EFRI Launch Campaign To Address Payments Services Providers Responsibility In Illegal Broker Schemes

Defrauding investors would hardly be possible without the willful or at least grossly negligent involvement of payment service providers (PSP). Through these PSPs, the operators of illegal broker schemes have cheated investors in Europe of hundreds of millions of euros through elaborate networks of companies and bank accounts. The European Fund Recovery Initiative (EFRI) has launched a campaign to take joint action against the PSP involved, i.e. against fraud facilitators.

PSP Responsibilities

PSPs are under an obligation towards investors. That’s also how FinTelegram sees it and how the courts see it! Recently, the competent supreme court in Austria awarded damages to the lawsuit filed by a fraudulent investor of an illegal broker. The Austrian investor had made payments to an illegal broker via a Czech PSP with the purpose of using the money for trading in binary options and CFDs. Since the investor did not get his money back from the broker, he had sued the PSP for damages and won.

Both the court of first instance and the competent court of appeal regarded the PSP’s involvement in the fraud scheme as evident. Receiving money from investors and forwarding it to changing offshore entities behind websites evidently is not an honest business practice, right? The Court of Appeal also found that illegal payment service providers must also comply with the relevant EU directive on payment services. The judgment is final.

In the meantime, investigating and supervisory authorities in Germany, the Czech Republic, Austria and Bulgaria have opened or monitored a number of accounts of illegal brokers as well as of participating payment service providers such as B2G GmbH, P2P GmbH, Xtrabit s.r.o. or StronIT GmbH.

Follow The Money

PSPs are active across various broker schemes and know the actual operators – the ultimate beneficial owners (ubo) – behind the various websites, domains, and bogus companies. They have the payment transaction records and can thus provide the authorities and investors with the relevant information about the beneficial owners. There are actually two basic categories of PSPs in the market:

• licensed and regulated PSPs intentionally or negligently violating AML/KYC rules to boost profits and business volume from illicit transactions;
• illegal PSPs set up with the sole purpose to facilitate illegal schemes.

The EFRI initiative to recover funds for investors via PSPs starts today with the “Payment Services Provider (PSP) Class Action Campaign” against the PSPs involved. Investors can register their payment transactions across all illegal broker schemes. EFRI will work with lawyers and litigation financiers, in conjunction with the relevant investigating authorities, to attempt to recover investor funds from the PSPs involved and/or to obtain operator data to use.

The payment service providers concerned participate in the money laundering of illegal brokers as well as in the fraud of retail investors (two sides of a coin). Not only do they violate regulatory rules on money laundering, but they also potentially commit criminal offenses, depending on the nature of their involvement.

Report Payments to EFRI

You can report payments to illegal online schemes in the PSP Class Action Campaign on EFRI here: