Kilifi Governor Amason Kingi (right) with Rabai MP William Kamote (left) when they addressed the press at the Tamarind Restaurant over the Sh51 million stolen from the county through the IFMIS system. A court has frozen bank accounts of five companies linked to the theft of the Sh51 million from Kilifi County. (PHOTO: GIDEON MAUNDU/ STANDARD)
Kilifi Governor Amason Kingi is be questioned by anti-graft agents over Sh51 million theft at the county as the names of firms and directors being probed emerged.
A Kilifi court froze bank accounts of five companies as the investigations gathered pace. On Friday, county lawyers sought orders at the Malindi Law Courts to freeze the accounts pending the determination of a suit the devolved administration has filed.
Principal Magistrate Dominica Nyambu ordered the directors not to interfere with any of their properties. A court has frozen bank accounts of five companies linked to the theft of the Sh51 million from Kilifi County.
This comes as Governor Amason Kingi revealed he will today appear before the Ethics and Ant-Corruption Commission (EACC) to shed more light on the scam.
The court directed Equity Bank, Jamii Bora, Diamond Trust Bank and Consolidated Bank, through whose branches the looted money was wired, to supply statements of account, cash and cheque withdrawal slips, copies of electronic transfer records and any other transaction on accounts of the companies.
The cash transfers between September 29 and October 3 have sparked an uproar in Kingi’s administration.
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Kingi suspended 10 officials who claimed their passwords were stolen to transfer the money from the county’s bank accounts at the Central Bank of Kenya through manipulation of the Integrated Financial Management Information System (Ifmis).
CBK managed to reverse a transfer of Sh8 million, reducing the amount successfully transferred by the cyber fraudsters to Sh43.
ACCOUNTS TRACED
On Friday, county lawyers sought orders at the Malindi law courts to freeze the accounts pending the determination of a suit the devolved administration has filed to recover the money.
Kilifi Principal Magistrate Dominica Nyambu ordered the directors of the companies not to sell or interfere with any of their properties.
Nyambu gave the order following an application by the Kilifi County government.
The magistrate ordered the county government to serve the parties sued by way of advertisement in any daily newspaper.
Investigators have since traced the accounts into which the money was wired.
The bank accounts have been traced to about five firms whose directors and dates of registration have also been identified.
Daima One Entreprises received Sh11.3 million in two tranches at Ngara branch of Equity Bank.
A Sarah Wangui Kamau is named as a director of the company registered as an MPesa outlet on Juja Road Nairobi on January 28 last year.
Zohali Services Ltd got Sh9.3 million at Jamii Bora Bank in Nairobi. Its directors include Anne Muthoni Kibogo and Lucy Wanjugu Kibogo.
E-commerce firms to deduct tax of 1% each for Centre and States while paying suppliers
New Delhi, November 27:
The draft GST (Goods and Services Tax) law has suggested the levy of a compensation cess, which will be credited to the GST Compensation Fund.
After five years, the unutilised cess would be transferred to the Consolidated Fund of India and then devolve to States based on the formula of the Fourteenth Finance Commission.
To ensure that the lower tax incidence under the GST is passed on to consumers, the draft model Central GST law has also called for anti-profiteering measures. “It is a good move, but will open up a Pandora’s box and its implementation may not be easy… How this will be calculated is very subjective,” Bimal Jain, Chairman, Indirect Tax Committee, PHDCCI, said.
The draft law has suggested setting up an authority to examine whether input tax credits availed of, or the reduction in the price due to lower rate, have actually resulted in a commensurate reduction in the price of the goods or services supplied. It has also called for the authority to penalise defaulters.
E-commerce companies will also be expected to deduct a one per cent tax at source each from their suppliers for Central GST and State GST. The provision will, however, not apply to aggregators.
According to Pratik Jain, Partner and Leader Indirect Tax, PwC India, it will add to the compliance burden of e-commerce players as they will have to be registered in each State where the vendor is located.
The draft model law also proposes to cap the Central and State GST rates at 14 per cent each, while the Integrated GST is set to be limited at 28 per cent.
