28 Jul 2020
A Mastercard executive allegedly was involved in a money-laundering operation at a bank accused of terrorist financing and organised crime that had links to Wirecard, the disgraced German payments group.
A report commissioned by the owners of FBME Bank in Cyprus uncovered evidence of apparent criminal activity, including an alleged operation designed to trick the international card payments system into processing high-risk and potentially illegal transactions.
Private investigators found the “apparent involvement of a senior Mastercard employee in criminal activities” and recommended that the bank’s shareholders tell prosecutors in the United States that a source of the problem “may be with Mastercard”.
The investigation, called Project Waxwing, was commissioned after the US Treasury’s Financial Crimes Enforcement Network froze FBME out of the American banking system in 2014. It accused FBME of being used by customers to “facilitate money laundering, terrorist financing, transnational organised crime, fraud, sanctions evasion and other illicit activity”. Money processed by FBME was said to have links to internet child sex abuse and the Syria’s chemical weapons programme.
Project Waxwing, along with two reports from Kroll, the corporate investigations firm, found problems with FBME’s card services division, which was linked to Wirecard via a key client, who was accused of helping to facilitate the alleged payments fraud.
The investigation by Nigel Brown and Alec Leighton, two former British police officers, found an operation allegedly involving hundreds of thousands of phantom transactions created to “circumvent or outmanoeuvre” anti-fraud and money-laundering systems within Visa and Mastercard.
The alleged intention was to “dilute” the high level of “chargebacks”, or returned transactions, being generated by illicit activity to avoid scrutiny from Visa and Mastercard. A chargeback occurs when a customer complains about a good or service. Their credit card company will refund them pending an investigation. High chargeback rates are a red flag for fraud. An unnamed Mastercard executive was alleged to have helped to facilitate the operation.
Pinging “phantom” transactions back and forth via UK and Cyprus shell companies added apparently innocuous payments that diluted the fraud ratio, allowing illicit activity to continue, the investigators concluded.
By James Hurley, The Times, 27 July 2020
Read more at The Times
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