This Week in AML

Homeland Security Launches Operation Boiling Point

Homeland Security Investigations has launched Operation Boiling Point an initiative to curb organized retail crime and cargo theft. The effort brings together public and private organizations. John and Elliot discuss the importance of the focus on this challenge which impacts many levels of the economy. They also chat about the role for the financial crime compliance community in these activities.



Homeland Security Launches Operation Boiling Point TRANSCRIPT


Elliot Berman: Hi John, how are you this week?

John Byrne: Hi, Elliot. Fine, thanks. How's it going? 

Elliot Berman: Okay. So I'm assuming that you saw that Homeland Security Investigations, part of a Big Homeland Security announcement earlier this week, the launch of something called Operation Boiling Point. 

John Byrne: Right. And it's interesting because this is sort of consistent with the overall priorities issued last year because this particular priority focuses on transnational criminal organizations as well as domestic ones.

So we know, cause we've talked about it earlier, that HSI has several projects in the works, including this one that looks at organized theft, which is a massive problem, and also to deal with it that concept of partnership with the private sector, which is obviously something that our community embraces.

So yeah, I did see that. And it's, again, just another step in what HSI has been working on for quite a while. 

Elliot Berman: Yes. It is a massive undertaking. One of the things they point out on the website they've created for this project is that they're not talking about shoplifting.

John Byrne: Right. I think, you know, many people, and I would include myself when someone says something about retail theft for the first time. What pops into your head is shoplifting, which some people would say is a victimless crime. This is about a massive organized theft, sometimes at the retail level, but also cargo theft and other, as you pointed out, both domestic and international activity.

And it's on a huge scale. They talked about the impact of this on the average US family is $500 of additional costs that they'll spend during a year for goods and services as a result of the adverse impact of this kind of activity. Which doesn't, on the one hand, it doesn't sound big, but you know, if you do a little arithmetic, all of a sudden, it's a pretty big number.

John Byrne: Yeah. And, to your point, why does this matter? It matters cuz of the scale. They said the increase in the fiscal year 2021 was a 211% increase in terms of cases initiated. And 61 criminal arrests and 59 cases. But they also point out the impact and what happens as we face inflation and other issues. This just continues to add to that. So if you think about the pandemic, and organized retail theft, all of these things have an impact on day-to-day economic challenges, right? So the boiling point, if you go to the website and look at their description of how this works, it's really fascinating.

They talk about cargo theft which is something that, you know, you wouldn't necessarily right away, you know, look at and say, oh, I could see where these thefts occur. But cargo theft is big because they're targeting building supplies, pharmaceuticals, and anything that's getting shipped, right?

So that's part of it, electronics, those sorts of things. And then other activities this is, I always thought this was kind of strange vehicles for their catalytic converters because I guess they contain precious metals in them. You know, things like that, obviously criminals are so focused on, and you, at least I would think, gee, why are they after those sorts of things? So pretty interesting. But what I liked about it in terms of its focus is on awareness. The enforcement and partnering, and the partnering with retail groups, of course, but they also mention, and they've talked about, and they've done this before, partnering with our community, the financial sector.

Elliot Berman:: Yes. And it's important for folks in the financial crime prevention community to understand that while these may not directly be financial crimes. Once the goods are stolen, they need to be liquidated. Ultimately, the goal is to get, you know, spendable funds. And as we all know, part of that liquidation process is also to make those funds appear legitimate.

So that's really where the money laundering connection is. Then, the focal is that its primary boiling point is at the front end actually to enter the actual thefts, but clearly, they want to attack. If you want to think about these thefts are really part of a criminal supply chain. They wanna Right, they want to intercede at every level, and one level is the money laundering level.

John Byrne: Right? And yeah, that's the middleman. They do say that obviously, in some cases, people that are what they call boosters or stealing the goods and selling them on their own, but most of the time, they're sold, right? And the person or persons purchases the merchandise at a fraction of the retail value.

And then, they sell 'em through e-commerce websites, social media, wholesale trading, and distribution companies. Going back to the issue about catalytic converters and, you know, people stealing other items out of cars. It's obviously a black market for this stuff. And so, making people more aware is one of the goals here. But obviously, there's a lot of criminal activity throughout this process, and it just becomes, you know, how do you figure this out? And I think, like, again, going back to my original point that I've mentioned now a couple of times, partnering with the private sector, you know, and so I know that dealing with the National Retail Federation and other similar groups, and that becomes pretty important.

But also partnering with other law enforcement agencies, and HSI deserves a lot of credit for doing that. I think certainly that's been the mindset of HSI for quite a while, is to work with their partners, not just at the federal level, you know, FBI, IRS, but also the state level. 

Elliot Berman: Yeah. One of the things that we all can do is there is a functionality on the website where you can sign up for email updates.

Operation Boiling Point, what those updates will look like, we don't know yet. But, likely, those would be useful for all of us to pay attention to as we see their success stories. There may be some topology information or investigative information that we can all use to improve our efforts to deal with the financial crime component of this.

John Byrne: Yeah. And, the other part of this, too, that they call out, and this is for our policymakers, is that there are currently no federal laws that directly target this. The prosecution is not simple because the crimes are typically multi-jurisdictional, multi-state. So that's also something to highlight, you know, given the rise in all of this, should there be specific laws dedicated to this?

Also, they mention that there's been an increase in violence, which is something that seems logical that would be the case, but you don't think about that necessarily. So when they talked to the private sector groups, they said, you know, that's why people are losing jobs or leaving jobs, saying we don't want to be involved in a retail operation where we put ourselves at risk.

So I think that's important. And you know, again, they focus on high-value items. And then also common retailers that get targeted are pharmacies, big box retailers, home improvement stores, those sorts of things. And we've all seen some of that in media reports. So there's a lot going on here, but the fact that no laws are dedicated here is something to call out.

The importance of working with other local and state, and federal authorities is important. But also recognizing this has a very negative effect on the economy and the community. 

Elliot Berman: Right. The other piece of the economic impact is where these goods are sold on black markets. There's no tax collected, and so the various taxing authorities are, you know, losing funds too. So this is, you know, up and down the economy, not just at any one level. 

John Byrne: Right? So check it out when you get a chance. Look at the HSI website. It's Operation Boiling Point. Just wanna highlight this as we close this down. We have a webinar coming up on October 27th. We will be reviewing where we stand with the AMLA Law from a couple of years ago. There's obviously been some changes, including the beneficial owner regulation that's out. We'll have a nice discussion with a couple of experts. Megan Hodge from Ally Bank and Dan Stipano, former OCC Enforcement director. We will be covering that and some of the other issues in Amla because even though it's not moved as quickly as I think folks would've hoped, there are still some things to think about for internal training purposes. And so we're gonna discuss that on October 27th at 1:00 PM Eastern time. 

Elliot Berman: Yes. And you can register for the webinar at our website, amlrightsource.com

So John, good to talk to you and we'll talk to you next week. 

John Byrne: Take care, Elliot. Stay safe. 

Elliot Berman:: You too. Bye-bye.