New Delhi: E-commerce operators like Flipkart and Snapdeal will have to deduct TDS (tax collected at source) while making payments to their suppliers, according to the new model GST law, which has done away with the definition of ‘aggregator’.
Explaining the changes in the provision, experts said the proposal will increase the compliance burden on e-commerce operators as they will have to deduct 2 per cent TdS and deposit it with the government.
The measure, Nangia & Co Director Rajat Mohan said, will not increase the incidence of taxation on consumers as the supplier will get tax credit for the TCS. The model GST law provides for 1 per cent TDS to be deducted by the E-commerce operators. According to experts, this would mean that a similar amount will have to be levied on inter-state movement of goods, taking the total TCS deduction to 2 per cent although burden on consumers will not increase.
Mohan further said in case of return of goods by the consumer, the e-commerce companies will not have to deduct TDS as there is no actual sale. The draft model GST law does not provide any definition of ‘aggregators’, saying that the government would later come out with a notification specifying which type of businesses would be covered under the term.
Aggregators mainly include Ola, Uber and UrbanClap which work as platforms for providing transport and other services. The TDS provision will not apply to aggregators.
E-commerce companies will also have to file returns on the TDS deductions. The model law has defined ‘electronic commerce’ as supply of goods or services, including digital products, over electronic network. ‘Electronic commerce operator’ would mean those persons who own, operate or manage digital or electronic facility or platform for electronic commerce.
E-commerce operators like Flipkart and Snapdeal will have to deduct TCS (tax collected at source) while making payments to their suppliers, according to the new model GST law, which has done away with the definition of ‘aggregator’.
Explaining the changes in the provision, experts said the proposal will increase the compliance burden on e-commerce operators as they will have to deduct 2 per cent TCS and deposit it with the government.
The measure, Nangia & Co Director Rajat Mohan said, will not increase the incidence of taxation on consumers as the supplier will get tax credit for the TCS.
The model GST law provides for 1 per cent TCS to be deducted by the e-commerce operators.
According to experts, this would mean that a similar amount will have to be levied on inter-state movement of goods, taking the total TCS deduction to 2 per cent although burden on consumers will not increase.
Mohan further said in case of return of goods by the consumer, the e-commerce companies will not have to deduct TCS as there is no actual sale.
The draft model GST law does not provide any definition of ‘aggregators’, saying that the government would later come out with a notification specifying which type of businesses would be covered under the term.
Aggregators mainly include Ola, Uber and UrbanClap which work as platforms for providing transport and other services. The TCS provision will not apply to aggregators.
E-commerce companies will also have to file returns on the TCS deductions.
The model law has defined ‘electronic commerce’ as supply of goods or services, including digital products, over electronic network.
‘Electronic commerce operator’ would mean those persons who own, operate or manage digital or electronic facility or platform for electronic commerce.
Imagine working as a blacksmith a century ago. “Horseless carriages” crashing into each other. “Aeroplanes” tumbling from the sky. What entertainment watching those newfangled contraptions fail! What job security forging shoes for those reliable old horses!
Until, all of a sudden, it wasn’t. In short order those aeroplanes were ferrying passengers between cities and across the nation while those automobiles were revolutionizing commerce, leisure and family life. We didn’t need horses to do what horses used to do. And we sure didn’t need blacksmiths anymore.
Some would have law schools as the blacksmiths of our time. The primary pedagogy of legal education was forged over a century ago and continues to shape the organization and accreditation of law schools today. A 50 percent decline in applications to law school since 2010 indicates that many talented people are forsaking this antiquated paradigm of professional preparation for other career aspirations.
And there is no shortage of law schools in the news for making painful decisions to scale back the size and content of their institutions as market forces have wreaked havoc on their revenue models. Many law schools remain singularly dependent on their students’ tuition, derived largely from federal financial aid, to fund their operations.
This fact means that most law schools operate not only with a curriculum in serious need of refreshing and redesign but also with a business model that, as the recent American Bar Association report on financing legal education makes clear, is seriously flawed.
We in legal education see the law changing literally before our eyes as technology, globalization and other social, cultural, and economic forces reshape the way the world works and our profession. And we remain steadfast in our commitment to preparing lawyers who can serve essential roles in our country grounded as it is in the rule of law.
We care about our students and we care about their futures as much as we care about our society. It is from these perspectives that we approach the conundrums confronting us. And it is why I only half-jokingly tell my family and friends: I sleep like a baby at night. I wake up every two hours crying.
Some schools may emulate the airline industry by reducing the number of seats for students, or cutting faculty and staff size of salaries, but who really wants to take a cue from companies that might charge $3 for in-flight pretzels? More creative and thoughtful law schools are redesigning curricula, creating new partnerships with the profession, and adopting new pedagogies that reach a new generation of students.
My law school has reimagined its curriculum to offer significantly more practical experience in a shorter time span that costs much less than previously. Other schools have created online learning opportunities that reach students where they are. Still others are exploring how to help people while generating fees that pay for their clinical opportunities.
These innovations reflect the hard work and creative forces that legal educators of good will can devise and implement.
One path that might offer help to law schools, with additional advantage to clients and others, is to invent new participants in the legal profession and legal education. The state of Washington has authorized a limited license practitioner who can serve clients in specific engagements without the full law school experience or expense, thereby creating new opportunities in law school and in the profession.
Another creative idea might be to establish a system where law faculty provide legal services for a fee that is split with the law school while teaching students who assist in the professor’s client engagement. This approach, which might be structured with the active participation of law firms or corporate counsels, evokes the idea of a teaching hospital where the teacher and practitioner meld into a single person.
We pride ourselves as Americans on being innovative and productive. As lawyers and educators we should be able to solve problems with new and better approaches. The challenges confronting us are not new and are not going away. Without our attention and creativity, we’re just perpetuating those challenges.
We in legal education need to put on our thinking caps and get to work. We need to update the preparation of our students, and we need to diversify our revenue sources. If we don’t, others will fill the void we leave and whiz right by. Just ask a blacksmith.
Luke Bierman (lbierman@elon.edu) is dean and a professor of law at Elon University School of Law in Greensboro.
The model GST law has proposed significant changes in taxation of e-commerce business wherein firms like Flipkart and Snapdeal will have to deduct TCS (tax collected at source) while making payments to their suppliers.
Explaining the changes in the provision, experts said the proposal will increase the compliance burden on e-commerce operators as they will have to deduct 2 per cent TCS and deposit it with the government.
The measure, Nangia & Co Director Rajat Mohan said, will not increase the incidence of taxation on consumers as the supplier will get tax credit for the TCS.
The model GST law provides for 1 per cent TCS and a similar amount will have to be levied for inter-state sale of goods under the IGST.
Mohan further said in case of return of goods by the consumer the e-commerce companies will not have to deduct TCS as there is no actual sale.
The draft model GST law, however, did not provide any definition of aggregators saying that that the government would later come out with a notification specifying which type of businesses would be covered under the word ‘aggregator’.
Aggregators mainly include Ola, Uber, Urban Clap which works as a platform for providing transport and other services. The TCS provision will not apply on aggregators.
The E-commerce companies will also have to file returns on the TCS deductions.
The model law has defined ‘electronic commerce’ as supply of goods or services including digital products over electronic network.
‘Electronic commerce operator’ would mean those persons who own, operate or manage digital or electronic facility or platform for electronic commerce.
LONDON (AP) — In Britain, Big Brother just got bigger.
After months of wrangling, Parliament has passed a contentious new snooping law that gives authorities – from police and spies to food regulators, fire officials and tax inspectors – powers to look at the internet browsing records of everyone in the country.
The law requires telecoms companies to keep records of all users’ web activity for a year, creating databases of personal information that the firms worry could be vulnerable to leaks and hackers.
Civil liberties groups say the law establishes mass surveillance of British citizens, following innocent internet users from the office to the living room and the bedroom.
Tim Berners-Lee, the computer scientist credited with inventing World Wide Web, tweeted news of the law’s passage with the words: “Dark, dark days.”
The Investigatory Powers Bill – dubbed the “snoopers’ charter” by critics – was passed by Parliament this month after more than a year of debate and amendments. It will become law when it receives the formality of royal assent next week. But big questions remain about how it will work, and the government acknowledges it could be 12 months before internet firms have to start storing the records.
