wmlro.com: copyright case shows multiple failings in KYC
Matthew Purse is starting a jail sentence; his alleged conspirator Christopher Loring (or perhaps it is Walters) is still at large. They sold thousands of illegal copies of software. But the relevant point is that they ran their business openly and used the full range of financial services to do so. And yet no one noticed.
The financials of the business were actually pretty simple: purchases: some tech, some internet sites and bandwidth and some software.
They used the tech to copy the software, posted ads on the websites (and others, such as eBay) and provided downloads from the websites.
The Software & Information Industry Association, which describes itself as "the principal trade association for the software and digital content industries," identified "several massive software [theft] schemes." A spokesman for the SIIA said "Matthew Purse duped nearly 8,000 unsuspecting consumers out of hundreds of thousands of dollars. He and Christopher Walters cheated software companies such as Adobe, Symantec, Apple, Corel, Intuit and many others out of millions of dollars in revenue."
That statement makes two assumptions that are open to question: if the customers were buying cheap downloads of software from a site other than the originator, why is is presumed that they did not know what they were doing? To describe them as "unsuspecting" must be at best simplistic. And if they did know or suspect that the copies were illegal, not only were they participators in the crime, they cannot be regarded as "duped."
The other assumption is that people who bought this software would, without question, have bought the original at full price. In truth, many who buy illegal copies do so because they would not - for whatever reason - buy the original at full price.
But a deeper question arises: if it took the SIIA to find the activities, was the financial industry either turning a blind eye or was it just asleep at the wheel.
Approaching 8,000 credit card transactions provided, it appears, no suspicious transaction reports.
The bank accounts are also interesting: the margin made by this business will have been exceptionally high. It had no historical R&D to pay off and no substantial operating costs. It did not pay for the stock it was selling. Clearly the company's bankers did not have a risk model that addressed this situation.
In the meantime, the SIIA has trouble with its facts: its media release dated 12 January describes Purse's alleged conspirator as Christopher Loring in one place and as Christopher Walters in another. That really helps financial institutions to know who they might be looking for. Not.
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