Rights Reserved.

Matthew Greene is the founder of STILAS, originally a government contractor for international economic security. Matthew Greene is a former Chief of Special Operations in anti-organized crime and anti-corruption, and is an international legal expert and career strategic advisor to governments, agencies and ministries in various countries.

This article is a brief extract from one of a series of expert reports developed by Matthew Greene and STILAS, in cooperation with certain federal law enforcement and national security agencies of multiple countries, for protection of national critical infrastructure in the private sector.

Introduction

Like any sphere or industry involving large scale dealings with formidable sums of money, "high finance" is a virtual "magnet" for attracting all kinds of fraudulent scams. Fraudsters target institutional players in the banking industry to steal their funds (or use their name and image to steal other people's funds). They also target individual and corporate players in the commercial sector (who want to enter the banking sphere as investors) to steal their funds. Compounding the problem is the fact that such fraudulent investment proposals are "infectious", often "contaminating" legitimate practices through confusion and distraction, primarily because they are so widely and aggressively promoted and circulated.

Imaginary Issuing of Fictitious Instruments

Fraudulent investment schemes (or other large financial transactions) are often based upon painting a picture of certain "bank notes" that either do not exist, or do exist but are not used the same way as falsely described by the promoters. Since an important part of any fraud is inventing "jargon" or "insider" terminology to impress upon the victim the specialized knowledge of the con artists of a subject matter that is "too complex" for the victim to understand, there are certain key words that are commonly used. These terms and phrases are typically non-banking terms that have no legitimate meaning in real financial transactions, and are used to describe the imaginary issuing (or purchasing, selling, leasing, etc.) of fictitious instruments.

These interrelated imaginary terms purportedly describing the issuing of fictitious banknotes, strangely enough, often originate from the culinary and food service industry. Only vegetables and cheese can be "fresh cut", and only soups, salads and meats can be "slightly seasoned" or "well seasoned". (Perhaps a dedicated vegetarian would prefer something "unseasoned"). Like the top quality juicy beef steak or "prime rib", the fraudsters also promise you a "prime bank" or "prime bank note". All of these terms seem to better belong on one document referred to by another fraudulent term on the law enforcement lists: "bank menu". These terms more accurately reflect what is probably on the fraudsters' minds when making up their story, rather than effectively describing any real transaction. Just imagine a banker in your bank asking you: "would you like some pepper on your fresh cut checkbook, sir?" and have a good laugh, because that is all those fraudulent documents are good for, pure entertainment for those who know the truth.

False Legal Theory of Regulatory Compliance

One of the primary tasks of a "successful" fraudulent document is to give a false sense of confidence in the "legitimacy" of the transaction and the promoters. This is commonly accomplished (among many other methods) by using language that pretends to be concerned with regulatory compliance and following certain well-known laws.

Among the most famous phrases found in fraudulent documents is contained in letters of intent, contracts (in a "key" section that is emphasized) or separate addendums to a contract (for extra emphasis). In these sections, the victims are asked to sign a statement warranting that their hard earned money (that the fraudsters are attempting to steal) consists of "Good clean and clear funds of non-criminal origin." While this phrase at first sounds innocent and on the surface appears to be required in compliance with anti-money laundering and anti-terrorism laws, closer analysis reveals it to be yet another fiction designed to give false confidence.

Asking an investor or purchaser to sign a statement that their funds are legitimate is based upon a false legal theory of the wrong way to do "compliance". Simply signing a statement that funds are in compliance logically cannot possibly make them in compliance. If that were true, then terrorists or organized crime groups laundering money would only have to sign such statements for all the bankers to be happy with the transaction. Of course things are not that simple. The fact is that compliance is the responsibility of the banks conducting a transaction, and the laws (and law enforcement agencies) place the burden on the banks to research and verify the source of funds and history of funds. Merely relying on a standard flat statement from the owner of funds would be negligent and illegal. The only rational purpose of such wording (since it is completely useless and meaningless to bankers) is to impress the victim of a fraud with a false face of the purported "legitimacy" of the transaction.

A closely related abuse of misleading wording is statements in contracts such as "the parties agree to comply with the Patriot Act." Anti-money-laundering laws such as the Patriot Act are laws with criminal penalties that are enforced by law enforcement and even national security agencies of the countries involved. It is absurd to imply that parties to a private commercial contract can simply "agree" that they will comply, and present this as a claimed assurance that the transaction is thereby lawful. The only way to comply with such laws is to use a contractual instrument carefully drafted by experienced licensed attorneys who know those laws in detail, and for the transaction itself in fact to comply, NOT merely state or "agree" that it will comply.

