FRAUD SUMMARY - MOSCOW

UNCLAS SECTION 01 OF 04 MOSCOW 000990

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: KFRD CVIS CPAS CMGT ASEC RU
SUBJECT: FRAUD SUMMARY - MOSCOW


1. (U) COUNTRY CONDITIONS:

Since the financial crisis hit in September 2008, uncertainty about
the banking sector, the value of the ruble, and the price of oil
have prompted investors to withdraw significant amounts of capital
from the Russian economy. The higher cost of credit that ensued, in
conjunction with the global downturn in demand for a broad range of
products, forced Russian firms to cut production, reduce the
workweek, decrease salaries, and trim staff. As a result, since
November 2008 incomes have declined, reversing nearly a decade of
real double-digit income growth. Unemployment and underemployment
in Russia continue to increase, although at lower rates than earlier
in the year. Estimates for actual unemployment by the end of 2009
range from ten to twelve million, with significantly higher risk for
workers in Russia's single company towns. In addition to currently
unemployed workers, more than 1.1 million workers are on idle time,
reduced work schedules, or administrative leave. Russian workers
also suffer from delayed salaries and falling real incomes. Wage
arrears rose 16.1 percent in February to 8.1 billion rubles as of
March 1, primarily due to the absence of sufficient funds on the
part of employers. At the end of February, the Ministry of Economic
Development predicted real incomes would fall 8.3 percent in 2009.

As the first quarter of 2009 draws to a close, the economy appears
to have achieved some stability, thanks to a modest, but steady rise
in the price of oil. The ruble has stabilized, the federal budget
was in surplus (through February),and the stock market has been
growing again. However, the economic outlook for the year has never
been more uncertain. The Russian Government forecasts an economic
contraction of 2.2 percent. Analysts outside the GOR are more
divided on the country's economic prospects than they have been in a
decade. Economists from academia and the think tank community
estimate a sharper economic contraction of 5-10 percent, whereas
investment bankers anticipate a recovery by the end of the year with
potential growth reaching three percent.

According to the last official census in 2002, the population in
Moscow is 10.4 million; however this figure only takes into account
legal residents. Current estimates place Moscow's population at over
13 million. The next official census is scheduled for October 2010.



2. (SBU) NIV FRAUD - MOSCOW:

During this reporting period, consular officers referred 282 cases
to the Fraud Prevention Unit (FPU) for investigation of suspected
fraud. We experienced a 19.5 percent increase in fraud referral
cases over March - August 2008 numbers. FPU confirmed fraud in
10.6 percent of the cases referred to FPU. Most of the referrals to
FPU during the report timeframe were for employment, educational or
bank statement verification. Based on these findings, Moscow is
currently considered a medium-fraud post.

FPM conducted routine LexisNexis checks and conferred with Embassy
representatives of U.S. federal agencies including federal law
enforcement agencies during fraud investigations. In addition, FPU
local fraud investigators conducted host country law enforcement
record checks. Local investigators also researched host country
tax and business registries; national and local media websites; and
reviewed a variety of Russian newspapers for fraud-related
information during the course of their investigations.

Sixteen out of 282 applicants for B1/B2 visas referred to FPU
provided fraudulent employment statements. For example, FPU
investigation revealed that two applicants presented employment
letters from a well-known U.S. financial firm. Further
investigation revealed that one of the applicants, a Ukrainian
national, had also presented a fraudulent Russian work permit. FPU
coordinated with local authorities and the applicant was deported
from Russia. Another case involved an applicant that claimed she
worked for a reputable local medical provider. FPU investigation
revealed that the applicant was a former employee that had obtained
the company's letterhead prior to her dismissal. Other cases
involved fraudulent local registration documents for non-existent
companies, forged letter head for reputable local companies, or
forged employment letters containing inflated job positions or
salaries.

FPU conducted two in-depth investigations on L1 intercompany
transfer non-immigrant visa cases. One case involved an applicant
that claimed that she had been employed for an extended period of
time at the company. When FPU contacted the "claimed" employer,
however, the receptionist said that the applicant was not employed
by the company but was the president's daughter. Another case
involved an applicant that claimed he was traveling to work at the
U.S. division of the company. When FPU checked the state's on-line
business incorporation documents, however, the company had been in
"inactive/noncompliance" status since March 2007.


MOSCOW 00000990 002 OF 004


FPU confirmed fraud in three student visa cases. All of the
applicants submitted fraudulent bank statements in conjunction with
their student applications and claimed that they were planning on
studying English. Based on these findings, FPU improved its
contacts at the top local banks and plans to investigate a recent
rise in ESL applications from non-traditional students.

