Civil forfeiture office seeks seizure of PacNet assets

Designation of PacNet by U.S. as transnational criminal organization dropped

PacNet's office in on Howe Street was shut down shortly after the U.S. designated it a transnational criminal organization, which it has since revoked.

PacNet, the Vancouver payment processing company that was put of business through an American designation as a transnational criminal organization, is now facing a forfeiture action here in B.C.

B.C.’s director of civil forfeiture has applied to the B.C. Supreme Court to seize property and bank accounts owned by PacNet, its founder, Rosanne Day, and several other PacNet owners and employees.

The application follows a Vancouver Police Department investigation that alleges PacNet knowingly did business for decades with people involved in “predatory mail-fraud schemes, primarily targeting the elderly and vulnerable.”

The allegations have not yet been proven in a court of law.

In an affidavit, Detective Dwain Mah of the Vancouver Police Department stated: “According to my investigation, I believe that, since 1997, PacNet has provided cheque processing services for companies acting as fronts for individuals and organizations perpetrating mass-mailed fraudulent solicitations.”

Some of the schemes included prizes in which victims of the scheme were asked to pay processing fees in order to claim winnings. Typically, elderly people who fell for the scam would pay $10 to $50.

“The victims, who are often elderly, receive nothing in return for their payment, other than an increased number of similar solicitations, and-or a worthless trinket,” the claim states.

In its notice of claim, the director of civil forfeiture says PacNet collected a 3% to 5% fee on transactions and that the various scams bilked victims of hundreds of millions.

Interestingly, PacNet, Day and other directors or employees that had been placed on transnational criminal organization list by the U.S. in 2016 have since been taken off that list.

The business, founded in the 1990s by Rosanne Day, was paralyzed in 2016 when the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) placed PacNet, several affiliates and a dozen owners and employees on its list of designated transnational criminal organizations.

But in October 2017, OFAC removed PacNet, its affiliates and 12 directors and employees from its designation list. The U.S. Treasury Department provides no reason for removing them from the designation list.

In an email to Business in Vancouver, Day slammed the media for its coverage of the company’s troubles, and said the prompt removal of her and PacNet from the OFAC designation demonstrates the designation was never warranted.

“OFAC delisted PacNet in record breaking speed because the facts about PacNet were brought to their attention,” Day wrote.

“OFAC was misled by the Department of Justice, specifically the US Postal Inspection Service, and once OFAC was furnished with the facts, they delisted PacNet and all the individuals.

“In fact, the first individuals were delisted within five months, even before much of the negotiation took place – because it was apparent right away what had happened here (except to the media of course). Typically, delisting takes years.”

In court documents, PacNet says that it was subject to numerous FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) compliance office examinations. The company also says it had reported “hundreds” of suspicious activities to FINTRAC.

The mere designation by OFAC as a transnational criminal organization was sufficient to put PacNet and its affiliates out of business.

Since most, if not all, wire transactions in U.S. dollars go through American banks, the OFAC designation essentially paralyzed the company’s ability to perform its core business of conducting payment processing.

According to court documents, about 125 employees with PacNet and affiliates lost their jobs from the OFAC designation, which essentially paralyzed any movement of money between banks.

“As an immediate result of OFAC’s actions, nearly all of PacNet Group’s assets and accounts were frozen, its reputation was shattered and its business ceased,” PacNet stated in one court document.

While some of PacNet’s clients were alleged to have been involved in fraud, the company also did business with a number of legitimate businesses and organizations, including the Special Olympics Society of B.C.

In October 2016, shortly after the OFAC designation was made, the VPD launched an investigation.

In affidavits filed in court, the civil forfeiture office states that PacNet processed cheques for companies and acted as “fronts” for organizations that committed “mass-mailed fraudulent solicitations.”

The VPD’s investigation raises questions about oversight of companies like PacNet, since it appears Canadian regulators have been aware that the company had been involved in payment processing for companies that were involved in activities believed to be fraudulent.

“PacNet was audited regularly and frequently by the Canadian government, financial institutions and independent auditors/accountants,” the affidavits stated.

But the director of civil forfeiture also states that PacNet had been warned numerous times about doing business with certain clients involved in fraudulent activities and continued to do so.

“PacNet has repeatedly been contacted by law enforcement and regulators in relation to civil and criminal fraud proceedings against its customers and that PacNet has been notified on multiple occasions that its customers are engaged in fraudulent mass-mailings and in certain instances, PacNet continued to facilitate the mail fraud, despite this notice,” the court documents state.

The documents filed in court ask for properties owned by PacNet, Day, and several others to be seized. PacNet properties include 1204 – 821 Cambie Street.

Also targeted are properties owned by Day in Vancouver, Gibsons and Keats Island.

The claim also seeks the seizure of money held in numerous bank accounts belonging to PacNet, Day, and several other directors or employees.