In the company of criminals

An important tenet of fraud examination: Learn to think like a fraudster. Chris Mathers knows the intricacies of money laundering and drug trafficking because he worked undercover for 20 years. Now he wants to teach you what he learned.

Chris Mathers says he’s spent most of his adult life in the company of criminals. He worked undercover for 20 years for the Royal Canadian Mounted Police (RCMP), the U.S. Drug Enforcement Administration (DEA) and the former U.S. Customs Service.

Mathers, a Canadian citizen, said he began his “life in crime” because he was looking for adventure. “I was thinking of joining the French Foreign Legion,” he says. “I figured, I speak French, maybe I could? But the Mounties recruited me, and I went with them. I passed selection into the undercover program, shortly after my initial training, and they put me on the street to buy drugs.”

As he matured, the RCMP had him working “big drug and money plays.” Mathers then posed as a money launderer to assist top criminals who wanted to wash some cash. The Mounties later assigned him to partner with the U.S. Internal Revenue Service Criminal Investigative Division and what used to be the U.S. Customs Service. (It became two distinct programs when it was rolled into U.S. Homeland Department of Security.) He subsequently also worked with the DEA and the FBI.

At the time of his retirement from the RCMP, Mathers was the senior undercover operator at the Proceeds of Crime Section where he established and operated a number of “storefront” money laundering businesses targeting Colombian, Russian and Asian organized crime groups. Mathers personally infiltrated criminal organizations in North America, the Caribbean, Latin America and Europe.

In 1995, Mathers joined the forensic division of KPMG. In 1999, he was appointed president of KPMG Corporate Intelligence Inc., where he was responsible for international due diligence, asset recovery operations, and the investigation and prevention of organized crime and money laundering.

In 2004, Mathers established CHRISMATHERS INC. He provides crime and risk consulting services, specializing in fraud, money laundering, terrorism and organized crime issues.

Mathers has appeared on television and radio interviews on CNN, PBS, MSNBC and media outlets around the world. His experiences posing as a gangster, a drug trafficker and a money launderer are the subjects of his book, “CRIME SCHOOL: Money Laundering.”

He also has served as a consultant on several feature films and documentaries, including “Don’t Say a Word,” starring Michael Douglas, “Werewolves – The Dark Survivors” and the National Geographic Channel’s “The Egyptian Job.” A film company has an option on his book, and “Treasure Agents,” a documentary on art theft, with funding from PBS and Discovery (U.K.), is in pre-production.

Mathers will be a keynoter at the 24th Annual ACFE Global Fraud Conference, June 23-28 at the ARIA Resort & Casino in Las Vegas, Nev.

He recently spoke to Fraud Magazine.

FM: When you posed as a money launderer, what were some of the ways you were able to prove the illegal sources of money?

CM: The problem is trying to get the bad guys to admit that the money came from a predicate offense [a crime that produces the funds that are to be laundered]. You know that the guy is a criminal, or you wouldn’t be targeting him, but that isn’t enough for the court. Our old adage was that we only worked on targets who had “demonstrated a predisposition to the committing of criminal offenses.”

When I posed as a money launderer, I had one trick that I used that worked pretty well. I would say to the bad guy, “Look, I don’t care where your money comes from or how you made it. But if you made it from (I’d refer to an appropos crime), I need to know. You don’t have to say the words, just nod or something. Because if that’s how you made it, I am going to have to do a couple of extra things to the money to clean it up. I won’t charge you extra. I will be doing it to protect myself as much as you.”

In retrospect, it seems kind of lame, but it worked more often than it didn’t. You would see the guy, right there on the video, nodding like an imbecile.

FM: How were you able to ingratiate yourself to fraudsters?

CM: Fraudsters are always ego driven. I think their egos are often more important to them than the money. You have to appeal to their baser instincts. Find out what aspect of themselves they are the most proud of and exploit that. 

If the guy is good at something, pay him compliments, but don’t be too obsequious.

FM: What advice would you give to fraud examiners who need to infiltrate criminal networks?

CM: The game is all about personalities. People do business with people that they like. There are a lot of tricks like manipulating conversation, non-verbal cues, etc. But for someone who is just starting out, there are only a few things you need to know.

Make really good notes. Good notes are the key to every successful case. You will have notes, and the bad guys won’t. The judge and the jury will be more impressed the more detailed notes you have.

Make the bad guys want to be you when they grow up. Speak well. Dress well. Show some breeding. Never interrupt. Always let them speak. 

Don’t make your cover story too complicated. Make your undercover persona exactly the same as your true self. As much as possible. Just change where you work. That way, you will only have to remember a few lies.

People will think of you, what you think of you. My mother always told me that, and it works. As George Costanza said, “It’s not a lie if you believe it.”

FM: What spurred you to leave governmental work for the private sector? And then to begin your own business?

CM: When I was with the Mounties, I worked undercover in Europe on this big corruption case. The guy in charge of our drug unit in Montreal was corrupt and was providing information to the gangsters. When the investigators came to interview him, he went into his office and shot himself. It was pretty bad.

The undercover case was super secret. The chain of command was from the commissioner to the cover team to me. That is pretty unusual in an organization like the RCMP, bypassing five or 10 levels of command. But I got to know the commissioner, Norman Inkster, pretty well because, sometimes, when they were briefing him over the phone from overseas, he would ask to speak to the undercover agent, which was me. [Inkster is a CFE and was the keynote speaker at the ACFE Sixth Annual Fraud Conference in 1995 – ed.]

Norm was also the head of Interpol. He retired and joined KPMG where he headed up its Forensic Group Worldwide. A few months after he got there, I was offered a spot. I thought, what the heck? Maybe it will be another adventure. It was. 

Norm and I have become very close friends over the years. When he retired, I had just written my book and had started doing professional speaking engagements. I decided to leave and try to do my own thing. KPMG was a great place with remarkable people. I loved my time there, and I still see many of my old colleagues regularly.

FM: Many of our members are interested in hanging their shingles. What are a few things they should know before they venture out as independent contractors?

CM: Clearly, in the fraud examination business, attorneys are your biggest source of new engagements. Typically, corporate-commercial, employment and litigation attorneys are at the top of the list.

Even if you do a great job for a corporation, chances are they won’t be calling you regularly with new files. If they are, then they obviously have bigger issues. But if you do a good job for an attorney, he or she will have enough clients with problems that he or she could refer several files per year.

FM: In addition to your public speaking, what kinds of clients now employ you?

CM: My clients are typically international companies with issues around corruption, fraud, physical security and the like. We do a great deal of due diligence work as well, because of the international nature of the business. 

Lately, Africa has been big for us, and we have one big corruption project on the go, and we are proposing on several other similar jobs.

FM: All cases are unique, of course, but what are the basic steps you take in a fraud examination?

CM: I would have to say that, whether it’s a whodunit or not, it’s all about interviews. Documents are absolutely important. But the interviews are really what make the difference. 

With technology, though, there is an added dimension. Prior to computers and Blackberries, the one thing that made fraud different from other crimes was that there wasn’t really a crime scene, per se. Now with computers, there is almost always a crime scene. Plus, proving intent was always a big challenge. These days it can be easier because often the bad guys will demonstrate their intent via their emails, etc.

FM: What are some of the more common current money-laundering techniques?

CM: These days, the most effective money laundering techniques we see are trade-based. 

Basically what they do is buy goods with criminal proceeds that they have amassed in one jurisdiction and then smuggle the goods into the country where they need to put their money. Then they sell the goods for local currency.

It’s a good way to circumvent exchange controls and, at the same time, deal with the problem with foreign currencies that are not negotiable outside the crook’s home countries.

FM: How does a bank compel its employees to help prevent and detect money laundering?

AML [anti-money laundering] is all about knowing your customer. The problem is that financial institutions became very impersonal for a time. They are starting to catch up now. When I go in the bank now, they have a greeter like at Walmart! 

