Documents trace history of firm accused of fraud
PacNet has 15 years of history with U.S. law enforcement
Documents provided by the U.S. Department of Justice are providing a look at the history of PacNet, a little-known Vancouver payment processing company that Washington alleges was key to an international money-laundering operation.
U.S. authorities last week seized a PacNet bank account. According to an affidavit sworn last week in support of the warrant to seize the account in the name of PacNet Services Ltd, there is “probable cause” to believe the funds in PacNet’s U.S.-based bank account were derived from proceeds of fraud or involved with money laundering.
The 42-page document, obtained Monday by Postmedia, outlines PacNet’s history with investigators, customers, and banks over the last two decades, alleging a “staggering quantity of mass-mailing fraud … has gone through PacNet’s accounts.”
The document contains allegations that have not been tested in court.
On Thursday, the U.S. Department of Justice announced, in collaboration with the U.S. Postal Inspection Service and the Department of the Treasury, that PacNet had been designated as a “significant transnational criminal organization.”
PacNet, which is headquartered on Howe Street, has denied the allegations, and defended its compliance and due diligence efforts.
In response to email and phone messages, PacNet’s head of marketing and client services, Renée Frappier, sent a prepared statement by email Monday saying: “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.”
The email, which included similar wording to a statement posted Friday to PacNet’s website, continues: “We will vigorously defend ourselves against these unproven allegations which we only learned about Sept. 22nd, 2016, through media reports.”
But before last week’s media reports, PacNet had a history of complaints and interactions with law enforcement dating back more than 15 years, according to the affidavit, which was sworn a week ago and filed in U.S. District Court for the Eastern District of New York.
The affidavit describes, among other incidents, the 2001 seizure by postal authorities of more than $450,000 from two bank accounts owned by PacNet. In a consent judgment the following year, PacNet president Rosanne Day and chairman Robert Paul Nadin-Davis “acknowledged that they had been warned and were aware, that their processing services for lottery and game of chance mail solicitations constituted federal criminal offences,” the affidavit alleges.
More recently, a postal investigator identified 107 different massmailing fraud campaigns for which PacNet processed payments in this year alone, the affidavit alleges.
Each year, potential victims in the U.S. receive millions of mail fraud solicitation packets, which purport to come from financial entities, lotteries, or world-renowned psychics, telling recipients they will receive large sums of money in exchange for a small fee, according to court documents.
The different parts of the international mail fraud operation are described in a separate, but related, civil action filed last week by the U.S. government.
The civil claim says: “Defendants’ direct mailing schemes involve a consortium of entities. ... These six diverse groups work together to produce and mail millions of solicitation packets each year, collect and distribute tens of millions in annual victim payments, and attempt to obscure their true identities from their victims and law enforcement agencies worldwide. Each of these entities plays an integral role in the mail-fraud schemes.”
Last week’s affidavit alleges PacNet was the payment processor of choice for several mail fraud campaigns, noting: “Victims were instructed to send their payments to P.O. boxes around the globe, including the U.S., Australia, Austria, Canada, Hong Kong, Hungary, Ireland, the Netherlands and Switzerland.
But evidence reveals that these payments all made their way to PacNet for processing.”
Frappier did not reply to a request for comment about previous PacNet involvement with U.S. law enforcement.
In an email, she said: “PacNet has a rigorous compliance program in place. We follow all global standards in client due diligence and continually update policies, procedures and training.”
But the postal investigator alleged in the affidavit that “in reality, PacNet misrepresents its due diligence claims,” and, in some cases, “PacNet actually performs no due diligence at all.”
Banks have also terminated their relationships with PacNet, the affidavit alleged, “because of concerns about the nature of the transactions PacNet is processing.”
One U.S. bank terminated PacNet’s accounts after only a few months, the affidavit says. The affidavit says that after Day received a termination letter from the bank in March 2010, she replied by email saying: “We understand that your compliance department raised some issues with some of our clients, but we moved those clients immediately on request.”
Accordingtotheinvestigatorwho swore last week’s affidavit, Day’s email to the bank “suggests that, upon being notified that PacNet’s clients were conducting fraudulent sweepstakes or contest solicitation schemes, instead of terminating or reviewing the merchants, PacNet and Day ‘moved them’... to a different bank.”
The affidavit also noted: “PacNet goes to great lengths to ensure that it can process its clients’ funds,” alleging for example that a PacNet principal, who is also a pilot, flew an airplane to the Netherlands to pick up currency, then transported the currency to Ireland, “where it would be deposited and then disbursed to the scheme participants.”
Meanwhile, RCMP national spokeswoman Cpl. Annie Delisle said in an email Friday that the RCMP was aware of the U.S. government’s actions against PacNet, but added: “However, we cannot comment on this specific case as no arrests have been made in Canada.”