Treasury Slaps Counting House As ‘Criminal Organization’

The U.S. Treasury has reportedly dubbed international payments processor PacNet, which operates Counting House, a “criminal organization,” and reports said the move could cause trouble for FX brokers.

In a press release dated Sept. 22, the Treasury said PacNet has been deemed a “significant transnational criminal organization” by its Office of Foreign Assets Control (OFAC).

“PacNet, an international payments processor and money services business, has a lengthy history of money laundering by knowingly processing payments on behalf of a wide range of mail fraud schemes that target victims in the United States and throughout the world,” the Treasury wrote.

According to the OFAC Acting Director John E. Smith, PacNet “knowingly facilitated the fraudulent activities of its customers for many years, and today’s designations are aimed at shielding Americans and the nation’s financial system from the large-scale, illicit money flows that are generated by these scams against vulnerable individuals.”

Now, reports say there could be fallout from the Treasury’s decision, especially with FX brokers.

U.S. regulators are targeting PacNet for its reported role in schemes like fraudulent mail lottery solicitations, requesting that the recipients pay in both check and cash. Those payments are processed through PacNet.

But PacNet-run Counting House is positioned as a provider of FX payment processing services for FX brokers. According to reports by FinanceFeeds on Sunday (Oct. 9), “in times at which it is difficult to obtain merchant services from many providers, firms could inadvertently use this company.” Some of the largest financial institutions in markets with stringent regulatory controls are turning FX brokers away from their services, the outlet said, forcing brokers to turn to third-party payment processors.

“This means that not only do brokers have limited options as to where to store their operating capital and client funds,” the outlet stated, “but are also now becoming the target of thefts from corporate bank accounts because FX brokers are being increasingly forced to use third-degree banks in less than salubrious regions, which, according to our research, is causing great difficulties in security of funds.”

PacNet has operations in Canada, the U.K. and Ireland, with subsidiaries in several markets across the globe, reports said.