Payment Services Providers And Their Responsibility In Illegal Broker Schemes

Payment service providers for illegal broker schemes

Systematic investor fraud involving illegal broker schemes would not be possible without intentionally or negligently co-operating payment service providers and banks. Only the facility to launder and move the illicit money worldwide gives illegal brokers the opportunity to rip off investors and maintain globally operating criminal organizations. In this respect, these payment service providers must be qualified as co-conspirators in the sense of criminal law and held accountable by authorities and investors.


Money laundering and investor fraud

Payment service providers (PSP) participating in illegal broker schemes do not only enable the cheating of investors. Moreover, these payment service providers launder the money for the fraudulent brokers. Money laundering is the act of concealing the transformation of profits from illegal activities and corruption into ostensibly “legitimate” assets

Since the 4th AML Directive at the latest, PSP, banks and other professional services providers have been obliged to inquire extensively about the customers and their beneficial owners. The AML directive calls it Customer Due Diligence (CDD) and the Ultimate Beneficial Ownership (UBO) audit. The aim is to exclude criminal funds from the banking system because they threaten the stability of the economy and society, as stated in the opinion on the 4th AML Directive:

Flows of illicit money can damage the integrity, stability and reputation of the financial sector, and threaten the internal market of the Union as well as international development. Money laundering, terrorism financing and organised crime remain significant problems which should be addressed at Union level.
In order to facilitate their criminal activities, money launderers and financers of terrorism could try to take advantage of the freedom of capital movements and the freedom to supply financial services which the Union’s integrated financial
area entails.

DIRECTIVE (EU) 2015/849 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 May 2015

EU Payment processors must adhere to the AML directives and perform AML checks on their customers and individual payments and report suspicious payments to the respective authorities. In most regulatory regimes, PSPs and banks have to implement appropriate software algorithms as part of their risk management system. In any case, the KYC/AML approach of PSPs must prevent illegal transactions from gaining access to the banking system.

According to the U.S. FBI, illegal brokers stole up to USD 10 billion per year in binary options alone in recent years. Provided that this huge number is actually close to the truth, we want to take a closer look at the payment service providers involved in illegal broker schemes identified by us during the past months..

Jubiter Technologies

FinTelegram has analyzed several payment service providers over the last few months as part of its research into illegal brokers. We came across companies such as Jubiter Technologies UO (www.jubiter.com), a company registered in Estonia. The company received two licenses from Estonian Financial Intelligence Unit (FIU) to operate a crypto exchange business and an online wallet service. Jubiter customers can buy cryptocurrencies via credit card which is a nice service.

Unfortunately, Jubiter has been deployed by illegal broker schemes to enable investors/traders to deposit funds with its illegal broker sites in crypto. Jubiter has been listed as a payment option on some illegal broker sites such as SafeMarkets, XtraderFX or Golden Markets to accept payments using cryptocurrencies. When using the Jubiter payment options the users are presented with a default wallet address which is the broker’s address (see below), i.e. the BTCs are automatically sent to the broker. In the case we investigated we found the wallet address 33q4bXPJ7mSw6THA5XqoQ6qHjRvbNM2aj6 showing 99 transactions with 46.4 BTC received (USD equivalent appr. 170,000).

Jubiter crypto payments to broker sites

While it may be true that Jubiter is not deliberately involved in investor fraud on the illegal platforms it evidently had no KYC/AML procedures in place to prevent the misuse of the platform by illegal broker schemes. Compliance with the KYC/AML guidelines is one of the essential prerequisites for obtaining the license in Estonia. In a Jubiter statement to FinTelegram it is said that the service can be used without KYC/AML by third parties:

In the article referenced above, you have mentioned Jubiter Technologies as a payment service provider […] for illegal brokers as SafeMarkets, Golden Markets and XTraderFX […] In addition, Jubiter Technologies never accepted […] the abovementioned brokers as its clients and any claim for its connections of any sort therewith is hereby repudiated. Therefore, no KYC or AML checks were required to be applied with respect to such persons/entities, as suggested in the article.

Jubiter statement to FinTelegram article on SafeMarkets payment services providers

From what we learned, SafeMarkets used the companies OPTIUMCOMMERCE OU and SOLVEKEY OU to run its business. The latter is given as responsible entity for payments to the platform.

We did not receive an answer from Jubiter to a new inquiry from FinTelegram regarding KYC/AML tests.

InvestBank (iBank)

The situation with the Bulgarian Investbank (www.ibank.bg) is even worse. Although Investbank is an EU-regulated financial institution it operates as a sort of offshore bank within the EU. That is where the operators of illegal brokerage schemes from the EU, Eastern Europe, United States, Russia, and Israel maintain their accounts. Millions of illicit dollars are processed via the Bulgarian bank, with significant amounts of cash transactions well above the EUR 10,000 threshold allowed by the AML rules. As an EU bank in the SEPA network, Investbank should be a watchdog to protect the SEPA system from money laundering and money from organized crime. In fact, however, the Investbank promotes these illegal activities by negligently applying the KYC/AML framework and facilitate the laundering of illicit money from ciminal organizations.

Deutsche Bank’s 2014 money laundering offenses (AML) seem almost cute against the behavior of the Bulgarian Investbank. As FinTelegram reported, Deutsche Bank was fined USD 625 million to the U.S. and U.K. at the time. the supervisory authorities.

The members of Investbank’s supervisory board are Mrs. Petia SLAVOVA, Festa Holding AD, and Mrs. Dimitriyka ANDREEVA.

Praxis Pay (Praxis Cashier)

In addition to the Estonian Jubiter and the Bulgarian Investbank, Praxis Pay, based in Cyprus, also plays an important role in global money laundering schemes around illegally acting broker sites. Many of the illegal broker sites work with Praxis Pay and collect customer funds via their platform. The company is also unlikely to use KYC or AML or include them in its solution. Although Praxis Pay is not a registered payment service provider, it would still have to comply with the KYC/AML guidelines.

PayCashier was previously known as Praxis Pay. The company claims that they are a leader in the financial services sector. Praxis Cashier System Ltd, which is officially based in Cyprus, has intensive contacts and working relations with the Israeli scene in the field of illegal brokers. Up until today, Tel Aviv is given as the place of residence on the Facebook page. Amit KLATCHKO, the company’s founder and director has his roots in Israel.

Praxis Cashier - payment services provider for illegal broker schemes
Praxis Cashier – payment services provider for illegal broker schemes

Payvision

In addition to Praxis Pay, Payvision, a Dutch payment service provider plays an important role in the collection and distribution of illegally received investor funds. FinTelegram received corresponding account data showing that millions of investor money are distributed via Payvision to the various offshore companies of the illegal operators.

Payvision is likely to be one of the most important money distributors of illegal brokers within the EU alongside Investbank. Questions of FinTelegram at Payvision have not been answered yet.

[to be continued]

Report Suspicious Payments

If you have information about illegal money flows with illegal brokers or have lost money with illegal brokers, please let us know via our whistleblower system. We will share your information with the appropriate authorities.