Operation Rico reminds us to warn the vulnerable about boiler-room frauds


By Tim Harvey, CFE, JP
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Global Fraud Focus: Examining cross-border issues

Martin Scorsese amused us with the recent movie, "The Wolf of Wall Street," based on Jordan Belfort's memoir of the same name. But the reality of "boiler-room" frauds leaves victims destitute and devastated. This column examines the result of the largest global investigation so far of these schemes. In February 2013, Operation Rico — a collaboration of international law enforcement groups — simultaneously arrested 110 organized criminals in Spain, the U.S., Serbia and the U.K.

WHAT IS BOILER-ROOM FRAUD, AND HOW DOES IT WORK?

Typical boiler rooms are small offices filled with desks, phones and computers staffed by telesales workers who, guided by scripts, make call after call to try to foist worthless or fictitious commodities on unsuspecting victims. Obviously, the name of the crime is derived from the sizes of the rooms and the high-pressure sales techniques.

The commodities are limited only by the criminals' imaginations. "Rare" Peruvian artifacts, company shares, precious metals, vintage wines, carbon credits, maturing whisky or diamonds are just a few. The common denominator is the commodities' fictitiousness, or they're worth just a fraction of what they're sold for.

The frauds work because of the callers' art of persuasion. They say that they're offering investment opportunities too good to be missed, demand is outstripping supply and any investment will make money. Importantly, there is always some truth in the fraudsters' confident and in-depth patter. Victims can verify on the Internet many of the callers' "facts."

I once investigated a fraudster selling shares in a gold mine in the U.S. He had aerial photos, a lawyer's letters confirming he had the rights to mine etc. The one small detail he didn't include in his pitch was that the mine had been unused for some 70 years and was now three feet under water!

These crooks constantly revise and update the detailed telesales scripts based on the successes and failures of dealing with non-responsive and uninterested recipients. Sales staff work to meet targets so they can keep their jobs and earn lucrative bonuses.




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