DOJ, FBI and SEC use new tools to combat fraud

Officials from the Department of Justice, the Federal Bureau of Investigation and the Securities and Exchange Commission discussed some of the latest fraud trends and how they are combatting them during an Association of Certified Fraud Examiners fraud risk management summit in New York.

“It’s an unprecedented time in many respects with the rapidity with which fraudsters are leveraging and utilizing everything from the dark web to myriad schemes involving cryptocurrency and virtual currency,” said Sandra Moser, acting chief of the DOJ Fraud Section, during the summit last Friday.

Steve D’Antono, chief of the FBI’s Financial Crimes Section, said a big priority for his unit right now is opioid diversions to stem the flow of illegal prescription drugs and narcotics, and elder fraud abuse of vulnerable senior citizens. “Probably somebody in this room has been affected by the opioid and heroin epidemic at some point in time,” he said. “We’ve put in a big push with the DOJ and the AGs on opioid diversion. The 12 districts that we’re in right now are fighting the doctors overprescribing. This past year, indictments are way up. We had the biggest health care fraud takedown in history. We’ve also got a big elder abuse initiative going on right now.”

Panelists at the ACFE Fraud Risk Management Summit (from left): moderator Reed Brodsky of Gibson Dunn, Sandra Moser of the DOJ, Steven D'Antuono of the FBI, and Judith Weinstock of the SEC

Last October, Congress passed the Elder Abuse Prevention and Prosecution Act, which mandates the Department of Justice and the FBI to focus more on deterring elder fraud, he pointed out.

Judith Weinstock, assistant regional director of the Securities and Exchange Commission’s New York Regional Office, noted that SEC enforcement is focused right now on violations that affect retail investors and is using data analytics to detect them. “For example, accounting fraud, sales of unsuitable products, and the pursuit of unsuitable trading strategies, pump and dump frauds, Ponzi schemes, just to name a few,” she added. “In 2018 the SEC formed the Retail Strategy Task Force. And that task force is using data analytics to identify specific areas of risk to retail investors.”

The SEC has also been investigating cybercrime with the help of data analytics. “The other big thing we’re looking at is cyber,” said Weinstock. “In 2018 the SEC formed a cyber unit to focus on cyber-enabled misconduct, including conduct on the dark web, such as brokering or selling stolen inside information paid for in untraceable cryptocurrency, market manipulation accomplished by hacking into the electronic accounts of others and then forcing the stock price to pump up, ICOs, market manipulation schemes spread through electronic and social media, cyber related threats to trading platforms, and cyber related threats to other critical market infrastructure. Like the Department of Justice and FBI, the SEC is using data analytics. Recently we announced we used data analytics to detect a cherry picking scheme. It was uncovered with the data used to detect suspicious trading patterns.”

The SEC’s Quantitative Analytics Unit has developed the National Exam Analytics Tool, or NEAT, to facilitate analysis of trading, she noted.

The DOJ’s Fraud Section has also been using technology to detect suspicious activity with cryptocurrency and other emerging technologies. “Just because you’re using something that sounds scary and complex to a lot of people, like a virtual currency, a scheme can be simple,” said Moser. “You can try to take someone’s money and do it by lying. That’s either wire fraud or mail fraud, but you’re doing it using virtual currency, so it’s not that complex of a scheme. Then there’s the other end of the spectrum where we’re really grappling to get our arms around understanding the very complex technological implications of how fraudsters are utilizing this sort of stuff.”

The DOJ, FBI and SEC are coordinating investigations to help uncover increasingly sophisticated forms of fraud.

“We, sitting as prosecutors at DOJ in Washington, or anywhere out in the field, don’t have access at our fingertips to all that complexity, and we don’t have access at our fingertips to the expertise to understand it, much less dismantle longstanding schemes,” said Moser. “So a major priority is working and collaborating with our regulator and agency partners to make sure that we are being as efficient as we can about getting access to the data and then taking an efficient and systematic approach, by educating ourselves as to migrating and leveraging that data to see what sort of themes that we can discern in terms of prosecuting fraud.”

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