Unmasking Corporate Owners in Canada

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Lincoln Caylor
Litigator focusing on high-stakes, cross-border financial crime disputes
Bennett Jones LLP

Most large-scale fraud, corruption, taxation and other economic crimes have a common characteristic: complex webs of corporations and trusts used to perpetuate schemes and to launder funds. While the “corporate veil” establishes the separate legal identity of corporations for legitimate reasons, it can also aid in the concealment of money and the identities behind it.

By permitting corporate ownership to remain secret, governments facilitate money laundering. Secret corporate ownership occurs when a corporation hides the identities of their true beneficial owners. The Panama Papers serve as the most recent example of the need for transparency of this beneficial ownership. However, it is not a new concern.

In addition to places like Panama, Canada is also an attractive jurisdiction for those looking to keep corporate ownership secret because of its lack of ownership disclosure requirements. But the issue in approaching a solution is not a lack of awareness – Canada is well known to be a hub for these white-collar crimes, facing criticism from nations who have created successful transparency schemes such as the U.K. and the British Virgin Islands (BVI). Bringing the country into compliance with international norms and increasing beneficial ownership transparency has been a recent budget agenda item of the Canadian government, but several factors are continuously highlighted as standing in the way of formal commitment. For example, only 10% of Canadian companies are federally registered, making it difficult to create a national strategy to close loopholes without the cooperation of the provinces.

Despite barriers to prompt resolution of this issue, elements of a successful government approach to monitoring corporate ownership are clear:

• Strong leadership from the Financial Action Task Force, the G-20 and the U.K.;
• Coordination with the provinces and foreign governments;
• A public registry of beneficial corporate owners;
• Mechanisms to ensure a balance between privacy and social interests; and
• Successful models to strive toward, such as those in the U.K. and BVI.

Canada is currently a safe harbor for laundered money, but it doesn’t have it to be. This infographic and the steps it lays out give Canadians the steps needed to make progress in the transparency of corporate ownership.

Are you interested in learning more about the latest fraud-related topics and trends that impact Canada? Attend the upcoming 2017 ACFE Fraud Conference Canada in Toronto, October 29-November 1. Register at FraudConference.com/Canada by September 29 and save CAD 100!

Identifying and Preventing Tech Support Scams

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Ron Cresswell, J.D., CFE
ACFE Research Specialist

While reading a blog on your laptop, a pop-up message suddenly obscures your computer screen. The message, which appears to be from Microsoft, says that your computer is infected with a virus and instructs you to call a toll-free number immediately. You call the number and speak to a woman who falsely identifies herself as “Sarah with Microsoft Tech Support.” Sarah wants you to download a program that will give her remote access to your computer so that she can diagnose the problem. If you comply, Sarah will claim to find a dangerous virus, or another serious security issue, which she will offer to fix for a fee.

This is called a tech support scam, and, according to the FBI, these scams are on the rise.

Tech Support Scams
In tech support scams, fraudsters impersonate major high-tech companies (usually Microsoft, Apple, Dell or Google) and convince victims to grant remote access to their computers. In most cases, victims are instructed to download and run common remote access software, such as TeamViewer, GoToMyPC or LogMeIn.

The goal of most tech support scams is to convince the victim to pay for unnecessary computer services to repair nonexistent viruses or other problems. However, in other variations on the scam, the fraudsters:

• Steal the victim’s usernames, passwords and other personal information
• Install spyware or malware on the victim’s computer
• Refuse to relinquish control of the computer until the victim pays a ransom
• Try to sell the victim software that is useless or free
• Try to enroll the victim in a worthless computer maintenance or warranty program
• Direct the victim to a website that asks for credit card numbers and other personal information
• Harass the victim with phone calls seeking additional fees

Prevention
To prevent being victimized by tech support scams, consumers and businesses should take the following precautions:

• Do not give unknown, unverified persons remote access to computers or install software at their direction.
• Resist the urge to act quickly. In tech support scams, fraudsters create a sense of urgency and fear to compel the victim to act immediately.
• Disregard pop-up messages that instruct the user to call a telephone number for tech support. Legitimate companies do not communicate with customers this way. 
• Hang up on unexpected, urgent calls from outsiders who claim to be tech support, even if the caller ID says Microsoft, Dell, Apple or Google. Those companies do not make unsolicited tech support calls.
• If there is a question about whether a communication is legitimate, look up the company’s telephone number and call to verify. Do not use the number on the questionable communication (e.g., pop-up message, caller ID).
• Ensure that computer networks are protected by strong and regularly updated antivirus software and a firewall.

