To ferret out crime, follow the money; to put a stop to crime, stop the money from getting to the bad guys in the first place.
That’s easier said than done, perhaps, in the digital age, where money flows digitally, increasingly in real time.
To that end, PayPal said last month that it would team with law enforcement agencies, academics and experts to track how payments are used to traffic firearms illegally through the United States.
And in in an interview with Karen Webster, Dave Szuchman, PayPal’s head of Global Financial Crime and Customer Protection, said that understanding how guns are bought and sold on the black market can help reduce, and block, illegal access to firearms.
In terms of focus, the research will seek to uncover pricing tied to illegal firearm purchases, and how those purchases are financed across different payment types.
Two-Sided Network, High Visibility
As Szuchman, a former prosecutor, explained, the data that the payments processor has and “the visibility that we have into a transaction” as a two-sided network offers significant potential to uncover financial crime.
He noted, too, that PayPal’s risk profile is different than might be seen at a bank.
“Our average transaction size is so small, and our volume is so large, that it becomes much more challenging, in many ways, to detect patterns of financial crime.”
As Szuchman noted about PayPal: “We are obligated, from a regulatory perspective, to enact a whole regime that files a full regulatory report; we are mandated as a company to do this globally. We have an expertise in financial crime.”
With that transactional data in hand, PayPal can help the law enforcement community fine tune its efforts to stop the sale of illegally sourced guns and, by extension, reduce criminal misuse of those guns. After all, prosecutorial cases are only as strong as the evidence underpinning them.
As Webster noted, we’re moving into uncharted territory. We may, as a society, have been dealing with cybercrime, fraud and illegal trafficking for a while, but now, those activities are converging on a global stage. That convergence, too, means that investigations must take a holistic approach to gathering data and insight, which can then be used to build a body of evidence that can adjust the legal frameworks that attack the very networks supporting illegal firearms activity.
As Szuchman said, illegal guns and violent crime are often looked at in “a box,” and that violent crime is not often thought of as also being tied to financial crime.
“But if you think about trafficking,” he said of the flow of illegal firearms, “there’s a huge financial backbone to these operations. People are looking to make money. And that [activity] can be lost on researchers, and it’s often lost on prosecutors.”
Szuchman noted that in his own time at the Manhattan district attorney’s office, where he ran the investigative division focused on white collar practices, his office was often paired with violent crime prosecutors to give them a sense of what was happening through the lens of financial activity. That cross-pollination will also be a hallmark of the PayPal-backed research. Knowing how, why and when to cut off the cash becomes easier with knowledge of who the parties are, where the cash is headed, and why suspicion may be warranted.
The efforts, funded by PayPal, are being spearheaded by the Center on Crime and Community Resilience, based at Northeastern University and the University of Chicago Crime Lab. Dr. Anthony Braga, director of the School of Criminology and Criminal Justice at Northeastern, is leading research efforts.
And with the study itself, Szuchman said the joint research efforts will seek to discover whether cash, credit or debit, or digital transactions or platforms, such as Venmo, are the ways that money gets into the hands of people across the globe — where, for example, transactions in New York may eventually fund illegal operations based in Russia. There’s an international component of gun trafficking that can be aided by illicit sales done online.
Amid initial areas of interest — and in following the money — Szuchman said researchers will be looking at the dark web and underground markets as well as gun shows.
Northeastern has said roughly 70 percent of the transactions for the firearms are facilitated through social connections, such as friends and family. Or, the data show, the transactions involve “street sources,” such as drug dealers, brokers who sell firearms. Gang activity and traffickers also play a role.
“On a practical level, I’m very hopeful that there will be red flags and learning for the financial sector to be able to look at their systems and learn how we can be smarter about stopping illegal transactions from going through,” Szuchman said.
The ripple effect of those insights may be one that can influence the policy conversation among lawmakers, ultimately leading to new regulations.
We’re a long way from the days of the archetypal Nigerian scammers, where email requests may have lured unwitting victims to send money, and where funds disappeared into the ether. But, in reality, some things never change.
As Szuchman said, “What’s amazing about these financial crimes is that the scams and schemes that have existed for eternity are utilized based on product changes and nuances in the market. So, it’s almost like what is old is new again.”
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