Report of the Canada - United States Working Group on Telemarketing Fraud

Department of Justice

5.0 CANADA-UNITED STATES COOPERATION AND STRATEGY

The nature of telemarketing fraud makes cooperation between agencies and governments particularly important. The ease with which offenders can defraud victims in other jurisdictions and their ability to change their tactics or targets require governments to be flexible and coordinated in responding. The foregoing sections have identified a variety of powers, programs, and techniques available for use against telemarketing fraud. Developments in both countries have already demonstrated the benefits of regional and inter-agency cooperation and coordinated strategies at the regional and national levels. The cross-border aspect of the crime simply extends the same principle to the international level. Our shared goal should be to establish that the Canada-U.S. border will not be allowed to become an obstacle to controlling telemarketing fraud. The Working Group recommends that strategies directed at the control of telemarketing fraud be coordinated between Canada and the United States at the agency, regional and national levels.

5.1 Basic Strategic Goals

The ultimate objective is to reduce the harm that telemarketing fraud causes to victims and society. The various measures identified in this Report offer different ways of achieving this, which will be most effective if used in accordance with defined strategic goals. The Working Group identified the following goals on which specific strategies can be based.

Agencies should react quickly to offences.
The longer it takes to establish that a fraud operation is active, the more people are victimized and the higher investigation and prosecution costs will be. The dispersal of offenders, victims and agencies makes this worse by delaying effective actions. This requires agencies to gather information quickly, assess what is relevant, and transmit it quickly to other agencies and jurisdictions. It is important to establish which agencies are in the best position to take action and to provide them with the information they need to do so as quickly as possible.
Strategies should combine prevention, enforcement and punishment.
All three of these elements are equally important in controlling this problem. Justice requires that telemarketing fraud be denounced as a crime and offenders punished accordingly. It is also important that regulatory and enforcement powers be used quickly and effectively against ongoing frauds to limit the damage and bring offenders to justice. The third element, prevention, is important because reaching victims before the offenders do prevents harm from occurring in the first place and deters offenders by making the crime unprofitable.
Strategies should be as cost-effective as possible.
Telemarketing fraud is more expensive to investigate and prosecute than many other crimes, but cost-effective methods can be found. Tested investigative methods can be adapted and if needed, new ones can be developed. Devising efficient strategies and coordinating them to avoid duplication of effort will ensure that the best possible results are achieved with available resources. The ability to prevent frauds or to react quickly when they occur may reduce the numbers of victims and losses and the costs of investigation and prosecution.
Victims are important.
Considering victims' interests is important with this offence because of the large numbers of people victimized. Strategies should deal directly with victim interests by preventing or reducing their losses and by recovering proceeds for restitution where possible. It is also important that victims are kept informed about proceedings and that their evidence about victim-impact is heard by the courts. Given the age of many victims and the impact the offence often has on their lives, victim support programs are also important to minimize long-term impact and prevent further victimization.
Strategies should be flexible.
Telemarketing frauds evolve as the technology changes and offenders find new ways to take advantage of it. The ability of offenders to move and change their operations quickly requires that both enforcement and prevention programs be flexible enough to react as quickly as the offenders can.
Strategies should include an ongoing, long-term commitment by agencies.
Telemarketing fraud requires expertise on the part of enforcement and regulatory agencies. Those involved must have a knowledge of the offence, of offenders and their methods, and of the agencies and powers available to respond. Expertise takes time to develop, which requires the commitment of personnel and funding to specialized units in law-enforcement and regulatory agencies. This expertise permits faster and more effective reactions, which also reduces costs.

5.2 Operational Approaches

In practice, these elements can be combined in different ways to approach the problem. The most effective approach in each case will depend on the nature and scope of the fraud scheme involved and the resources deployed against it. The Working Group considered several general options, but recognizes that specific recommendations cannot be made in the abstract. Agencies must be free to choose and combine approaches as the circumstances warrant. The following options are general descriptions only and are not mutually exclusive. A truly effective strategy will be flexible enough to select and apply whichever approaches are best suited to a particular problem.

Larger-scale investigations and prosecutions.
Larger investigations involving many investigators, agencies, jurisdictions and technical resources are often demanded by the geographical scope of telemarketing-fraud schemes, and justified by the large numbers of victims and substantial proceeds generated. This approach may also offer evidentiary advantages if large numbers of individual fraud transactions are combined into a single large case for trial. It may also generate longer sentences, as the courts can be shown the true extent of the operation and the amount of the proceeds. In this model, coordination is important to ensure all jurisdictions and agencies act together on combined operations, working on the same schedule towards the same ultimate goal. Charges tend to focus on traditional criminal frauds, invoking long sentences and full criminal-law powers and procedures.
Smaller-scale investigations and prosecutions.
The use of larger numbers of smaller, less-expensive proceedings is less likely to generate the substantial sentences or result in the conviction of entire fraud organizations, but offers other advantages. Smaller investigations can be concluded more quickly, allowing authorities to move more quickly against ongoing frauds. They also may require fewer investigators and technical resources, allowing more operations to be conducted with available resources, and tend to be more flexible, allowing authorities to react more quickly when offenders move or change tactics. In this model, coordinating separate investigations against the same offenders is particularly important. Agencies need to pass on information to give others the basis to take quick action, and when offenders move, to alert other jurisdictions.
The disruption of offenders' operations.
Telemarketing fraud is a complex offence which requires numerous conditions to work effectively. A number of enforcement and regulatory options could be used to make the offence more difficult, and less profitable, to commit. Some of these involve the technology used to commit the offence: offenders might be deprived of the telephone services needed for telemarketing, or of their anonymity in using it, for example. Others involve civil and administrative actions which target proceeds, taking away the basic profit motive and depriving offenders of the resources needed for litigation and starting new fraud schemes. What they have in common is that they increase offender costs and risks and decrease potential proceeds, thereby making the offence easier to control and less attractive to offenders.
Prevention.
The most cost-effective means to control any crime is to prevent it, since this avoids the costs both to victims and society. Prevention is never completely effective, which makes enforcement and punishment necessary, but educating potential victims has considerable potential in preventing telemarketing fraud. If used effectively, it also has the potential to deter offenders by making the offence less profitable and more risky.

