ANGUILLA FINANCIAL SERVICES COMMISSION FROM THE OFFICE OF me GH/thb Email 09 April 2015 To: Company Managers and Trust Companies Re: Notice Concerning Companies Involved in Forex Contracts or Binary Ogtions Business Remiircment to lggister as a Non-Regulated Service Provider under the Externally and Non-Regulated Service Providers Regulations, 2013 Regulations?! under the Proceeds of Crime c. P98 (as amended) Please be advised that the Anguilla Financial Services Commission (the ommission?) considers any company incorporated under the laws of Anguilla involved in the business of dealing in, or offering facilities to others to deal in, foreign exchange (forex) contracts, binary options, contracts for differences or any other type of security or commodity, whereby the business is structured to generate income ?om trades. including the results of trades. in which it or its customers engage, to fall under the de?nition of ?service provider? under section 1(d) of Schedule 2 of the Anti-Money Laundering and Terrorist Financing Regulations, R.R.A. P98-l (the Regulations?). The above-noted section of the Regulations de?nes a ?service provider? to include: person who, as a business, tradesfor his own account or for the account of customers in money market instruments, including cheques, bills. certi?cates of deposit and derivatives. (ii) foreign exchange. (ii i) exchange, interest rate and index instruments, (iv) ?nancial futures and options, (12) commodities futures, or (vi) shares and other transferable securities. As a service provider, the company is required to apply to the Commission to be registered as a non-regulated service provider in accordance with section 3 of the ENRSP Regulations. Upon enactment of the proposed Investment Business Act, such companies will be required to be licensed under that legislation. A MAICO Building- Floor - Box 1575 - The Valley - Anguilla. B.W.I. I?l'2640 Tel.: (264) 497-5881 - Fax: (264) 497-5872 - E-mail: gerrv.halischuk(a afsc.ai - Website: 9 April 2015 Page 2 The Commission when reviewing an application for registration under the Regulations will consider the following: the location of the customers and the mind and management of the company?s business; 2) whether the business is licensed in any jurisdiction and whether supervised for AMUCFT purposes; and 3) the ability ofthe Commission to supervise the company?s business for AMI purposes. The Commission considers that companies involved in the business of dealing in. or ol?t'ering facilities to others to deal in, forex contracts or binary options to be. a high risk for money laundering and terrOrist ?nancing if not licensed or supervised in any jurisdiction. Reference is made to the Investor Alert published on 12 December 2014 on the Commission?s website. See link below: '11\ -"?0201 Reference also is made to the attached memorandum dated 2 April 3015 From the Head of Anguilla?s Financial Intelligence Unit which identities companies engaged in binary options and forex trading as an emerging crime type and the high risk of money-laundering and terrorist ?nancing that these types ot'businesscs represent. lt?sueh a company fails to apply to register under the Regulations, or it?thc (?ommission refuses to register it, and the company continues to engage in the business. it Will be non- compliant with section 15213 of POCA. The Commission's expectation is that such circumstances will result in the registered agent immediately terminating its relationship with that company. 1 encourage you to provide a copy ofthis notice to your introducers and intermediaries. Yours sm?. ely. Director Fine. Building- 2"?1 Floor - Box 1575 - The Valley - Anguilla. B.W.1. Al-2640 Tcl.: (264) 497?5881 - Fax: (264) 497-5872 - E-mail: gerrnhalischuk'a afsc.ai - Website: IAUNDILIING Al?'llORll'Y FINANCIAL IlNll'. ANGUII IA MEMORANDUM To: Director of Anguilla Financial Services Commission From: Head of Financial Intelligence Unit. Anguilla CC: Date: April 2015 Re: Binary Options/Fore): trading - emerging crime type Dear Mr I lalischuk. lngodggjon The Financial Intelligence L'nit has recently seen an increase in reports concerning wehobased companies purporting to offer the facility to trade in ?binary options? or ?forex?. However, rather than being genuine internet trading platforms, the websites encourage customers to deposit money and this money is never returned to them. This activity impacts upon Anguilla because the companies involved are IBCs registered in Anguilla and the companies then include the company management agent?s of?ce address on their website. The company also may claim to have an address in another country. a London, UK. address is especially popular. In most cases, however, this address is a corporate mail box at best and is not staffed. Thus when victims lose money and seek to ?le a complaint their only point of contact is the company manager?s o?icc. 'es and lixeha Needless to say this type of criminal enterprise has come to the notice of the US authorities. 