Good morning. Thank you, Tammy [Reno], for your kind introduction.
This conference represents the Department of Justice at its best. The Executive Office for United States Attorneys (EOUSA) developed the idea for this conference as part of the Department’s Fraud Identification Center (FIC), which was established a couple years ago with the goal of gathering and analyzing industry data to detect financial frauds as they emerge. The FIC includes teams of attorneys and analysts from the Criminal Division, the Civil Division, and the EOUSA. We are leveraging the Department’s nationwide resources and diverse expertise to protect the public by applying cutting-edge capabilities to shut down novel ways of committing crimes. This conference is designed to train our U.S. Attorney community to join in the fight. We are also joined by our law enforcement and regulatory partners, as well as partners from the private sector. Let me thank each of you for your commitment to combat complex fraud schemes that affect Americans every single day—especially those that are rooted in new cyber technologies and internet-based lending or trading platforms.
I also want to thank our official co-sponsors, including the FDIC’s Office of Inspector General, the FINRA Investor Education Foundation, and Georgetown University’s McDonough School of Business. And a special thank you to Kathy Rutledge from EOUSA. Kathy is on detail from the Eastern District of Kentucky. This conference would not have been possible without Kathy’s hard work and commitment.
Technology is rapidly transforming our financial ecosystem in both good and bad ways. Technology offers new investment vehicles to stimulate the economy and bring economic growth. At the same time, it paves new avenues for criminals to engage in larger, more devastating fraud schemes and to avoid detection.
Let me provide a few examples of the ways technology is transforming our financial system.
Consider “crowdfunding.” Until just a few years ago, businesses raised money through IPOs or stock sales on public exchanges, and individuals raised money through lines of credit or loans. That system presented barriers to capital for small businesses and individuals with poor credit. Crowdfunding provides an alternative to the traditional banking system by creating a forum for individuals, non-profits, and small businesses to raise funds across a social network or a private website relatively quickly and easily. But the potential downside of crowdfunding is that it occurs outside the watchful eye of a regulated banking and financial industry. Unregulated websites therefore provide a platform for criminals to defraud potential investors.
And consider on-line trading. In the last century, to purchase stocks, brokers physically placed trades on the floor of an exchange. Today, they trade via computer from locations around the world. Technology increases efficiency for traders, but it also creates the potential for fraud. In 2016, the Department of Justice extradited and convicted a British futures trader for fraud and spoofing in connection with a scheme he perpetrated for years. On May 6, 2010, he caused a “Flash Crash,” when the Dow Jones Industrial Average plunged 600 points in five minutes. By manipulating trading technology through “spoof orders,” this criminal stole at least $12.8 million, and spread panic on Wall Street.
Most of you are familiar with emerging virtual currencies. Traditionally, currency was created by a nation-state and backed by the full faith and credit of the country. Today, there are more than 700 virtual currencies. One of them—Bitcoin—reportedly has a total market value of more than $30 billion. Emerging currencies have the potential to transform the world, and to do so in a positive way. But criminals are also increasingly using virtual currency to perpetrate fraud schemes and conceal the proceeds. The Department has successfully prosecuted individuals for laundering illegal proceeds through virtual currencies. And just last week, the entire globe was shaken by a particularly malicious type of computer attack called ransomware. Ransomware schemes have garnered millions for cybercriminals who use software to hold victims’ computers hostage. They encrypt files and demand extortion payments to free the data—often requiring difficult-to-trace virtual currency. Ransomware attacks have rapidly become more prevalent thanks to improvements to encryption software and the growing use of Bitcoin.
The basic point is that fraud in the digital age knows no boundaries. It targets vulnerable victims in small towns and large corporations in our nation’s financial hubs. Everyone benefits from the successes of our financial system, and everyone suffers the serious harms of financial fraud. From bankrupting businesses, to depleting hard-earned savings accounts, to wiping out pensions, modern-day thieves can very quickly cause financial ruin.
The Department of Justice remains steadfast in its commitment to protecting our nation’s financial system, by thoroughly investigating and aggressively prosecuting fraud cases. These cases can be challenging. Foreign actors often target the United States, making it difficult to collect the relevant evidence, interview witnesses, and prosecute targets. Criminals also use sophisticated tools, such as encryption, the dark web, and virtual currency to shield their identities from law enforcement—part of what we call the “Going Dark” problem. The crimes often span many jurisdictions, with no one District readily able to see the full scope of the scheme.
The Department of Justice is focused on overcoming these challenges and giving agents and prosecutors the tools they need to successfully infiltrate and prosecute the most sophisticated fraud cases. The Department distributes funding through the Financial Fraud Enforcement Task Force to support prosecutions of sophisticated fraud. We also have created task forces, sponsored training programs, created list-serves, and hosted roundtables about sophisticated fraud schemes. We will continue to devote resources to this critically important problem.
Financial fraud is a global problem that requires a global solution. The Justice Department cannot win this fight alone. Collaboration and cooperation are the keys to our continuing success. Now, more than ever, law enforcement must deepen its already strong partnerships with the private sector, regulatory agencies, and our international counterparts to fight collectively to safeguard our nation’s financial institutions and to protect American citizens from being defrauded. Today’s conference is an important step in furthering the dialogue and in renewing our united resolve to combat financial crimes.
I am honored to be working with you in the United States Department of Justice. Thank you for your hard work, thank you for your public service, and thank you for your commitment to protecting the American people.