I am not sure we can compel people to prevent or detect money laundering. I think they need proper training. We do a lot of online AML training, and I do a lot of speaking gigs for training purposes. You have to make it interesting. Most of the AML training programs that I see are a good cure for insomnia — except, of course, those the ACFE teaches! 

FM: What are four or five things you try to impress on your clients when you consult with them on money laundering compliance reviews?

CM: Know your customer. Know your customer. Know your customer.

If you have clients with criminal backgrounds or associations, you are probably laundering money.

If you are doing financial transactions for a money service business, you are probably laundering money.

Know your customer.

FM: In April, the U.K. Department for International Development’s Justice for All Program engaged you to provide technical assistance to Nigeria’s Anti-Corruption Agencies. Are you able to talk a bit about your experiences with this assignment?

CM: I have a team in Nigeria that is assisting the Nigerian authorities in the anti-corruption efforts. This technical assistance ranges from training and policy drafting right up to pointy-end stuff like working on corruption cases, alongside the Nigerian investigators. 

We have made a great deal of progress, and we are continuing the assignment into 2013. I have made a lot of friends in Nigeria. There are some very dedicated investigators there who have a difficult job, given the current issues facing Africa. But they just keep on going. It’s remarkable.

FM: You write that police are inundated with fraud reports and may not have the manpower to investigate cases. Is this a trend, or do you see police departments adding staffers to their fraud units?

CM: Fraud is a non-violent crime. Police departments do their best, but violence has to take priority. The FBI is doing less and less fraud work because of the pressures of terrorist investigations.

FM: You work with your clients to prepare written reports that they can give to law enforcement for possible investigation. What are the must-have components of those reports?

CM: Follow the KISS rule. Keep it simple, stupid!

I think the best advice is that, if you’re going to send a report or a complaint to the police, keep the attorneys away from the process as much as possible. Lawyers think they know what the police want or need, but my experience is that they don’t. They will complicate everything, and that is the last thing the cops want.

Just make a list of the things you know and can prove, and provide the evidence that supports your position.

Then make a list of things you know but can’t prove. And attach anything that will help that. 

Then provide copies of all of the interviews that your investigators have conducted. I have found that once the police get to know you they will quite often go and arrest the bad guy based solely on your report. When they are confident in you and your people, your report will give them enough probable cause.

Typically they will have to go and re-interview the witnesses. The prosecutors will likely insist on that. But if you have done a good enough job, the bad guys usually will plead out.

FM: What’s the best advice you can give our members who work in the trenches every day?

CM: When you’re going to interview a suspect — perhaps an executive who is still employed at the company where the crime has occurred — stretch out the process. Contact him on Tuesday and schedule the interview for Friday. Then on Thursday, re-schedule it for the following Tuesday. I have found this technique to be very effective, particularly on the nervous types. By the time you get to him on Tuesday, he’s a wreck.

Another one I use is similar. If you have six people in the office who have to be interviewed, and you are pretty sure who the bad guy is, send them all an email, except the suspect, requesting that they be available for an interview. Give them the times and location. They will all talk about it, and the suspect, the one who didn’t get an email or a request, will start thinking about it, and he won’t be able to stop thinking about it. The whole point is to soften him up.

Business types who commit fraud are usually doing all sorts of other stuff —alcohol, drugs, etc. But almost all of them are cheating on their wives. If you can get a look at their Blackberry or their mobile phone tolls, you will almost always see a pattern. Usually he will have a few pictures of the woman he is fooling around with, and you can use those if and when you do the interview.

Always ask the client who they think the bad guy is. Most of the time they are right on.

Never disregard that little voice in your head — the one that wakes you up in the middle of the night and tells you who did it. 

Dick Carozza, CFE, is editor in chief of Fraud Magazine.

Selection of ACFE money laundering resources:

Online self-study: “Investigating Money Laundering” 

Book: “Money Laundering: A Guide for Criminal Investigators, Third Edition,” by John Madinger 

Book: “Money Laundering Prevention: Deterring, Detecting and Resolving Financial Fraud,” by Jonathan Turner, CFE 

Course: “Money Laundering Schemes: Identifying and Investigating" 

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