During this reporting period, FPU investigations revealed that three
separate applicants legally changed their names in an attempt to
obtain visas - all cases were caught as facial recognition hits.
Two cases involved individuals attempting to cover up illegal
overstays. Another applicant admitted to legally changing her first
and patronymic names after three visa denials. When she was denied
a fourth time, she decided to change her entire name in an attempt
"to circumvent the system" - she was quite surprised to receive a
FPU phone call asking if she had a twin sister. Our FPU
investigations have revealed that it is quite easy to officially
change one's name in Russia and often little reason needs to be
provided to the local officials for the change.

There is still inconsistent use of NIV "Suspicious Documents
Function" by NIV line officers. A standard operating procedure for
fraud referrals, including the use of suspicious documents, was
formalized during this reporting period. FPU continues to work with
NIV officers to encourage the use of the suspicious document
function more consistently.

Belarusian Summer Work & Travel (SWT) Validation Study: Since March
2008 when the Government of Belarus mandated staffing reductions at
Embassy Minsk, Moscow has accepted Belarusian SWT applicants. FPU
conducted a 100 percent validation study of the 1,250 Belarusian
students who were issued by Embassy Moscow. The study was
undertaken in an effort to compare our SWT issuances to those of
Embassy Minsk in prior years.

Moscow utilized the Department of Homeland Security's Arrival and
Departure System (ADIS) records to confirm the arrivals and
departures of Belarusian SWT participants. Those with confirmed
departures were considered to have completed their summer program
and were not further examined. Those with no departure records,
with pending Adjustments of Status, or who had adjusted to B1 status
with a departure date before March 1, 2009 were contacted by the
Fraud Prevention Unit in Minsk.

The results showed that 1,062 students (or 85 percent) had confirmed
departures from the United States. Of the remaining 188 students,
130 (or 10.4 percent) had no departure records, and the remaining 58
(or 4.6 percent) had either adjusted status or had an adjustment of
status application pending with DHS. The non-return rates for males
and female students were almost equal. Older applicants (and, thus,
further along in their university education) were more likely not to
return to Belarus. Also, Post's validation study revealed that
applicants with prior J-1 visas were more likely to legally adjust
status than first timers. Post has contacted all Belarusian SWT
agencies and provided them feedback on the travel patterns of their
SWT participants.


3. (SBU) IV FRAUD - MOSCOW:

Officers within the Immigrant Visa Unit referred sixteen cases for
FPU investigation, mostly for criminal background checks with local
law enforcement. None of the investigations resulted in a permanent
refusal.


4. (U) DV FRAUD - MOSCOW:

During the timeframe of this report, Russian nationals were not
eligible to participate in the Diversity visa (DV) program.
Russians will be eligible to participate in the DV 2010 program. We
have received numerous complaints regarding DV email scams. Post
has translated the Department of State's DV Fraud Warning for use on
its internet site.


5. (U) ACS AND U.S. PASSPORT FRAUD - MOSCOW:

During this reporting period, no ACS cases were referred to FPU.
However, FPU has assisted ACS with Lexis-Nexis checks to assist in
locating down American Citizens (generally as a result of the
two-parent signature regulation for minor passports or on emergency
ACS cases).


6. (U) ADOPTION FRAUD: N/A


7. (U) USE OF DNA TESTING: N/A


8. (U) ASYLUM AND OTHER DHS BENEFIT FRAUD

From September 1, 2008 through February 28, 2009 the Moscow U.S.
Citizenship and Immigration Service (USCIS) field office interviewed

MOSCOW 00000990 003 OF 004


184 refugee and asylum cases for applicants from Russia. Of the 184
applicants interviewed, 27 of them were denied at least in part
because of credibility.

The criteria for denying an applicant based on credibility are as
follows:

"The USCIS officer informed you of discrepancies concerning material
facts within your testimony during your interview and you were
provided with an opportunity to reconcile those discrepancies.
Because you were unable to reconcile the discrepancies to the
officer's satisfaction, it has been determined that your testimony
lacked credibility on those material facts. As a result, you are
not eligible for refugee status."


9. (U) ALIEN-SMUGGLING, TRAFFICKING, ORGANIZED CRIME, TERRORIST
TRAVEL - Moscow:

For the fifth consecutive year, Russia has been included as a "Tier
2 Watch List" in the Trafficking in Persons (TIP) annual report.
Russia is considered to be a source, transit, and destination
country for men, women, and children trafficked for various forms of
exploitation. According to the most recent TIP report, "the
Government of the Russian Federation does not fully comply with the
minimum standards for the elimination of trafficking; however, it is
making significant efforts to do so." The report also indicates
that last year, the GOR "demonstrated progress in its law
enforcement efforts over the last year. Article 127 of the criminal
code prohibits both trafficking for commercial sexual exploitation
and forced labor." The TIP report also noted a 10-percent increase
in the number of investigations in 2006.