While tech support scams are common, they are usually easy to spot. Generally, they involve an unknown person asking for remote access to your computer. Once identified, such scams can be defeated by following the guidelines listed above.

3 Psychological Tools That Will Help You Elicit Confessions

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Sarah Hofmann
ACFE Public Information Officer

On a Thursday evening your doorbell rings. You open the door to find a 9 year-old child on your threshold who says, “Hi. I’m selling candy bars for my school. Do you want to buy one?” Would you buy one? Or would you politely decline? What if the child instead said to you, “Hello. Do you think children should be reading more?” If you respond affirmatively, they follow up with, “Do you mind buying a candy bar to support our library?” Chances are that you are much more likely to buy that candy bar after agreeing with the child that children should read because you now feel compelled to back up your previous affirmative statement. That scenario is more than a clever sales pitch for a child — it is a perfect example of the social contract compelling you to act.

In his session, “Social-Psychological Behaviors: An Underused Tool for Fraud Investigators,” Bret Hood, CFE, will share that story and more at the upcoming 2017 ACFE Law Enforcement and Government Summit in Washington, D.C., October 30. The child in question was his daughter and after slumping candy fundraising numbers, he taught her to use a two-prong question method to increase the likelihood of people buying the bars. He says that fraud examiners can use a number of psychological tactics like two-prong questioning to interview and elicit confessions from suspected fraudsters. A few other tools Hood will discuss are:

Social Contract. If you force someone into a situation where they use cognitive dissonance to lie to themselves, they are more easily exposed. He says that if you lie to a stranger, you won’t have as much trouble changing your story later, or denying what you said previously. However, if you lie to someone you know, or if you write down the lie, you’re more likely to stick to that story, no matter how outlandish it might be. 

Reciprocity. Humans are naturally inclined to reciprocate what they perceive to be kind gestures from others. Hood suggests some seemingly minor tricks to use in an in-person interview with a suspect — like offering them a can of soda or a more comfortable chair. The same concept can even be applied to interviews over the phone. Starting a thought with an implication of camaraderie or collusion — like saying, “I normally don’t share this with people, but…” — can make the target of the interview feel that they must give you a piece of information equally special.

Priming. Simply softening an interrogation about embezzling to a line of questions about “misplaced” money can elicit more honest responses from suspects, or even unwitting pawns. When people feel like they are safe and understood, they’re more likely to share information. Priming your words to make them feel understood is an easy way to achieve that truth.

There are many ways that anti-fraud professionals can build a case against fraudsters, but much of the work that requests for documents, subpoenas and audits do can also be accomplished by tapping into the most basic aspects of the human psyche. 

You can hear Hood speak about this topic, and hear about the latest fraud techniques unique to law enforcement and government professionals in Washington, D.C. next month. Visit ACFE.com/fraudsummit and register by September 29 to save an extra $95!

Want to Become a CFE by the End of the Year? We’ve Got a Challenge for You.

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Courtney Howell
ACFE Community Manager

I have a few small, but important questions I’d like you to answer.

• Are you passionate about fighting fraud?

• Is it time to take your career to the next level?

• Does having a support group make it easier for you to accomplish goals?

• Do you want to earn your CFE credential?

If you answered yes to one of these questions, and especially if you answered yes to the last one, then the 90-Day CFE Exam Challenge is exactly what you need to complete your next professional goal.

The challenge is designed for those who’ve purchased the CFE Exam Prep Course, so when you join the challenge, we’ll help you stay focused and motivated to work through the course materials and complete the exam in three months.

