Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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5/24/2007 International Lottery Scams Pose Risks for Banks as Well as Customers

In a typical international lottery scam, an individual receives an email saying that she has just won a large prize in a foreign lottery, usually many millions of dollars. The winner is informed that she will receive the funds after paying taxes and fees. The lottery commission or other entity says it will send a check to cover these expenses and asks for the individual’s address. If the address is provided, the “winner” receives a check in a few days, with instructions to cash it as soon as possible and simultaneously wire funds to a foreign entity. The check the winner presents to her bank may be rejected as bogus, but some lottery scammers are sophisticated and the bank may not initially detect the fraud. The winner wires the funds, but when the check is presented for collection, it is returned as non-negotiable. If the funds have already been provided to the winner, the bank may be out the money advanced. Tellers should be on the look-out for customers who say that a check came from a foreign lottery commission, particularly if the individual did not buy any such lottery ticket. If there is a suspicion of fraud, law enforcement and FinCEN should be contacted. The winner is usually a victim rather than a perpetrator and should be cautioned not to advance any money until she can verify that she won the lottery. A discussion of international lottery scams was included in FinCEN’s 11th SAR Activity Review, which will be discussed in depth in the August issue of the Monitor. A number of red flags discussed in the Review have been added to the Red Flag Checklist (the checklist is now at 64 pages; available at http://www.civicresearchinstitute.com/moneylaundering/index.html).

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