Moscow is a massive transit point for human smuggling, specifically
to and from China, Korea, Japan, Central Asia, and Eastern Europe,
and remains a primary source of supply of trafficking victims to
Western Europe. Organized crime is also considered to be
widespread, but with a loose structure and intertwined with
corruption.


10. (SBU) DS CRIMINAL FRAUD INVESTIGATIONS - MOSCOW:

The Consular Section enjoys an open, strong working relationship
with its ARSO-I. During the timeframe of this report, ARSO-I worked
on a joint investigation with DHS and FBI regarding a Eurasian
Organized Crime group operating in Colorado and Nevada that is
suspected of using 28 Summer Work and Travel (SWT) exchange program
students including two female students from Russia to participate in
financial fraud schemes to obtain money or goods.

ARSO-I successfully documented visa fraud committed by a Russian
government official accused of the theft of billions of dollars
worth of land and money. When the suspect fled to the United
States, ARSO-I Moscow determined the suspect had made material false
statements on the most recent visa application. After DHS was
notified, the suspect was detained on his next entry into the United
States, and confessed to having made false statements. Due to the
extremely high value of money allegedly stolen, DS, DHS, DOJ, and
the FBI are working closely with Russian officials on pursuing the
case and proceeds from the theft and subsequent money laundering.

ARSO-I and the DS New York Field office jointly investigated visa
fraud committed by a fugitive from Kazakhstan who initially obtained
a Russian passport and fled to Moscow, before going to the United
States. Based upon the concealment of his prior arrest and criminal
charges, the suspect was charged with fraud and arrested. The U.S.
Marshal Service initially brought the case to the attention of DS
due to the Interpol warrant issued by Kazakhstan for the suspect's
alleged murder of four people.


11. (SBU) HOST-COUNTRY PASSPORT, IDENTITY DOCUMENTS, AND CIVIL
REGISTRY:

ARSO-I Moscow is leading a joint criminal investigation into the
sale of counterfeit and altered documents by a crime ring based in
Moscow. The overall investigation encompasses more than 34 DS
criminal cases, touching on 46 countries. The vendors are suspected
of having produced counterfeit supporting documents for visa
applications, counterfeit and altered passports, and counterfeit
visas from the United States, Russia, Schengen countries, Canada,
and several other nations. Over the past 11 years, the group has
sold an estimated 1000-3000 U.S. visas. Several key members of the
organization have been identified and indicted in the United States;
however the suspects remain at large in Moscow. A recent success
in the case was the arrest of suspects in Ghana and Belarus after at
least eight of the counterfeit U.S. visas were sold through that
portion of the distribution network. To date, approximately 21
members of the organization have been arrested, however Russian
officials have to date refrained from pursuing the highest level
suspects. The vendor ring has also sold documents to criminal

MOSCOW 00000990 004 OF 004


fugitives and Chechen fighters, raising concerns of terrorist
travel.


12. (SBU) COOPERATION WITH HOST COUNTRY AUTHORITIES:

Official requests for verification of documents and information must
be conducted using the format of Diplomatic Notes to the Ministry of
Foreign Affairs for dissemination to the respective federal or
regional government office. FPU relies on contacts in various
ministries to provide verification and/or confirmation of requests
on an unofficial basis. In September 2008, the Ministry of Internal
Affairs disbanded the anti-organized crime unit following
allegations of extortion of wealthy business men by members of the
unit.

ARSO-I has had limited cooperation and slow response from host
country law enforcement units. Despite the willingness of some host
country officers to discuss criminal cases, the endless layers of
bureaucracy, corruption, and apathy lead to limited success in
responding to criminal acts. Transparency International has rated
the perceived level of corruption in Russia as having risen steadily
over the past eight years, and have noted the judicial system as a
particular concern.


13. (U) AREAS OF CONCERN: None


14. (U) STAFFING AND TRAINING - Moscow:

The Fraud Prevention Unit consists of two Consular Officers, the
Fraud Prevention Manager and an entry-level officer that serves as
the Deputy Fraud Prevention Manager; an Assistant Regional Security
Officer-Investigator; and four locally engaged Fraud Investigation
Specialists. During the reporting period, FPU and ARSO-I organized
two training sessions for consular officers. FPM also provides
information on fraud trends and other guidance to consular officers
in Moscow as well as in the consulates on a regular basis.


15. (U) EVENTS - Moscow:

The FPM regularly participates in the monthly Anti-Fraud Diplomatic
Group meetings. FPM agreed to host the September 2009 Anti-Fraud
Diplomatic Group meeting.


BEYRLE