Investment scam in Seychelles offshore sector foiled |02 July 2014

An investment scam involving the defrauding of nearly R5 million has been foiled by the Financial Intelligence Unit (FIU) and the defrauded monies frozen by the Supreme Court.

The criminal conduct in this case involved a complex share fraud known as a ‘boiler room’ scam which targeted European investors.  ‘Boiler room’ is a term used to describe an investment fraud conducted by unauthorised offshore investment brokers who use high pressure sales techniques and false information to persuade investors to buy shares with little or no realisable value.

In this case, the brokers operated a company called DCA Group Limited, a company registered in the Commonwealth of Dominica but which had opened its bank account in Seychelles.

The opening of an offshore bank account in a jurisdiction on behalf of a new company registered in another offshore jurisdiction is a common indicator of intent to conceal illicit financial flows in fraud and anti-money laundering cases.  

The account in Seychelles was being used to receive proceeds of the share scam and to transfer the money onwards to the persons behind the scam.

When the account was opened in Seychelles the documents indicated that the business of the company was offering architectural services to its European clients.
The named beneficial owner was investigated and identified as a nominee officer of Thai nationality.

Further investigation revealed that the persons who had transferred the funds into the account in Seychelles did so not as payment for architectural services but for purported shares they had bought in two companies designed by the fraudsters to look like high-value legitimate enterprises.

These shares had been offered to them by tele-sales personnel who claimed that they were investment brokers.  

Once the funds were transferred into the DCA account all communications from the brokers had ceased and they simply disappeared on the investors.
Following an investigation a total of approximately R4.6 million was frozen by the Court.

The success of this case, which was initiated by the FIU in 2011, reiterates to the international community the commitment of the Republic of Seychelles to confront the abuse of the offshore financial services sector for criminal purposes.  

The case is a good example of why the implementation of our national anti money-laundering framework through active compliance by the banking sector, investigation by the FIU,  prosecution by the AG’s office and independent arbitration by the courts is increasingly being recognised as the most effective framework in the region by international organisations and commentators.