“It won’t happen in a big bang next week,” Home Office official Chris Mills told a meeting of internet service providers on Thursday. “It will be a phased program of the introduction of the measures over a year or so.”
The government says the new law “ensures powers are fit for the digital age,” replacing a patchwork of often outdated rules and giving law-enforcement agencies the tools to fight terrorism and serious crime.
In a move taken by few other nations, it requires telecommunications companies to store for a year the web histories known as internet connection records – a list of websites each person has visited and the apps and messaging services they used, though not the individual pages they looked at or the messages they sent.
The government has called that information the modern equivalent of an itemized phone bill. But critics say it’s more like a personal diary.
Julian Huppert, a former Liberal Democrat lawmaker who opposed the bill, said it “creates a very intrusive database.”
“People may have been to the Depression Alliance website, or a marriage guidance website, or an abortion provider’s website, or all sorts of things which are very personal and private,” he said.
Officials won’t need a warrant to access the data, and the list of bodies that can see it includes not just the police and intelligence services, but government departments, revenue and customs officials and even the Food Standards Agency.
This photo-illustration shows the web flash pages for GCHQ, the British governments communications and electronic surveillance headquarters, and The Security Service (MI5), the governments internal security service, on a computer and smartphone in London, Friday, Nov. 25, 2016. After months of wrangling, Parliament has passed a contentious new snooping law that gives authorities — from police and spies to food regulators, fire officials and tax inspectors — powers to look at the internet browsing records of everyone in the country. (AP Photo/Alastair Grant)
“My worry is partly about their access,” Huppert said. “But it’s much more deeply about the prospects for either hacking or people selling information on.”
James Blessing, chairman of the Internet Services Providers Association, said the industry has “significant questions” on how the law will work – including “how to keep the vast new data sets secure.”
He warned that if the law is not implemented in a “proportionate, considered way, there is a real danger the U.K. could lose its status as a world-leading digital economy.”
Some aspects of the new law remain clouded by secrecy. Not all internet companies will have to comply – only those that are asked to by the government. The government won’t say who is on that list, and the firms involved are forbidden from telling their customers.
Service providers are also concerned by the law’s provision that firms can be asked to remove encryption to let spies access communications. Internet companies say that could weaken the security of online shopping, banking and a host of other activities that rely on encryption.
The new law also makes official – and legal – British spies’ ability to hack into devices and harvest vast amounts of bulk online data, much of it from outside the U.K. In doing so, it both acknowledges and sets limits on the secretive mass-snooping schemes exposed by former U.S. National Security Agency contractor Edward Snowden.
The government says the law incorporates protections against intrusion, including an investigatory powers commissioner to oversee the system, and judges to scrutinize government-approved warrants to hack into electronic devices or look at the content of communications.
David Anderson, a lawyer who serves as Britain’s independent reviewer of terrorism legislation, said the new law “creates powerful new safeguards” and “achieves world-leading standards of transparency by putting on a detailed statutory basis all the powers which police and intelligence agencies already use.”
Privacy groups battled to stop the new legislation, and now say they will challenge it in court. But public opposition has been muted, in part because the bill’s passage through Parliament has been overshadowed by Britain’s vote to leave the European Union and the upheaval that has followed.
Renate Samson, chief executive of the group Big Brother Watch, said it would take time for the full implications of the law to become clear to the public.
“We now live in a digital world. We are digital citizens,” Samson said. “We have no choice about whether or not we engage online.
“This bill has fundamentally changed how we are able to privately and securely communicate with one another, communicate with business, communicate with government and live an online life. And that’s a real, profound concern.”
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After months of wrangling, Parliament has passed a contentious new snooping law that gives authorities — from police and spies to food regulators, fire officials and tax inspectors — powers to look at the internet browsing records of everyone in the country.
The law requires telecoms companies to keep records of all users’ web activity for a year, creating databases of personal information that the firms worry could be vulnerable to leaks and hackers.
Civil liberties groups say the law establishes mass surveillance of British citizens, following innocent internet users from the office to the living room and the bedroom.
Tim Berners-Lee, the computer scientist credited with inventing World Wide Web, tweeted news of the law’s passage with the words: “Dark, dark days.”