Another ill-conceived legal fiction is to show fake concern for compliance with "non-solicitation" laws. This is traditionally accomplished by asking the victim to sign statements that they are "Ready willing and able" (RWA) to pay out their money and complete the transaction. The phrase "ready willing and able" actually originated from the pornography industry of the early 1950's. Another term "soft probe" (a safe-sounding comfort term for full access to deplete your bank account under the pretense of limited verification of so-called "blocked" funds) appears to belong to the same industry that originated "ready willing and able". Like the culinary terminology, these terms most likely express what the fraudsters plan to be busy with after they steal your money, rather than stating any verifiable facts about the transaction. In any case, federal regulatory and law enforcement agencies have given the strongest warnings that people who give you such unprofessional documents are certainly "ready willing and able" to give your bank account a "soft probe" that you weren't expecting.

Misrepresentation and Abuse of the Limited Involvement of Banks

Many fraudulent schemes rely on the involvement of a major banking institution or governmental department in the transaction. Such involvement is usually remote at best. In such cases, the promoters actually target the banking or government entities, tricking or defrauding them into some limited level of involvement, such that the entity is not aware of the overall transaction or its exposure to affiliation with the fraudulent activity.

The Office of the Comptroller of Currency (OCC) of the US Department of Treasury warns that it "is aware of an increasing volume of bogus proposals currently being promoted and directed toward banks", and which "may utilize deposit, trust, or safekeeping accounts at major financial institutions". (Office of the Comptroller of Currency (OCC) of the US Department of Treasury, OCC Alert on Fraudulent Investment Programs, Alert 2001-3 of March 30, 2001, issued to US national banks, State banking authorities and federal regulatory agencies, signed by Brian C. McCormally, Director of Enforcement & Compliance Division.)

According to security experts of HSBC bank, "fraudsters almost invariably attempt to involve banks in some way in their frauds, and in some cases it is the banks and other large organizations themselves which are the intended targets. ... The most common reason for this is to add credibility to the transaction. By making the victim believe that a major financial institution is underwriting, or at least involved, in a large deal, they make the victim that much more confident". (Hongkong Bank, Advance Fee Fraud and Banks, Paul A. Collier, Manager of Regional Security, page 4. ("Hongkong Bank" is the original trademark of "The Hongkong and Shanghai Banking Corporation Limited, which is a founding member and wholly owned subsidiary of the major international bank HSBC.))

Abuse of the limited involvement of banks is especially prevalent in developing economies such as "third world" countries, where bank officers and staff often lack experience to detect that a seemingly innocent transaction is in fact a small component part of a larger, more complex fraud scam. Often compounding the problem is the need for translating highly technical or specialized (or fraudulent) financial terminology into languages where capitalism and investment banking are new and unfamiliar concepts. The possibility of bribes or "under the table" kickbacks (in the form of "unofficial" commissions) can also cause inexperienced bankers to overlook (or be distracted from) potential indications of a questionable transaction.

The security department of HSBC bank explains how bankers are often tricked into limited involvement or exposure in fraudulent transactions: "Fraudsters are very keen to obtain signed letter headed bank notepaper which they can then alter and use to convince others that a bank is actively participating in a deal. To get the maximum number of items of signed correspondence they will frequently send numerous letters and faxes to the bank which relate to deposits and remittances which they claim will be made or received at some time in the future. These deposits of course never materialize. It is quite common for a junior, or even medium level executive, to spend a great deal of time answering this correspondence and making other arrangements in the mistaken belief that he or she is promoting a very profitable deal for his bank." (Hongkong Bank, Advance Fee Fraud and Banks, Paul A. Collier, Manager of Regional Security, page 5.)

In addition to collecting official bank correspondence, other seemingly innocent steps are achieved such as convincing the bank to "hold documents against receipt" or "any number of other actions which all add up to the same thing - involvement by the bank and possible financial exposure. ... Occasionally, the fraudsters will attempt to involve or defraud a bank directly, often targeting a small branch or a junior or susceptible manager which they believe they may be able to deceive. A common tactic will be to persuade the manager to accept, for safekeeping against receipt, some certificates which are claimed to be worth millions of dollars. Armed with this receipt the fraudsters then deceive others", and "may also attempt to obtain credit... or to persuade the manager to issue other forms of guarantee based on documentation that they provide." (Hongkong Bank, Advance Fee Fraud and Banks, Paul A. Collier, Manager of Regional Security, pages 5 and 6.)

Matthew Greene and STILAS avoid accepting any business from the general public. Consultation is generally provided only to government agencies and banking institutions. Provision of services to the private sector may be considered only upon introduction through trusted partners or colleagues of Matthew Greene and STILAS.