Challenge participants will receive these three benefits:

1. You’re Part of a Group Who Are All Working toward the Same Goal.
When you join the 90-Day CFE Exam Challenge, you’ll be added into an exclusive group in the ACFE Community along with your fellow participants. In this group, everyone will introduce themselves and share why they’ve joined the challenge. Over the course of the challenge, you’ll get to know one another and, ultimately, support one another in reaching this big goal. At times, the journey will be tough. You may even want to give up. But as the community manager, I’ll be working alongside Ross Pry, our director of membership, to help keep you and your fellow participants motivated and inspired. Most importantly, when those difficult moments do arrive, your peers will be there to lift you up just as you will lift them up. It truly is a team effort and having that support makes a huge difference.

2) There is a clear timeline to follow with the 90-Day Study Plan.
We provide you with a 90-day study plan so that you can mark the exact dates you want to accomplish mini-goals along the way. This allows you the flexibility to work around your job, family time, travel plans or anything else life may throw at you, but it also gives you achievable steps to follow — ensuring you’ve accomplished necessary tasks along the way to earning your CFE credential.

3) It will hold you accountable.
Here’s the promise you make to yourself when you purchase the CFE Exam Prep Course and sign up for the 90-Day CFE Exam Challenge: “I will become a CFE in 90 days, and I will start right now. Not tomorrow, not a couple months from now, not next year. I am doing this now.” We’ll help you along the way, but at its heart, the 90-Day CFE Exam Challenge is a commitment that you make and that you are accountable for. At the end of your three-month journey, you will have earned something that’s extremely important to you.

If this is something you’re interested in, you have two simple steps to follow.

1. Purchase the CFE Exam Prep Course.

2. Sign up for the 90-Day CFE Exam Challenge.

The challenge kicks off on Monday, October 2. We hope to see you there!

Setting the Tone at the Top with a Robust Whistleblowing Policy in Africa

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Mustafa Yusuf-Adebola, ACCA
Risk Consultant

In late 2016, the Nigerian government introduced a whistleblowing policy that awarded individuals between 2.5% to 5% of the amounts recovered based on information about violations of financial regulations, mismanagement of public funds and assets, financial malpractice, fraud and theft. Within a three-month period, the government received 282 tips from whistleblowers through:

1. Text messages (34%);
2. Phone calls (31%);
3. Emails (18%);
4. A whistleblowing portal (17%).

While 55% of these tips were actionable, the medium of communication whistleblowers chose gives an indication of what Nigerians are more comfortable with.

Until recently, whistleblowing was not seen as a serious and viable detection technique in Africa. Whenever one brought up the topic, it sounded like a textbook term used only for academic purposes. Though codes of corporate governance, regulations and international affiliations forced a number of companies to have a whistleblowing policy, in the companies I reviewed I noticed what accountants call ”substance over form.” Essentially, the regulatory (or affiliate) substance of having a whistleblowing policy overrode the working form.

Regarding the tone at the top, the government’s policy has made the whistleblowing immersion and enlightenment a more engaging discourse. “I am going to blow the whistle” is now a popular phrase within the country and people use the whistle as a metaphorical expression of reporting wrongdoing.

The publicity of this policy has also spurred discussions concerning the protection of whistleblowers, rewards for whistleblowing and punishment for false reporting. Similarly, there have also been questions raised on the safeguarding of tips provided by whistleblowers to ensure they are not leaked by those who receive or work on these tips (thus making the whistleblower appear like a false informant). In response to some of these concerns, the country’s senate passed a Whistleblower Protection Bill last June.

As these discussions gain traction, organizations in the private and public sectors are now either introducing whistleblowing policies or reviewing existing ones. Recently, I have observed more Nigerian companies having a whistleblowing link on their websites while some publicize the existence of these portals on their social media pages.

Despite all of these changes, it is important that companies do not just have whistleblowing policies in place but the top hierarchy display and are seen to display a strong commitment to act ethically in order to encourage a whistleblowing culture whose “form supersedes its substance."