From
the very moment that people started using money, perhaps, some have uncovered
ways of stealing it. And so, as sure as there will still be money after 25
years — or in some other form — corporate fraudsters will still be plying their
trade. But innovative technologies could produce an environment where, as one
retired law-enforcement official warns, “There
will be no boundaries in relation to what fraud can be perpetrated.”
Crime
investigators state that the crimes per se do not completely change. From our
common frauds and Ponzi schemes to intricate security breaches, tax avoidance
and money laundering, there are still various ways a criminal can make a dirty
buck. When CNBC began in 1989, junk bond king Michael Milken was being accused
of securities fraud charges in a sensational investigation. After 25 years, a
new Wall Street insider-trading investigation — this time centering on hedge
funds — has victimized 79 people, perhaps, more.
Imagine
a world where an inside-trader can obtain his information not from an insider
who works in a firm but from a hacker working outside and stealing data from
the organization’s data systems in the cloud. He shares the data to others
through a bunch of intricately encrypted, untraceable instant messages. The
unlawful act is done in nanoseconds. The money is disbursed through virtual
currency. And the criminals thrive happily plying their trade and stealing from
other victims any new day.
And
imagine a Ponzi schemer — a future-generation Bernie Madoff – except that he is
not human at all but a poser for a rogue nation with the ability to rob you,
spend your money and stash it away in a split second.
Enter
the world of white-collar crime, 2039.
“Simply
use your imagination as to the form of fraud you wish to perpetrate,” said
Thomas G.A. Brown, who assisted in launching cyber investigations in the U.S.
Attorney’s Complex Frauds Unit in Manhattan.
Brown,
presently a senior managing director at FTI Consulting, said the future
white-collar criminal will be quicker and more highly invisible than before —
allowing the possibility for “nearly the perfect crime.”
In
truth, cybercriminals can already perform some of those heists today.
“Crime
in cyberspace is not merely the coming trend of the future; it is here with us
now,” said E. Danya Perry, also a former senior deputy in the Manhattan U.S.
Attorney’s office, now practicing privately. “I believe we will be seeing more
of how this chameleon will evolve into a raging dragon.”
Cyberspace
crimes already cost the U.S. economy about $120 billion yearly and the entire
globe about $1 trillion, as revealed by a study published in 2013 by McAfee and
the Center for Strategic and International Studies. And all that in a crime
onslaught that is comparatively only new.
Prosecutors
obtained a view of what the future will look like from last year’s taking down
of Silk Road — a clandestine website which officials authorities claimed was
“the most advanced and widespread illegal marketplace online.”
Although
Silk Road specialized on the lucrative prohibited drug trafficking, Brown of
FTI Consulting reported that agents uncovered methods that could “skyrocket
financial crime’s spread.”
Virtual
stash
The
primary technique among several promising tools is the new virtual currency
called bitcoin, which is already changing the face of the global payment
structure.
“Bitcoin
is so hard to manage,” Brown said.
In
the Silk Road case, which Brown built with others, the federal government has
captured an amount of over $33 million bitcoin money from the computers of the
site’s accused founder, Ross William Ulbricht. However, that amount is a small
part the $1.2 billion in sales the system allegedly generated within less than
three years of operation. And detecting where the rest of the money is located
is almost impossible.
“Imagine
every bitcoin as being a gold bar,” Brown said. No one knows where that gold
bar originated, and anyone can readily sell it for cash. “Anyone can steal it
and run away with it.”
Even
if agents can locate bitcoin in a certain account, that clue will not mean the
owner can be traced. “No one is required to register a bitcoin account in a genuine
name,” Brown said.
There
exist other virtual currencies aside from Bitcoin. Back in 2013 as well, a
federal grand jury in New York charged Liberty Reserve for trafficking in the
currency referred to as LR. Officials captured five Internet domains and
charged 35 currency-trading websites in what was billed by Manhattan U.S.
Attorney Preet Bharara as one of the biggest global money-laundering cases in
legal history.
The
implications of the virtual money revolution on white-collar crime are vast. At
the bottom, Brown said, the virtual cash could make tax avoidance become easier
than before.
“I
can enter into any kind of deal I want to derive income without paying taxes
since no one is aware of what I’m doing,” Brown said.
“The
financial rewards are going to be very compelling for any person to want to
trespass the law ,” Perry said.
Exactly
how regulators and law enforcers will clamp down on those tempting baits — and
what government agencies will head the move — remains unresolved.
In
March, the Internal Revenue Service released its first advisory on virtual
currencies such as LR and bitcoin.
“Virtual
money is considered as property for U.S. federal tax purposes,” the IRS stated
in a March 25 announcement. “A disbursement with virtual cash is covered by
information reporting within the same limitations imposed upon any other
disbursement made in property,” the announcement stated.
Yet,
in our world where financial crimes are perpetrated by faceless people, where
do we point an accusing finger?
Fraudsters
anonymous
“Locating
people in an environment of uncertain identities is a difficult task,” said
Perry. “When you have a place where you can make deals incognito, this sort of
problem will keep going.”
In
the Silk Road investigation, officials say numerous drug dealers and over
100,000 of their customers covered their identities by utilizing what are
called tumblers, which jumbled their personal identity information to produce
anonymous transactions.
Cybercriminals
now also often use a technology called Tor — formerly the acronym for The Onion
Router, for its multi-layered complexity — to hide their online tracks.
Tor
software, which is free online, lets the user to hide his PC’s IP address — its
virtual fingerprint — as well as every server’s IP address to which the PC
connects.
“Imagine
a gigantic pinball machine,” Brown said, where your PC is the silver ball bouncing
around. Each time the ball touches a bumper, its identity — or IP address —
changes and so with the bumper, making it “functionally impossible” to trace
the traffic.
Aside
from making illegal deals and underground websites invisible, Tor provides criminals
—whether the financial kind or otherwise — a means to interact and pass on data
more easily than before.
“Traditionally,
you have to identify ‘Harry from Bensonhurst’ or ‘Johnny from the block’ to
round up a robbery group,” Brown said.
Today,
with their virtual masks covering their faces using all the new technology,
white-collar criminals, hackers and identity robbers can assemble and exchange
information without fear in so-called carding venues. For such bandits, chat
rooms are not merely for socializing. They are sources of stolen identities,
software code and even cash beyond the scope of authorities.
“A
savvy crook utilizing effective functional security is almost impossible to
locate,” said Brown.
Falling
prey to the schemes of tomorrow’s crook, he said, are firms that are already
forced to share more and more of their valuable information in the web and in
the cloud so their workers and clients can readily get that information — a
signal for hackers to prowl for victims.
“Many
firms concentrate on merely the collecting and using of the information instead
of securing that information,” Brown clarified.
Fighting
back
The
future white-collar cybercriminal may not be a single person. It could actually
be a whole country. Brown is apprehensive of the coming “nation-state” in
financial crime. “Much of this is not talked about extensively, if at all, due
to its confidential nature,” he said.
