The case of the botched fraud trap

CREDIT card giant MasterCard International has infuriated local police by flying a self-acknowledged South African crook overseas in a botched cloak-and- dagger operation intended to entrap members of a powerful South African fraud syndicate.

Now MasterCard stands accused of bypassing South African police, withholding information and obstructing local investigations. MasterCard denies the charges, adding little by way of explanation. But part of the reason it attempted the set-up overseas appears to be information that the syndicate is well connected to senior local policemen.

The main actor is the elusive K, a printer by trade, who is said to have put his skill to use in forging all manner of documentation for sale. He was once arrested on charges of counterfeiting travellers' cheques, and is now wanted by police for an allegedly fraudulent vehicle deal. In opposing wings are Captain Sarel Snyman, South Africa's top fraud cop, and Peter Wolfram, a German policeman turned MasterCard's chief investigator in the Middle East, Europe and Africa.

K, who cannot be named for his own safety, last October offered to peddle information on crime syndicates with which he had contact to affected organisations.

It is understood from sources close to police that he spoke of millions of rands filched from Eskom's pension fund, of government cheques used in fraud, theft rings at Johannesburg International Airport, and fraud schemes involving banks. The most imaginative, was one gang's plan to extort money from banks threatening their head offices would be contaminated with radioactive material.

Later checking convinced some South African policemen the information was at least partially true. But disturbingly, K also revealed names (some known to the Mail & Guardian) of senior policemen he claimed are connected to the syndicates.

K, accompanied by a private investigator, first went to Nedbank and later to Eskom, offering information. On October 18, Eskom took K to a meeting in Pretoria with the police anti-corruption unit and bank representatives. Police are believed to have confirmed that K's story corroborated information they held independently.

During October, K swapped allegiance from banks and the police, to MasterCard International.

He met Wolfram in Johannesburg, telling him of the activities of a syndicate code-named Lagos-2. A sophisticated outfit with senior banking, legal and police contacts and stakes in hotel, restaurant and liquor businesses, Lagos-2 is said to specialise, among other crimes, in falsifying credit cards, supplying electronic point-of-sale terminals where the cards can be charged, and establishing channels to launder the profits.

Wolfram then set up a sting: K would lure Lagos-2 members overseas, where they would participate in a bogus credit-fraud scheme set up by himself and K.

MasterCard flew K to London in the first week of December, but he returned empty-handed when Lagos-2 members failed to participate, possibly because they had foreknowledge. A police source confirms details of the operation were probably leaked to Lagos-2 members, and argues the operation hardly justified the trouble. Had Lagos-2 sent members to London, they would have been runners the peripheral members syndicates sacrifice easily and replace easily.

Snyman head of Johannesburg's credit card fraud section and named policeman of the year last year by South Africa's International Association of Credit Card Investigators, and separately by the international Travellers' Cheque Fraud Control Association believes K's collaboration with MasterCard, and the fact it failed to inform him of its plans, has had an impact on his ability to solve crime.

Paris-based J Angelo Letimier, senior vice-president of MasterCard responsible for the Middle East, Europe and Africa, said questions about the operation could not be answered in detail, since it is our policy not to comment on the specifics of our ongoing anti-fraud activities [and] this can be prejudicial to the interests of our cardholders, member financial institutions and the legal process in those countries where MasterCard is accepted.

Letimier denied the police were ever by-passed, pointing to three South African court cases last year which will indicate clearly the close co-operation. Snyman, who investigated all three cases, this week said MasterCard had helped in only one of the cases.

K contacted the M&G soon after questions were first directed to MasterCard about the London project. Late last month he briefly visited the M&G's Johannesburg offices to make plans for a further meeting, but failed to make contact again as arranged. K said he was still in close contact with MasterCard and claimed the vehicle fraud charge was merely a cover to lend him credibility in the underworld.