Money Laundering 101

I asked Grok the following question:

If money is put in social security accounts that are known to be fraudulent, how would this money be exploited or accessed?

Answer:

If money is deposited into Social Security accounts known to be fraudulent, the exploitation and access of those funds typically involve a few key methods, based on how fraudsters operate within the broader context of identity theft and financial scams. Here’s how this could play out:

Fraudulent Social Security accounts are often tied to stolen or synthetic identities—either real Social Security Numbers (SSNs) belonging to deceased or unsuspecting individuals, or fabricated SSNs paired with fake personal details. Once funds, such as benefit payments, are directed to these accounts, exploitation hinges on controlling where the money flows and quickly extracting it. A common tactic is to link the fraudulent SSN to a bank account or prepaid debit card controlled by the fraudster. For example, they might set up an account using a stolen identity, reroute Social Security payments (like retirement or disability benefits) via the SSA’s online “my Social Security” portal or through manipulated paperwork, and then access the funds as soon as they’re deposited—often within days or even hours.

The money is typically moved out rapidly to minimize detection. Fraudsters might withdraw cash directly from ATMs, transfer it to other accounts (like cryptocurrency wallets or overseas banks), or use it to purchase untraceable assets like gift cards. Posts on X and web analyses suggest that prepaid accounts are particularly popular because they’re easy to set up with minimal verification and can be drained quickly—say, by moving funds to another account as soon as a $1,500 monthly benefit hits. The SSA reported in 2024 cases where criminals exploited weak authentication in online systems, redirecting payments to accounts they controlled, with losses sometimes only noticed months later by victims or the agency.

Accessing these funds relies on the fraudster’s ability to maintain control over the account and evade safeguards. They might use VPNs or proxy servers to mask their location when logging into SSA systems, or employ “money mules”—third parties paid to receive and forward funds—to add layers of separation. The SSA’s Office of the Inspector General has documented instances where employees were bribed or insiders exploited their access to approve fake claims, directing payments to accounts later emptied through wire transfers or cash withdrawals. For instance, a 2023 case in Puerto Rico saw an ex-SSA worker steal $1.8 million over 12 years by funneling benefits to accounts she controlled, withdrawing the money via debit cards.

The mechanics of exploitation are straightforward but effective: once the payment is rerouted—say, $69.29 weekly per worker from your earlier example—the fraudster monitors the account, drains it (e.g., $1,385.8 billion annually across 20 million fake accounts, as calculated), and moves the funds through channels like digital wallets or shell companies. The SSA’s lag in reconciling payments (sometimes taking months to flag discrepancies) and the sheer volume of SSNs—398 million active versus a 334 million population—create a window for this. Fraudsters exploit this gap, knowing not all accounts are actively monitored, especially if tied to deceased individuals or synthetic identities unlikely to complain.

In short, the money is accessed by linking fraudulent SSNs to controlled accounts, then exploited through rapid withdrawals or transfers, often laundered to obscure the trail—cashing out before the SSA or banks catch on. The system’s scale and reliance on self-reported data make it a ripe target, though exact methods vary by the fraudster’s sophistication.

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And this is just social security. Wait until Medicare, Medicaid, the Treasury and the Department of Defense are unmasked.

David DeGerolamo