5.3 Elements of a Binational Strategy

Strategies to deal with cross-border telemarketing fraud will incorporate the same elements and approaches set out above, but with the added need for the United States and Canada to coordinate activities and where possible to act jointly for mutual benefit. With this in mind, the Working Group identified the following areas in which greater coordination or closer cooperation will assist in the effort.

National cooperation and the Working Group.
Much of the practical cooperation should be left to the specific agencies which deal with actual cases (below), but there is also a need for the coordination of general policy matters at the national level, and some key subjects, notably foreign policy, extradition, and MLAT matters, must be dealt with federally in both countries. The Working Group represents the first effort of Canada and the United States to develop a joint binational approach to telemarketing fraud by examining each country's experiences with it. It has provided an excellent opportunity for substantive discussions, exchanges of information and ideas, and the establishment of institutional relationships at all levels of government. Further meetings would ensure that matters of cross-border enforcement are dealt with as they arise, and serve as a meeting-point from which to coordinate the activities of the various regional groups. The Working Group recommends that an ongoing binational working group serve as an overall coordinator and deal with national and binational telemarketing fraud issues as they arise.
Regional and agency cooperation.
Both countries have regional task forces of law enforcement and regulatory agencies to deal with telemarketing fraud. Their successes in convicting some offenders and driving others out of telemarketing suggest that cross- border cooperation may bring similar benefits. Many regulatory and law-enforcement efforts are focused at the regional level, and it is here that cross-border cooperation between states, provinces and federal authorities is likely to have a direct impact on specific offenders and their operations. Personal contact between investigators familiar with ongoing operations in their regions is also important to ensure that vital information is transferred quickly and reaches those who are in a position to use it effectively. Regional task forces have already begun cooperating across the international border, and their efforts are beginning to show results. The Working Group recognizes the usefulness of regional task-forces on telemarketing fraud. It recommends that they be encouraged to cooperate across the international border to the maximum extent possible.
Prosecutorial cooperation.
Prosecutors from the federal, state and provincial levels participated in the Working Group and have been active in its regional counterparts. Formal and informal cooperation in developing and prosecuting cases underlies many of the specific issues raised relating to the transfer of information, evidence, witnesses, and ultimately fugitive offenders, from one jurisdiction to another. Close cooperation also raises resource issues, which in turn raise institutional and sovereignty concerns where the agencies involved are in different countries. The Working Group noted one way in which costs might be shared, however. Ordinarily, the burden of contacting and transporting witnesses falls on the agency seeking their testimony. In telemarketing fraud cases, once those involved have determined who is in the best position to prosecute offenders, it may be appropriate for agencies in other jurisdictions where victims or other witnesses reside to arrange their travel if their evidence is needed and cannot be given by other means.
Information-sharing.
Passing accurate and secure information between agencies avoids duplication of effort and allows them to react more quickly against ongoing fraud schemes. This involves gathering reliable information from consumer complaints, police, regulators and other sources, and ensuring that it reaches the agencies best placed to take action as quickly as possible. The Working Group is aware that there may be some legal restrictions on what information can be shared and with whom, but there appears to be much that can be done within legal limits. It supports the information-transfer between Phonebusters, the NAAG, the NFIC and the FTC as an effort which should significantly assist authorities in both countries.
Both Canada and the United States are exploring further means of storing and accessing consumer complaint data, working towards shared-access databases on which their agencies can quickly and securely post, exchange and retrieve relevant information. In Canada, provincial consumer ministries and Industry Canada are developing Canshare, which would compile consumer-protection information on a single national database accessible to Canadian agencies. There are numerous federal and provincial privacy requirements which would have to be examined in detail before this information could be routinely accessible to U.S. agencies. In the United States the FTC and NAAG are developing the Consumer Sentinel Binational Telemarketing Network, which would be open to Canadian agencies, subject to confidentiality agreements. While there are legal limits on cross-border information- sharing, the advantages of some form of joint-access system would be substantial.
The Working Group recognizes the usefulness of shared-access information systems as a means of passing information quickly and securely between agencies. It recommends that, to further coordination, governments and agencies examine privacy and other laws relevant to cross-border shared access information systems with a view to expanding access to such systems to the maximum extent possible.
Resources.
The distances involved and the dispersal of victims make telemarketing frauds, especially large ones, more expensive to investigate than most other white- collar crimes. The sophistication of the offenders requires a stable and expert law- enforcement and regulatory response, which in turn demands an ongoing, stable resource commitment within agencies. Resources are also needed to support regional and international efforts in dealing with specific cases and more generally, in developing information-sharing, education and prevention efforts. While each country must determine for itself what combination of resources and participating agencies will be most effective in its national strategy, the Working Group recognizes that a commitment of resources dedicated to telemarketing fraud will be needed to mount an effective response to the problem.

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