The Group no longer offers payment services effective 22nd September 2016
PacNet Services Ltd.
Cutting-edge international payment processing company
PacNet Services was created in 1994 to serve a growing need among catalogue sales companies and international publishers to accept payment in their customers' home currencies.
In 1994, "globalization" was a buzz word, and many companies within the US and around the world were wondering how best to tap into opportunities to sell their products internationally.
The internet was in its infancy; direct mail was the primary vehicle for international sales and cheques were the preferred method of payment. PacNet, one of the world's first international fintech companies, provided a way for companies to accept cheques in their customers' home currency, yet receive funds in their company-designated bank account quickly and without high fees.
As globalization continued apace and more and more companies recognized the opportunities presented by international markets, PacNet added payment services such as multi-currency card processing, bank transfers and cheque issuing to facilitate international e-commerce and consumer refunds.
PacNet Services was a well-respected, cutting-edge, fully licensed and compliant international payment processing company, among the first to recognize the importance of providing consumers and businesses with convenient local-currency payment options. The company ceased doing business on 22 September, 2016.
September 22, 2016
On 22 September 2016, the United States Government, Department of Treasury’s Office of Foreign Assets Control designated PacNet Services, approximately 33 group companies and subsidiaries, and 12 individuals as a “Transnational Criminal Organization” and added their names to its list of Specially Designated Nationals. As a result, it was impossible to continue business and the Group commenced an orderly shut-down of all its business activities.
The designations were based on an allegation that PacNet Services conspired in fraudulent activities of “Direct Mail” marketers active in the United States and elsewhere. PacNet and its officers vigorously deny the allegation and have presented factual evidence to OFAC that the action was unjust and undeserved. No accusations or allegations whatsoever were made against Chexx Inc or Counting House. They were, nevertheless, included in OFAC's actions.
Prior to September 22, 2016, neither PacNet Services nor its affiliates, directors, or officers had ever been accused—much less charged and convicted—of any criminal offense arising from its business activities. To the contrary, PacNet Service's history of compliance and cooperation with law enforcement agencies and anti-money laundering initiatives was publicly recognized and appreciated.
Sanctions Lifted
On 19th September 2017, OFAC and the PacNet Services Group signed an agreement under which OFAC would remove all remaining entities and individuals from the SDN list. There was no fine, no penalty, and no agreement by the companies that any wrongdoing had occurred. However, on the insistence of OFAC, the agreement did include a clause which prevents the PacNet Services Group of Companies from suing OFAC for damages.
The PacNet Services Group is in the process of dissolving the companies in an orderly manner. Any client funds in which the US Government claimed a law enforcement interest were paid under an Interpleader action into the District Court for the Eastern District of New York.
Incredibly, after PacNet Services filed the interpleader in compliance with its agreement with OFAC, the US government attempted to seize client funds. PacNet received court permission to file a complaint and request censure of the US Government's actions and some of the individual lawyers involved. A former Chexx Inc client, i-Payout, joined the court action in support of PacNet's complaint. Click here to read PacNet Service's reply brief to the District Court of New York.
On 26 October 2017, OFAC announced removal of the entire PacNet Services Group of Companies from its sanctions list. However, the announcement lacked the sensationalized media coverage dedicated to the original designations. There has been a disappointing lack of media curiosity and discussion regarding OFAC's unprecedented and outrageous actions in designating PacNet Services, a reputable organization with no criminal history, as a Transnational Criminal Organization and its subsequent speedy removal of all associated individuals and companies from its list.
The US Government’s attempts to further damage PacNet Services using unauthorized procedures did not end with their withdrawal of the ill-considered, incorrect and unlawful OFAC sanctions in 2017. In late 2019, attorneys for the Eastern District of New York attempted to cause forfeiture of the very same PacNet money that had been authorized by OFAC to be paid into the District Court as part of the interpleader agreement. The government seized those funds ex parte then attempted to justify their action by adding them to the forfeiture in a case against an individual named Ryan Young, who had a relationship with some former PacNet clients. This is contrary to the unanimous decision of the US Supreme Court Honeycutt v. United States, 581 U.S. ___, 137 S. Ct. 1626 (2017) that forfeiture “is limited to property the defendant himself actually acquired as the result of the crime,” and it was made more egregious by its failure to serve proper notice of the proceedings on PacNet.
Acting within the statutory time periods, PacNet Services filed a petition to remove the attempt to forfeit its funds from the Ryan Young forfeiture case. The government failed to respond to PacNet’s petition within the 60 days allowed, and on May 19, 2020, PacNet filed a motion to grant the petition with the District Court as it was unopposed. Click here to read PacNet’s Motion to Grant Petition which outlines the government’s wrongdoing in more detail.
Undeterred, the US Government persisted with its unlawful forfeiture attempt. Although Young’s plea stipulated a forfeiture of $1.5 million in total, over $6 million more from PacNet bank accounts was illogically sought to be included. The Government’s pleadings ignored the Supreme Court’s decision in Honeycutt, and attempted to persuade the court to make a decision based on older cases which are no longer valid having been over-ruled. PacNet Services was forced to respond in a further letter to the District Court which can be read here.
Exonerations Relevant to PacNet's History
Judge Rules in PacNet's Favour
From 2010, PacNet Services was engaged in litigation with the Irish government over a particular delivery of cash. In a resounding High Court judgment delivered after nine years on January 25, 2019, Mr. Justice Simons ruled that the preceding four years of proceedings were unnecessary and disposed of the case entirely in favour of PacNet.
Click here to read about this ruling in the Irish Times;
Click here to read the full judgment.
Mr. Justice Simons also ordered the Director of Public Prosecutions to pay the full costs of the applicant parties, which are substantial.
Click here to read the costs order;
Click here to read about this repayment order in the Irish Times.
No Connection to Illegal Activity
As a knock-on effect of the OFAC sanctions and inaccurate press reports, freezing orders were placed on company assets in three jurisdictions: Ireland, the Isle of Man and the United States. The American orders were lifted with the removal of OFAC sanctions. On 3 September 2018, the IOM Court lifted its freezing order, ruling that there was no demonstrated connection with any illegal activity whatsoever.
Judge Rules: PacNet UK "was not involved in money laundering."
In February 2021, after a two-year battle, highly respected District Court Judge Ezzat dismissed an application by the UK’s National Crime Agency for forfeiture of approximately USD 2.5 million of PacNet’s funds and ordered their immediate return. His Honour criticized the Agency for relying on American authorities' allegations instead of looking at the evidence and forming an impartial view. He specifically found that with respect to fraud allegations, the amount of fraud involved in transactions processed was no more than would typically be expected within the volume of transactions processed.
On 30 April 2021, District Judge Ezzat handed down a costs award in favour of PacNet of approximately GBP 104,000. His Honour stated in awarding this substantial sum out of the public purse that, had the NCA done a proper review of the evidence, it should never have brought the case.
Law Society Ruling: No Professional Misconduct by Dr. R Paul Davis
On 27 April 2021, after an investigation commenced in 2018, the Law Society of Ontario issued its final determination of a complaint brought against PacNet General Counsel Dr. Paul Davis. After consideration of a complaint bought by the Law Society itself and information provided by solicitor Declan O’Reilly of the Irish Criminal Assets Bureau, the forensic investigation concluded with a ruling that there was no evidence of professional misconduct by Dr. Davis. The file was closed.