'lhe Securities and Exchange Commission (SI-EC) and the Commodity Futures Trading Money Laundering Reporting Authonty Intelligence llmt. - Tel Fax 1 384407-8594 mel. I Commission (f 11"? I) have issued a joint investor alert, in which they explain very how these types of fraud are pcmetratod. I've reproduced this explanation here: ?The SEC and have received numerous complaints_of fmud associated with websites that offer an opportunityjo buy or trade binary options through Internet- basedjrading platforms. The complaints fall into at least threecategories: The ?rst category of alleged fraud involves the refusal of certain lnternet-baSed binary options trading platforms to credit customer accounts or reimburse funds after accepting customer money. These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by ?brokers? over the telephone to deposit additional funds into the customer account. When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customers? withdrawal requests, re?ise to credit their accounts, or ignore their telephone calls and emails. The second category of alleged fraud involves identityr theft. For example, some complaints allege that certain Internet-based binary options trading platforms may be collecting customer information such as credit card and driver?s license data for unspeci?ed uses. If a binary options Internet-based trading platform requests photocopies of your credit card, driver?s license, or Other personal data, do not provide the informaticm. The third category of alleged fraud involves the manipulation of the binary options trading software to generate losing trades. These complaints allege that the Internet-based binary options trading platfomis manipulate the trading software to distort binary options prices and payouts. For example, when a customer?s trade is ?winning,? the countdown to expiration is extended arbitrarily until the trade becomes a loss.? In Anguilht the most commonlj,r reported of these three methodologies is the ?rst; in which the companies refuse to refund customers? money which they have deposited into online trading accounts. Munro; Hi-Fu-?m ;.t"ml"o fF "Ill if? 2h: F.3- groups Information gathered by the Anguilla and supported by similar reports from other international law enforcement agencies, indicates that this type of sophisticated fraud is likely to have links to organised crime gangs and possibly terrorist ?nancing Banking information discovered during the course of our investigations provides a connection to limiter-n Europe. This is a favourite location for wishing to hide the proceeds of crime. Company registration information shows that a number of persons from the Middle I-last are connected to these companies. This brings with it a clear risk. A connections As I said in the introduction, the main area in which this activity impacts upon Anguilla is through the registration of the companies used to facilitate these frauds. A number of Anguilla licence holders have formed IBCs that have subsequently turned out to be connecrcd to websites used for binary options trading fraud. 'lhe .'\nguilla address is then listed on the websites (often under the Iontaa L?s? page). Some of the common factors in the registering of these companies are that the Beneficial Owners are represented to be Israeli citizens and the company pro?le is usually given as ?markcting?. The way forward It appears to be the case that Anguilla has been specifically targeted by (XLGs involved in this type of sophisticated fraud. The registering of IBCZs in Anguilla forms part of a complicated ?web? which makes invesdgation by law enforcement extremely difficult. Not only are registered in Anguilla but the companies are being formed by overseas agents and/ or licence holders which adds a further ?layer? between the criminals and law enforcement. Money Laundering Reporting Authority (Fmanrml Intelligence llml, - nl 1-264-407-5630 .Fax 1-2?64-497-8?374 mel Add to this the fact that they are usu 1g ll?-inasking to tlis;v_uise the: ol~ the servers for the websites; and the hank at emuus seem to he hell in litirope aml/or the Middle liast. and one can see the deliberateh eoiuplieated nature ol the operation. Any business that holds a lieenee to fomi TIM in \ngmilla (including; overseas agents of a license holder and foreign-based licence holders) should lH' aware of this current trend and should undertake enhanced clue diligence Checks on anyone seeking? to register an ll?H'I if the lmsiness purpose is given as ?marketingf or ?online ma: l? my. ?l'hiS due? diligence should lk? an on and er unpan} managers/KY i( )ri/h?ll should seek information from their Ll?ienls? alien it the welisiu?s they intend to use for their ?online markering?. 'lhese websites should be viewed and researched to properl}~ establish the nature of the business. 'It is also imperative that SAKS are submitted to flte l?Il? in a timol) fashion so that the intelligenee can l)C Collated to produce. a lull i?l( Lure oi the criminal network. 'l'ht are available to provide :ul\ guitlauee should .my sen'it prmitler wish to hau- con?dential (lixeussinne before submitting a SAR Sulmutted for your information and action as appropriate. Detective I nspecto- l?leatl liraneli Financial Intelligent