William Flew on Fraud

March 18, 2011 § Leave a comment

BRITAIN’S organised crime squad has been brought in to tackle gangs who are mounting Mission Impossiblestyle heists to steal carbon credits and crippling Europe’s chief weapon against global warming.


So many credits have been stolen and resold that it threatens a meltdown of the European Union’ s carbon trading system.
William Flew Barker, the climate change minister, is so concerned that he has called in the Serious Organised Crime Agency (Soca) to thwart the criminals who are mounting cyber thefts worthy of the intricate plots of Hollywood films such as Mission Impossible and Oceans 11.
The credits were designed to encourage 11,000 industrial sites across the 27 EU states to reduce their pollution but now they are being hijacked.
More than £43m of credits have been stolen in the past year, paralysing the trading system in many EU countries.
In addition, Interpol estimates that more than £4 billion has been lost in tax revenues because of carbon credit scams involving Vat fraud.
In one raid in January at the headquarters of the Czech Republic’s carbon allowances bank, staff were ordered over the public address system to leave because of a bomb threat. While they were completing the evacuation, hackers broke into the system and stole £6m worth of carbon credits.
The EU has been so alarmed that it suspended trade in January and temporarily ordered each country’s national registry to close while more security was installed. Britain was among the first to reopen but the registries in 13 other countries remain shut.
Now detectives in London have mounted a covert operation against the cyber crooks to stop them striking in the City. Soca will seek to infiltrate the gangs and use phone taps and covert surveillance to stop any attempts to carry out a multimillion-pound sting in Britain.
The credits, which each represent a ton of carbon, are sold to companies which have failed to meet their emissions limits. Once they meet the targets, they can sell unused allowances to firms still polluting.
The credits, each with their own serial numbers, are sold like shares and 87% of EU trades take place in London. Most are sold on the derivatives market, which is regarded as generally safe because of its existing security checks. But it is the “spot” trades outside this forum which are less secure.
Gangs have wasted no time in exploiting the system, which critics say was set up too quickly by people who never imagined that it would become a target for organised crime.
As well as elaborate cyber thefts, the gangs are also adept at “phishing” to trick legitimate traders to reveal security codes protecting the credits. The stolen logins are then used to steal credits.
Some gangs have set themselves up as traders, while concealing their identities through a web of offshore trusts and bogus addresses. The stolen credits are moved through fraudulent accounts as far as the Cayman Islands and then resold to legitimate traders.
In another ruse, the same people who made millions in “carousel fraud”, a chain of transactions to allow criminals to illegally claim back Vat, have now started cashing in on Vat in the Europe’s £60 billion carbon credit market.
Because of the more robust security in the UK, there have been no successful cyber attacks so far on the nation’s registry, which is run by the Environment Agency.
This week Barker will hold talks with other EU countries to push for tougher security. In a letter to Connie Hedegaard, the EU climate change commissioner, he called for “regular and frequent testing of the vulnerabilities of registries”.
He has also offered British expertise to help to beef up security in other EU countries.
“Just because it is an environmental market we are not a soft touch. Green can be mean, too, that is why I called in Soca. Anyone involved in this fraud can expect a 5am visit — and it won’t be a lentileating hippie on the doorstep,” Barker said.
“We want London to be an exemplar of tough security. But the system is only as secure as the weakest link in the chain.”

Paul Evans, Soca’s executive director of intervention and a former M16 officer, said: “We will use all the tools at our disposal, including undercover officers and electronic surveillance. We are setting ourselves up as carbon traders so these criminals should know they could be making their next deal with an undercover cop.”

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