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Scammers and their bankers III – The legal entity monopoly played by PAYVISION to bypass regulatory frameworks

To date, EFRI represents more than 910 European consumers who have been ripped off by investment scams, stealing EUR 49,8 Mio of their lifetime savings. The harm is done to hundreds of thousands of European consumers – mainly older people – during the past years by investment and boiler room scams is nothing short of shocking: massive financial losses, psychological distress, and mental illness resulting from such an experience. Unsuspecting European consumers lose their life-time savings to scrupulous international fraud organizations. EFRI tries to support victims to get some justice.

No scams without payment facilitators

The investment scam tsunami currently sweeping Europe, would not be possible without willingly participating Payment Service Providers (PSPs). We are convinced that the scammers’ fraudulent business is made possible, in part, by their lengthy, personal and close relationship with the management of the payment processors.

Details about the extent and the results of such a structural collusion can be found in the criminal files of the Vienna Cybercrime Trials (#VCT) around the Israeli Gal BARAK who has been sentenced to four years in prison for severe fraud and money laundering in Vienna as of September 1, 2020.

Profitable partnerships indeed

Gal BARAK was the head of a cybercrime organization that operated a portfolio of investment brands (OptionStarsGlobal, xtraderfx, safemarkets, goldenmarkets) with their boiler rooms defrauding tens of thousands of European consumers.

According to estimates of the Austrian enforcement people Gal BARAK´s fraudulent organization stole more than EUR 100 Mio between 2016 up to the end of January 2019. 75% of the total volume of this money was processed via the Dutch licensed financial institution PAYVISION – a 100% subsidiary of ING Group N.V. Amsterdam. Rudolph BOOKER, founder, and ex-CEO of Dutch high-risk payment processor PAYVISION has definitely been the acquiring institution of choice for BARAK. PAYVISION was referred to Gal BARAK by Uwe LENHOFF – a German scammer – who died about a medical overdose in July 2020 in his arrest cell in Saarbrücken.

The Vienna Cybercrime Trials (#VCT) files show that late 2016, 2017 and early 2018 have been the most successful time for BARAK´s fraud organization, most of the money was stolen during these 20 months. This time was also the period when BOOKER tried to sell its company and successfully did. He and his partners successfully sold its high-risk processing merchant processing FinTech PAYVISION to ING Group N.V. at a valuation of EUR 360 Mio

So being a payment processor for fraudsters and scammers pays off evidently.

But as one can learn from the BARAK´s criminal files, very often it can become quite challenging to fit all the requirements of such scammers.

The KYC Challenge!

PAYVISION is a Dutch financial institution licensed by the Dutch Central Bank (in Dutch: De Nederlandsche Bank “DNB”) to provide payment services in the European Economic Area (EEA). According to the Card Schemes terms, PAYVISION is only authorized to process credit card transactions for merchants located in Europe and/or EEA respectively.

For the scammers, the requirement to have European companies shown as operating companies on their fraudulent websites always pose a challenge. Potential legal actions from victims and enforcement agencies make it more advisable to present offshore companies as operating companies on the scam sites. Scammers learn quite early the rule that the more shell companies and offshore countries are involved in a scam, the lower the probability that European enforcement agents will actually act.

Legally onboarding new merchants requires the payment processors to do a proper Know-Your-Customer (KYC) check. Part of KYC is the due diligence of the potential merchant’s business, including the review of his website. In such a KYC process, it would be quickly uncovered that, for example, an applying merchant with an EU address runs the website via an offshore entity registered on Marshall Islands, British Virgin Islands, Vanuatu, St. Vincent and the Grenadines, Samoa, or other offshore destinations.

Thus, scammers have to look out for “flexible” payment processors that regard KYC/AML guidelines and regulatory restrictions as a sort of nice-to-have recommendation.

Gal BARAK and Uwe LENHOFF have been lucky to find Rudolph Booker and PAYVISION. They had no issues at all to onboard their Bulgarian (EU) shell company Markets Development EOOD, for example, to process payment transactions for their scam broker website operated by the offshore entity New Markets S.A, Novasage Chambers, Level 2 CCCS Building, Beach Road, Apia, Republic of Samoa. PAYVISION processed illicit transactions for more than four years for the scam website OptionStarsGlobal showing a company from Republic of Samoa as the operating company and processed millions and millions of stolen money for this website.

Please change the legal entity!

And after receiving a short instruction (four-sentences on a slip of paper) from the Bulgarian shell entity’s Nominee Director (also called “Monkey”) with the order to transfer part of the stolen money directly form the PAYVISION account to the bank account of the offshore entity, i.e., New Markets S.A. Novasage Chambers, Level 2 CCCS Building, Beach Road, Apia, Republic of Samoa), PAYVISION happily did so and transferred more than EUR 10 Mio to a company, they never had a merchant contract with. In the criminal files, the shell entity’s Nominee Director confirmed that he never had any contact with employees of PAYVISION himself. All was dona via BARAK, i.e., the beneficial owner and ultimate perpetrator a/k/a scammer, who had a direct line to BOOKER.

In January 2019, when PAYVISION had already cancelled all the contracts with Gal BARAK because of the exposing reports on Fintelegram, a general “refurbishment” of the contracts was requested by PAYVISION. The respective documentation can be found in the seized email communication. Part of the refurbishment was also to ask for a European company to act as the operating entity for the trading website OptionStarsGlobal.

On 28th January 2019, only one day before Gal BARAK was arrested, he told his team, that he succeeded to get a 3rd-way arrangement with BOOKER/PAYVISION so his team can neglect the request for refurbishment.

Up to now, we have not learned the details about this 3rd-way arrangement, but we guess due to the arrest of Gal BARAK, this “arrangement” was never executed, but who knows?… maybe Gal BARAK will tell us..? Stay tuned.

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