The Investigatory Powers Bill — dubbed the “snoopers’ charter” by critics — was passed by Parliament this month after more than a year of debate and amendments. It will become law when it receives the formality of royal assent in the coming week. But big questions remain about how it will work, and the government acknowledges it could be 12 months before internet firms have to start storing the records.
“It won’t happen in a big bang next week,” Home Office official Chris Mills told a meeting of internet service providers on Thursday. “It will be a phased program of the introduction of the measures over a year or so.”
The government says the new law “ensures powers are fit for the digital age,” replacing a patchwork of rules.
In a move taken by few other nations, it requires telecommunications companies to store for a year the web histories known as internet connection records — a list of websites each person has visited and the apps and messaging services they used, though not the individual pages they looked at or the messages they sent.
The government has called that information the modern equivalent of an itemized phone bill. But critics say it’s more like a personal diary.
Julian Huppert, a former Liberal Democrat lawmaker who opposed the bill, said it “creates a very intrusive database.”
“People may have been to the Depression Alliance website, or a marriage guidance website, or an abortion provider’s website, or all sorts of things which are very personal and private,” he said.
Officials won’t need a warrant to access the data, and the list of bodies that can see it includes not just the police and intelligence services, but government departments, revenue and customs officials and even the Food Standards Agency.
“My worry is partly about their access,” Huppert said. “But it’s much more deeply about the prospects for either hacking or people selling information on.”
James Blessing, chairman of the Internet Services Providers Association, said the industry has “significant questions” on how the law will work — including “how to keep the vast new data sets secure.”
He warned that if the law is not implemented in a “proportionate, considered way, there is a real danger the U.K. could lose its status as a world-leading digital economy.”
Some aspects of the new law remain clouded by secrecy. Not all internet companies will have to comply — only those that are asked to by the government. The government won’t say who is on that list, and the firms involved are forbidden from telling their customers.
Service providers are also concerned by the law’s provision that firms can be asked to remove encryption to let spies access communications. Internet companies say that could weaken the security of online shopping, banking and a host of other activities that rely on encryption.
The new law also makes official — and legal — British spies’ ability to hack into devices and harvest vast amounts of bulk online data, much of it from outside the U.K. In doing so, it both acknowledges and sets limits on the secretive mass-snooping schemes exposed by former U.S. National Security Agency contractor Edward Snowden.
The government says the law incorporates protections against intrusion, including an investigatory powers commissioner to oversee the system, and judges to scrutinize government-approved warrants to hack into electronic devices or look at the content of communications.
David Anderson, a lawyer who serves as Britain’s independent reviewer of terrorism legislation, said the new law “creates powerful new safeguards” and “achieves world-leading standards of transparency by putting on a detailed statutory basis all the powers which police and intelligence agencies already use.”
Privacy groups battled to stop the new legislation, and now say they will challenge it in court. But public opposition has been muted, in part because the bill’s passage through Parliament has been overshadowed by Britain’s vote to leave the European Union and the upheaval that has followed.
Renate Samson, chief executive of the group Big Brother Watch, said it would take time for the full implications of the law to become clear to the public.
“We now live in a digital world. We are digital citizens,” Samson said. “We have no choice about whether or not we engage online.
“This bill has fundamentally changed how we are able to privately and securely communicate with one another, communicate with business, communicate with government and live an online life. And that’s a real, profound concern.”
THIRTY Scottish shell companies are fronting for “all or nothing” financial gambling sites of a kind police believe are part of Britain’s biggest internet scam.
An investigation by the Sunday Herald has identified a total of around 130 UK-registered firms providing an EU smokescreen of respectability to unregulated “binary options” websites, many run from call centres in Israel. Scottish firms make up more than a quarter of the total.
International watchdogs believe the industry has cost investors – or punters – hundreds of millions of pounds over the last decade, with English police earlier this autumn saying they believe an average of two scams they uncover a day were just the “tip of the iceberg”. It is believed that thousands of Britons have been conned out of money by the sites, many of which are rigged so that their customers lose.
The Scottish firms acting as formal owners of the website are all limited partnerships or SLPs, a kind of business which allows their owners to be secret, file no accounts and pay no taxes.
