Cases of sextortion are on the rise; however, as this type of crime grows in prominence, its relation to financial crime remains under-explored.
In May 2018, the National Crime Agency warned that tens of thousands of Britons were being targeted by ‘sextortion’ gangs. Reported cases have increased three times since 2015, and in July 2018, reports of a new, related phishing scam began making their way into our newsfeeds.
Sextortion is not a legal term and is used to cover a broad range of criminal activities. Interpol offer one of the best definitions, classing it as ‘blackmail in which sexual information or images are used to extort favours and/or money from the victim.’
Despite growing awareness from both a law enforcement and potential victim perspective, little analysis has been done on the financial crime implications of sextortion, which are potentially significant.
To help shed light on the subject, we explore three models here--detailing how they operate and what money laundering red flags you should look for.
The Phishing Scam
Over the past couple months, law enforcement agencies from around the globe and across the UK have identified a new scam whereby perpetrators email victims alleging to have hacked into their webcam whilst they were watching pornographic content. The perpetrators request sums ranging from USD$200 to USD$8000 to be paid in Bitcoin and have allegedly made USD$500,000 in total off of the scam thus far. Other phishing scams linked to sextortion exist as well, meaning funds firms might have seen laundered - and would normally attribute to classic phishing scams - could in fact potentially be proceeds from sextortion. The likelihood of this could increase with time as the success of recent sextortion-related phishing campaigns becomes publicised.
Financial Crime Implications
Cryptocurrency payments-- payments relating to sextortion cases may be requested in cryptocurrencies, so efforts should be made to cluster and risk rate bitcoin addresses, and this information could be communicated with FinTechs whose customers deal in cryptocurrencies or who directly facilitate cryptocurrency exchanges and wallets.
Recurring payments to the same beneficiary-- the initial one-time payment could become recurring (though the value of each payment could change). Moreover, the payer and payee may have no other obvious connection outside of these payments.
New customers-- victims could be new to paying in cryptocurrency and may not use cryptocurrency exchanges outside of these transactions.
The Catfishing Scam
This type of scam is typically carried out through organised criminal efforts, where fake profiles of women are created and used to entice men into performing sexually compromising acts on camera that are then recorded and used as blackmail. Recent cases have seen such activity linked to Romanian crime groups and call centre-style establishments out of the Philippines. Some photos and videos used to create these women are assessed to originate from coerced activity.
Financial Crime Implications
Payments from victims--these could come through as FPS payments, and, like with phishing scams, could to be larger amounts followed by recurring payments of varying amounts.
Adverse media checks--some KYC details including contact information and residential address may be found through adverse media checks to be connected to alleged romance fraud, dating scams or catfishing.
Organised activity--as these types of sextortion scams are often centrally organised, network analysis can be conducted on suspect accounts.
The Blackmail Trade
Blackmail trading can be done through organised criminal groups or more decentralised networks. This type of sextortion typically targets women, and overwhelmingly women under the age of 18. In some cases, children’s sites have deliberately been exploited to find potential victims. It begins similarly to catfishing, with the victim being encouraged into sexually compromising activity, which is then used as blackmail to extort further sexual activity. When the perpetrator grows bored of the victim, they will sell the blackmail material (and by extension, the victim) to a buyer who continues the activity.
Financial Crime Implications
Perpetrator to Perpetrator payments--as the payments are for blackmail, amounts could be smaller sums (e.g., £50 to £200) that are one-off payments and may be done through P2P platforms as the parties may know each other. They could be less likely to recur.
Payment references--check suspicious payments for references to sexual acts, children’s websites and the name of a woman in a payment between two men.
In all of these cases, unlike other scams, victims rarely ever report the abuse. The implications can be devastating and have been linked to suicide and non-virtual sexual violence. Even when victims do manage to escape, the fear remains. More effort is needed not just to help potential victims protect themselves, but also to crack down on the financial trail behind these activities. The latter - if addressed correctly - has significantly more chance of identifying rings and perpetrators than relying solely on victims reporting crimes, and is another area where public-private partnership could be used to powerful effect.
If you’d like to further discuss this type of crime or other serious predicate offences and how they are financed, don’t hesitate to get in touch.