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October 04, 2016

U.S. Feds Label PacNet ‘Transnational Criminal Org.’

WASHINGTON – U.S. federal authorities have designated a Vancouver, B.C.-based payment-processing company with clients in the adult entertainment industry “a significant transnational criminal organization.” In court documents filed Sept. 22, the U.S. Justice Department (DoJ), U.S. Postal Inspection Service (USPIS), Department of the Treasury’s Office of Foreign Assets Control (OFAC) and other law-enforcement agencies allege PacNet Group has “defrauded millions of Americans out of hundreds of millions of dollars.” Thus far in 2016 alone, PacNet has processed payments for the perpetrators of more than 100 different mail fraud campaigns, collectively involving tens of millions of dollars, the court documents reveal.

In the adult industry, PacNet does business primarily as Chexx Inc. and The Payment Factory LLC. The companies process wire transfers of funds in 80 countries including Canada, France, India, the Netherlands, Singapore, Switzerland, Turkey and the U.S. On Sept. 26, adult industry clients of the two companies began receiving notices that Chexx and The Payment Factory “will have to temporarily stop operating due to regulatory problems with their Canadian mother company.”

The “Canadian mother company,” PacNet Services Ltd., on Oct. 4 emailed business partners and vendors a very brief statement: “Due to unexpected circumstances we have to shut the company down. …[U]nfortunately we will have to end our business relationship…effective immediately.”

The “unexpected circumstances” comprised a large-scale, multinational enforcement action by U.S. authorities with assistance from agencies in Canada and the U.K. PacNet and a global network of 12 individuals and 24 entities across 18 countries face or already have been served with a variety of actions including criminal charges, economic sanctions, seizure of criminal proceeds and civil injunction lawsuits. All property and interests in property subject to U.S. jurisdiction are frozen, at least one PacNet bank account has been seized, and U.S. citizens are prohibited from engaging in transactions with PacNet, its subsidiaries, or persons named in the various federal actions.

The USPIS, Internal Revenue Service Criminal Investigation Division and Homeland Security Investigation’s El Dorado Money Laundering Task Force continue to investigate and may execute additional warrants and property seizures pursuant to filing additional criminal charges.

The company addressed the allegations on its website’s homepage in late September, but by the evening of Oct. 4 had not updated the message to advise business associates about the shutdown.

PacNet Services is an international payment processing company. We absolutely and categorically reject the allegations made against us regarding our processing for direct mail campaigns.

We will vigorously defend ourselves against these unproven allegations which we only learned about on September 22nd, 2016, through media reports. As a result of this investigation, it is our understanding that several associated companies have been added to the Office of Foreign Assets Control (OFAC) list which we are also working to address.

PacNet has a rigorous compliance program in place. We follow all global standards in client due diligence and continually update policies, procedures and training. Central to this entire program is the safety of the general public.

In an effort to better safeguard the public, the company decided September 23, 2016, to immediately stop processing payments for direct mail companies. Affected clients are being notified.

According to OFAC, “PacNet has a nearly 20-year history of money laundering by knowingly processing payments on behalf of a wide range of mail fraud schemes that target victims” worldwide. The mail schemes involve a complicated web of actors located across the world, but all follow a similar pattern, which is a brick-and-mortar version of the Nigerian email scam. Fraudulent “direct mailers” create letters falsely claiming the recipient has won, or soon will win, cash or valuable prizes or otherwise will come into good fortune. In order to collect the benefits, the letters instruct the recipients to send a small amount of money for a processing fee or taxes. The letters appear to come from legitimate sources, typically on official-looking letterhead, and — even though they are in reality identical form letters — the letters appear to be personally addressed. Some solicitations even use fonts that appear to be handwritten.

“PacNet’s processing operations help to obscure the nature and prevent the detection of such fraudulent schemes,” an OFAC statement explained. “In a typical scenario, scammers will mail fraudulent solicitations to victims and then arrange to have victims’ payments (both checks and cash) sent directly or through a partner company to PacNet’s processing operations. Victims’ money, minus PacNet’s fees and commission, are made available to the scammers through wire transfers from the PacNet holding account and by PacNet making payments on behalf of the scammers, thereby obscuring the link to the scammers. This process aims to minimize the chance that financial institutions will detect the scammers and determine their activity to be suspicious.”

OFAC records indicate that in 2002, as part of a forfeiture action in U.S. federal court, PacNet executives Rosanne Day and Paul Davis acknowledged the company violated U.S. money-laundering laws by processing funds for such schemes. The pair told the court they no longer would use the mail to process payments.

“Despite PacNet’s prior acknowledgement and the many notifications it has received regarding the fraudulent activity of its clients, PacNet continues to knowingly process checks on behalf of numerous companies that are actively involved in widespread mail fraud campaigns,” according to an OFAC statement in late September. “As an example of the clear warnings PacNet has ignored, the North Dakota Attorney General contacted PacNet in 2009 regarding the Group’s processing of payments for the “Maria Duval” psychic scam. Although PacNet eventually refunded the money to the victims, PacNet continued to process transactions for the Duval scheme for over five years.

“Similarly, PacNet received subpoenas from the Iowa State Attorney General in 2014 regarding the victimization of the elderly and other Iowans by fraudsters they identified as PacNet clients,” the statement continued. “PacNet continued to process transactions for these scams until law enforcement shut down the PacNet clients.”

The PacNet officers and directors facing sanctions and possible criminal action are Paul Davis, Roseanne Day, Gerard Alphonsus Humphreys, Ruth Ferlow, Marie Boivin, Brian Weekes, Monica Elizabete Bottcher, Siobhan Ann Hanrahan, Raffaella Ferrari, Donna Maria MacBain, Mary Ann Driscoll and Estelle Snyman.

Davis — president, partner, shareholder or corporate director of several PacNet companies — is accused of unlawfully couriering funds and instructing subordinates to mislabel customs forms of currency shipments to evade cross-border reporting requirements. Day — who serves as president of PacNet Services Limited, which functions as a holding company for the rest of the PacNet Group — allegedly “instructed subordinates to route transactions through the PacNet entity Indian River (UK) to hide the affiliation of the transactions with PacNet Services Limited and avoid the potential rejection of the payments by financial institutions.” Humphreys, chief pilot for PacNet Air and a director for several other PacNet companies, is accused of couriering bulk cash within Europe.

In addition to Indian River, Chexx, The Payment Factory and a slew of entities whose names include “PacNet,” the parent holding company’s many operating units include Aeropay Limited, foreign exchange firm Accu-Rate, Counting House Services Ltd., Deepcove Labs and Manx Rare Breeds Ltd.

Several companies with which YNOT has been in contact assured affiliates, webcam performers, subcontractors and others who receive wire transfers that their payments will not be interrupted. The companies did not want their names mentioned.

PacNet did not respond to requests for comment.



 
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