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U.S. Banks also criticized for money laundering.
Complaints made by investors and members of the public to regulatory bodies such as the Securities and Exchange Commission (SEC) have grown since the Internet made possible new types of scams by unscrupulous criminals.
There has been a dramatic rise in the volume of investor requests for help to the SEC. For example, in 1999 the SEC experienced a 39% increase (to over 73,000) in the number of complaints and questions received compared to 1998.
Check out the figures here.
http://www.sec.gov/consumer/jdatacom.htm
Some people have asked why the SEC won't tell them if it is investigating a company and its directors. You e-mail to ask when the remaining Starnet directors are likely to join the RCMP's list of most wanted fugitives for fleecing investors with their pump-and-dump schemes but although your message will be acknowledged, you will never know if an investigation is ongoing until you read about it in the press.
There should be a rogues' gallery on the Internet set up just for those CEOs and directors who manipulate share prices to line their own pockets. The Toronto Police and the RCMP already publish their own kinds of rogues' galleries, which you can see below. It's not a very pretty sight.
http://www.torontopolice.on.ca/sis/wanted/
http://www.rcmp-grc.gc.ca/html/graphics/wanted/list.htm
Unsurprisingly, the SEC conducts its investigations in a cloak of secrecy and confidentiality. Investigations can be carried out more effectively when they are unannounced. Consider that even before the RCMP raid on Starnet's Vancouver offices, there may well have been time for important documents and evidence to be destroyed, so the quieter the better.
The other good reason is to protect those companies and individuals where no wrongdoing is found or can be proved successfully. As a result, you will find that the SEC can neither confirm nor deny the existence of an investigation.
As soon as the SEC files an action in court, the process becomes public. You can find information about public investigations on the SEC web site. It is reassuring to know that inquiries and complaints from the public are the primary sources of leads for detecting law violations in securities transactions.
Because insider trading undermines investor confidence in the fairness and integrity of the securities markets, the Commission has treated the detection and prosecution of insider trading violations as one of its enforcement priorities.
To report suspicious activity involving possible Internet fraud, visit the SEC's Enforcement Complaint Center at www.sec.gov/enforce/comctr.htm. You can also find details of litigation releases here: http://www.sec.gov/enforce/litig.htm.
The SEC advises investors to be skepticalof investment opportunities on the Internet. Their advice is, if you see an offering on the Internet -- on the company's website, in an online newsletter, on a message board, or in a chat room -- you should assume it's a scam until proven otherwise. This simple piece of advice, if heeded, could save investors millions of dollars.
There are just three questions to ask that will help you:
1. Is the investment registered?
2. Is the person selling the investment licensed and law-abiding?
3. Does the investment sound too good to be true?
The Internet is now under surveillance by an SEC "Cyberforce," a group of over 200 attorneys, accountants and investigators in the U.S. whose purpose is to root out Internet fraud. This was set up by the Office of Internet Enforcement (OIE).
Investors are also warned to stay away from offers that:
- Offer a "ground floor opportunity"
- Guarantee big profits quickly
- Either minimize or mask the risk involved
- Pressurize investors because "the market is moving."
For more tips on avoiding online fraud, investors should have a look at Internet Fraud: How to Avoid Internet Scams.
Complaints About U.S. Banks.
U.S. banks are the latest in the complaints firing line. They are reported by a congressional investigation as providing a gateway for "rogue" foreign banks to launder billions of dollars of cash from illegal activities such as investment scams, drug trafficking, and Internet gambling.
Leading U.S. banks such as Chase Manhattan and Bank of America came in for criticism for facilitating money laundering, especially through so-called correspondent banking -- where banks provide services to other banks, especially wire transfers. There was "an atmosphere of complacency, with lax due diligence, weak controls and inadequate responses to troubling information." The congressional probe lasted almost a year.
The report found that correspondent accounts were used to transfer cash from Internet gambling, and that Chase Manhattan was "fully aware" that its accounts were handling such funds.
"Bank of America disclosed that it did not know until tipped off by...investigators the correspondent account it provided to St. Kitts-Nevis-Anguilla National Bank was being used to move hundreds of millions of dollars in Internet gambling proceeds."
This makes the case for tighter controls over software suppliers such as Starnet and Cryptologic even more pressing. You have to ask, who has control over the gambling funds? Who is responsible for laundering millions of dollars? Who refuses to show figures to licensees? Who cooks the books?
One solution for investors is to dump the shares of both companies. Give them some of their own pump and dump medicine. They really don't deserve anything better.
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