UK Security Minister Ben Wallace last week told MPs that “intelligence assessments from law enforcement” on the abuse of SLPs were “very concerning”. The Sunday Herald and its sister paper The Herald have named scores of SLPs involved in criminal or unethical behaviour over the last two years, including the alleged $1bn looting of banks in Moldova and Ukraine’s arms export mafia.
Ben Wallace MP
A Dundee SLP called T.S.I.E is now acting as front for a website called DGI Market, which earlier this month was fined half a million shekels – more than £125,000 – by the Israeli Securities Authority in the first major crackdown on binary options operators in Tel Aviv. DGI was found to have provided financial services in Israel without a licence. Most of the firms do most of their business outside Israel, but have faced numerous bans across the world, including in Belgium and America.
Britain’s Financial Conduct Authority (FCA) has issued a blanket warning on using such sites.
Roger Mullin, the SNP’s Treasury spokesman and a campaigner for the reform of SLPs, wants the UK to follow other nations and ban binary options.
He said: “Masquerading as investment opportunities, binary options are unregulated, unethical gambling on financial markets, but where the investor-punters are systematically stripped of all of their funds.
“That some are now using SLPs to give a smokescreen of legitimacy while hiding the identity of the crooks running such operations, is doubly concerning.”
Mullin believes the UK Government is now moving towards acting on SLPs, control over which is reserved to Westminster. “I will be ensuring ministers are fully aware of these binary option scams which serve to emphasise the need for urgent action,” he said.
Formal ownership of the con has been migrating to Scotland and the rest of the UK from traditional Pacific tax havens in recent months.
Scam watchers believe this may be because credit card companies are happier processing transactions from an address in Edinburgh than in the Marshall Islands.
Writing for our website, Simona Weinglass, the investigative journalist for The Times of Israel who uncovered the scale of the binary options industry there, said Scotland had a clear role to play in stopping scammers processing credit card payments.
She said: “Fraudulent binary options and other cyber scams only work because the scammers are able to process credit card payments.
“Thus, if a binary options company in Bulgaria can pass itself off as a company that sells electronic equipment in Scotland, the transaction is much more likely to be approved by Visa and MasterCard. All of this happens algorithmically, with no humans involved. At the human level, victims are more likely to ‘trust’ a company with a Scottish address than one in, say, the British Virgin Islands.”
Israeli lawmaker Ksenia Svetlova, who represents the centre-left Zionist camp in the Knesset, said: “Tax havens and the dodgy businesses being incorporated around the world, and now in Scotland as well, must make us all lose sleep, especially when there is money coming from Israel involved.
“Vast sums of money are changing hands, crossing continents clandestinely, and this is because government authorities are not doing enough to expose this activity. It’s clear that the purpose of transferring the money is dubious, otherwise there would be no need for tax havens.”
Ksenia Svetlova
Svetlova is proposing Israeli legislation to impose tighter controls on lawyers and accountants who provide company formation services. As revealed in this newspaper, such businesses, some based in Scotland, have been advertising off-the-peg SLPs globally as vehicles for secret ownership and tax avoidance
The FCA in its warnings on binary options stressed such websites frequently presented themselves as being British.
It said: “Fraudulent firms operating in the binary options market without the necessary authorisations or licenses tend to be based outside the UK yet often claiming to have some kind of presence here, often at prestigious City of London addresses.”
SLPs acting for binary options are clustering around two addresses, one in Bath Street, Glasgow, and another in St Vincent Street, Edinburgh. Both are mail drops and the partnerships concerned have no physical presence in the country bar their virtual “brass plates”.
England’s National Fraud Intelligence Bureau’s head of crime, Detective Chief Inspector Andy Fyfe, has described offshore binary options scams as the biggest fraud in the UK. Speaking in September, he said: “People have been persuaded to cash in some of their pensions and invest in rubbish. The vast majority of the non-UK based binary firms are operating from Israel.”
Twenty years ago, only 180 million people worldwide had access to the Internet. Today, amazingly, that number is 3 billion, yet in many nations, including Scotland, people are worried about growing inequality and whether the digital economy will rob them of their job. To add insult to injury, the Internet has become the source of scams for the too trusting or too unlucky, with an estimated one in ten Britons falling victim to online fraud.
