10/28/2016

Worldpay sanctioned by French government for processing payments from Israeli FX fraudsters takes banks to court


In the next part of the investigation into 15 Israeli executives that ran a series of separate firms which stole a fortune from French customers, France applies sanctions to Worldpay for processing the payments, and takes major banks to court for failing to check what the payments were for.

France
The inter-governmental onslaught that is faced by the rogue binary options business is gaining, even more, ground.

Last week, Israel Securities Authority (ISA) Chairman Professor Shmuel Hauser requested permission from Israel’s Attorney General Amichal Mandelblit to amend the law to make it a felony to market binary options from any corporate structure within Israel, vowing to put an end to the fraudulent global binary options business at the same time showing his disdain for the unregulated ‘closed system’ firms purporting to offer FX trading to retail customers which in reality were stealing funds, never processing orders, before cutting and running.

Professor Hauser’s cross-border legislative intentions are very much in full swing, and many individual countries this year have outlawed binary options categorically, those being France, Belgium, Holland, Germany, Denmark and Israel (domestic market), with the US having implemented a ban on OTC binary options five years ago.

France, a nation which was an early target by French-speaking Israel-based sales floors of unregulated companies offering FX services but actually not transferring any orders to a live market and manipulating platforms, took extreme umbrage a few months ago by establishing a working relationship with the Israeli police to arrest and sentence 15 ‘executives’ from fraudulent firms that have stolen, according to French authorities, an average of 210,000 Euros from each victim, amounting to tens of millions of Euros in total.

Now, the French government has taken a similar stance, sanctioning London Stock Exchange-listed payment processing provider Worldpay for processing the payments of companies which have defrauded French customers out of such a vast sum of money on false pretenses.

The sanctions against Worldpay represent a similar action to how the US has begun stopping fraudsters illegally continuing to steal from members of the public in nations where it is illegal, by going after the payment processors, which would subsequently make it impossible to do business in those nations even if a fraudster wanted to.

In court on September 15 this year, the second part of the Israeli-French joint criminal investigation into 15 executives took place in the form of Worldpay having been handed a fine of 1 million Euros, and applied to the Sanctions List in France.

The French authorities have noted that Worldpay has provided services to bforex, Aston Market, FXGM, 4XP, Sisma Capital and Tradaxa, all of which are under criminal investigation, along with their directors, some of whom are still at large.

French judge Buresi visited Israel in April 2016. The Israeli authorities are actively cooperating with countries that request assistance with regard to bringing the felons to book.

In an interview with Times of Israel 16 August 2016, Professor Hauser said he was “disgusted by fraud Forex as a regulator but also as a citizen.” The State of Israel has banned companies based in the country to explore the domestic market, which the French government refused to do, despite suggestions in the sense of the Financial Markets Authority (AMF), according to a French-language report that was released at the time of the court case.

France is attempting to regain the trust of the public in its national regulator, AMF, after Yigal Felix Haddad, CEO of Aston Market was only jailed for five months in 2015 for alleged embezzlement and released to enjoy the proceeds of his crimes with very little punishment.

The unregulated brokerages in question have been accused of operating without regulatory approval in any jurisdiction, and soliciting clients either online or by phone, promising annual returns of 20%, 30%, and even 88%, for derivatives trading, most commonly Foreign Exchange, with certain investment products guaranteeing the total amount invested during the first year.

Investigators have alleged that they disguised themselves as representatives of the company’s offices in London or Paris to induce a more credible approach and have them convinced that the money would be transferred to European banks such as ING, RBS or HSBC. Instead, it was moved outside the EU, mostly to Israel, Georgia or Singapore, and offshore tax havens Seychelles, Belize, and the British Virgin Islands.

Given that the French prosecutor said that the investigations ongoing regard to 50 cases, 500 victims, and a total sum of €105 million, then the average scam must have been worth €210,000. French economic daily ´Les Echo’ estimates the volume ranges from €100,000 and €500,000 for each victim.

Two employees at 4XP were already charged by the French police, according to the French press. One of them was involved in a hate crime against a Palestinian taxi driver in 2007. The second employee, Jeremias C., was arrested in a suite of a luxury hotel in Paris last November. He was carrying €6,000 in cash in €50 bills, claiming he earned it playing poker. He paid bail of €80,000 and the directors of the other firms involved have yet to face the music.

Mainstream media across the world is highlighting the non-financial markets orientated nature of these disguised gambling platforms that are weighted in favor of the house and pose as financial investment platforms, the Times in Britain having labeled them a ‘complete fraud’ and several governments working together now to extinguish it – which would indeed be for the greater good of the genuine electronic financial services industry.

Last week, the United States Department of Treasury sanctioned PacNet, (of which Counting House – a firm which processes many binary options payments) is a subsidiary, which is also subject, along with its directors, to the sanctions, its operation now ceased globally and labeled a criminal organization by the US government.

A smart move on the part of the US government, especially bearing in mind that many binary options firms have the audacity to break US law en masse by continuing to solicit US based customers using dedicated algorithmic payment services which disguise the nature of the transaction from merchant service providers (such as Visa or Mastercard) which would block any deposits to such a firm.

France goes after the banks for not conducting due diligence when dealing with fraudsters

In addition to the sanctions on payment processors, France holds the banks responsible for not checking where payments were coming from and being sent to.

Member of the Bar of Paris and Tel Aviv, Deborah Abitbol is one of the lawyers following the case for the plaintiffs.

According to Justice Abitbol, “We have engaged the responsibility of banks. You have a client, not especially wealthy. All his savings are siphoned off in two months by transfers abroad. The regulation is clear, a bank must report abnormal movements.”


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