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U.S. designates Vancouver company PacNet a 'significant transnational criminal organization'

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Treasury Department says payment processor PacNet launders money for fraudsters around the world

A security guard is posted outside the entrance to PacNet's downtown Vancouver office. The company declined to comment. (Anita Bathe/CBC)

The U.S. Treasury Department has designated Vancouver-based company PacNet a "significant transnational criminal organization" as part of a crackdown on mail fraud.

In a news release, John Smith, acting director of the department's Office of Foreign Assets Control, claims the payments processor 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."

'Large-scale, illicit money flows'

The designation places PacNet in the company of organizations like the Japanese Yakuza, Mexican Los Zetas and Italian Camorra.

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All are targeted by a presidential executive order issued in 2011 to deal with threats posed by transnational criminal organizations to American national security, foreign policy and economic interests.

In addition to naming the company, the designation also includes 12 individuals and 24 entities connected to PacNet. They include two women from Vancouver and one from Ottawa.

The U.S. Treasury Department says it has sanctioned PacNet executive Rosanne Day as part of a crackdown on the payment processor. (U.S. Treasury Department)

"PacNet has 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," Smith said.

PacNet executive Rosanne Day is among the individuals targeted for "assisting, sponsoring, or providing financial, material or technological support for" the company.

Day was on the phone when the CBC contacted PacNet's Vancouver office, which is located in the financial district of Howe Street. She did not return a message. A receptionist later told a reporter the company would not comment.

PacNet says clients misled it

In a lengthy news release, the Treasury Department claims the payment processor obscures the nature of mail order fraud and prevents detection by acting as a kind of middleman between victims and the people preying on them.

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"In a typical scenario, scammers will mail fraudulent solicitations to victims and then arrange to have victims' payments … sent directly or through a partner company to PacNet's processing operation," the release says.

"Victims' money, minus PacNet's fees and commission, are made available to scammers through wire transfers from the PacNet holding account and by PacNet making payments on behalf of the scammers.… This process aims to minimize the chance that financial institutions will detect the scammers."

U.S. Treasury Department Office of Foreign Assets Control acting director John Smith says PacNet has 'knowingly facilitated' fraudulent activities. (Linktank)

The U.S. Treasury Department designation comes at the same time as an investigation into PacNet by CNN.

In a response to the broadcaster, an attorney for the company claimed PacNet did everything it could to prevent fraud.

"To the extent there have been isolated instances in which PacNet clients have, unbeknownst to the company, misled PacNet and misused PacNet's legitimate payment processing services to support their own deceptive conduct directed at consumers, PacNet is no different than any bank, credit card company, or other financial institution," PacNet's attorney said in a letter written to CNNMoney in June.

'Maria Duval' psychic scheme

The Treasury Department cites a 2002 U.S. District Court decision in which Day and PacNet president Paul David "represented to the court that in the future they would not use the mail to process payments for illegal lottery purchases."

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The news release says that despite that promise, "PacNet continues to knowingly process cheques on behalf of numerous companies that are actively involved in widespread mail fraud campaigns."

The department claims PacNet was contacted by North Dakota's attorney general in 2009 with regard to processing of payments relating to the "Maria Duval" psychic scheme, in which purported psychics sent letters to people claiming to have foreseen good fortune based on the purchase of various products and services.

"Although PacNet eventually refunded the money to the victims, PacNet continued to process transactions for the Duval scheme for another five years," the release says.

The Treasury Department's action is part of a wider American law enforcement bid to target mail fraud schemes preying on elderly and vulnerable victims.

The U.S. Department of Justice claims that in 2016, PacNet has processed payments for the perpetrators of more than 100 mail fraud campaigns involving tens of millions of dollars.