Indeed, Action Fraud UK, the national cybercrime reporting centre run by the London police, lists dozens of scams to be wary of, including advance-fee fraud, malware, miracle health scams and romance scams.
But the worst scam currently affecting Britons, according to UK police, is binary options, a con in which customers are led to believe they are successfully trading assets online, but usually lose most or all of their money.
As a reporter at The Times of Israel, I have been covering binary options and forex trading scams since February of this year, when a whistleblower approached me and said he had worked in an online trading firm where his job was to call hundreds of people around the world and persuade then to invest in a financial product called “binary options.” He was told to pass himself off as a professional broker who had worked at the Bank of Scotland, and to say he was calling from London, when in fact he was sitting in an office in Herzliya, Israel.
He was not supposed to tell customers that the company made money when they lost, that the trading platform was rigged to make them lose, and that even if they won money on the computer screen, they would be unlikely to ever see it again. Once a fraudulent binary options company feels it can no longer get money out of a client, it will typically cut off all contact. When the victim tries to track down the people he spoke to, he discovers that the names, address on the website and nationality they gave are all fake.
After some investigation, The Times of Israel discovered that fraudulent binary options is a vast criminal enterprise, employing thousands of people in over 100 companies, many of them in Israel, but also in countries like Romania, Bulgaria, Ukraine and the Philippines. The industry is thought to earn hundreds of millions, if not billions of pounds a year and victims worldwide are believed to number in the millions.
I have spoken to a number of British victims of the fraud. One lost £400,000 and has hired an Israeli lawyer to track down the real identities of the company’s owners and sue them. Another woman, a widow from Shropshire, lost£190,000 pounds, most of her life’s savings and was forced to sell her house.
“Some days I think I would like to walk into the river and not come out,” she told me.
After ten years of inexplicable inaction, the Israeli government is slowly waking up to the scale of the fraud. As a direct consequence of our reporting at the Times of Israel, the Prime Minister’s Office last month condemned the industry’s “unscrupulous practices” and called for it to be outlawed worldwide.
Two weeks ago, Israel Securities Authority chairman Shmuel Hauser told us that consultations had begun on the framing of legislation to bar all Israel-based binary options operations from targeting anybody, anywhere. (Israeli firms are already banned from targeting Israelis.) The consultations have extended to Attorney General Avichai Mandelblit and to the government, he said.
Nevertheless, only a handful of companies in Israel have been shut down, while the rest continue to operate as usual.
And while this scam does not originate in Scotland, a loophole in Scottish law is being exploited by criminals to process payments and launder money for the crime.
Fraudulent binary options and other cyber scams only work because the scammers are able to process credit card payments. Thus, if a binary options company in Bulgaria can pass itself off as a company that sells electronic equipment in Scotland, the transaction is much more likely to be approved by Visa and Mastercard.
All of this happens algorithmically, with no humans involved. At the human level, victims are more likely to “trust” a company with a Scottish address than one in, say, the British Virgin Islands.
In addition, merchants outside of Europe pay higher transaction fees to process major credit cards. Having a company anywhere in the EU lowers these costs. The news agency Reuters recently published an article about a British town whose unemployed residents made money acting as nominee directors for dodgy offshore companies. One man looked himself up one day to learn the company he represented specialized in hardcore porn.
One observer of the binary options industry recently explained to me that it is modular, meaning its component parts are easily replaceable. “If a government or too many lawsuits shut down one brokerage, say, XYZOptions, it will simply pop up elsewhere with a different name. If Israel outlaws binary options, the companies will migrate to Cyprus or eastern Europe. Even the companies that franchise the trading platforms are replaceable. But if you cut off their ability to process credit cards and launder money, the industry is finished.”
In that respect, Scotland has a major role to play.
Svetlova is proposing Israeli legislation to impose tighter controls on lawyers and accountants who provide company formation services. As revealed in this newspaper, such businesses, some based in Scotland, have been advertising off-the-peg SLPs globally as vehicles for secret ownership and tax avoidance