Busted in the boiler room! Seychelles’ FIU catches European investment scammers red-handed

The controversial movie ‘The Wolf of Wal Street’ starring Leonardo Dicaprio (James Terrell,Flickr)   Photo license: CC BY-NC-SA 2.0

(Seychelles News Agency) - Forensic financial investigators from the Seychelles have busted a syndicate of European investment fraudsters using an offshore bank account registered in the Indian Ocean archipelago through which they funneled their illegal proceeds.

The con, known widely as a ‘boiler room’ scam, is similar to that portrayed in the Oscar-nominated film, The Wolf of Wall Street. The scam netted the criminals millions of Seychelles Rupees worth of Euros.

According to a press statement released by the Seychelles’ Financial Intelligence Unit (FIU) this morning, the funds, worth R4.6 million (approximately $370,000) have now been frozen by the Supreme Court of Seychelles.

The syndicate in this case operated a company called DCA Group Limited, a company registered in the small island nation of Dominica in the Caribbean, which had then opened its bank account in the Seychelles.

According to experts at the FIU, the very fact that an offshore bank account is opened in a one country on behalf of a newly-created company registered in another offshore jurisdiction is a clear sign of illicit financial activities.

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

Further investigation by the FIU revealed that funds transferred into the account in Seychelles were not payment for architectural services but rather for shares they had supposedly bought in two companies made to look like legitimate enterprises.

“These shares had been offered to them by telesales 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,” said the FIU.

Beware the investment scammers

The boiler room scam is so called because its unauthorized offshore investment brokers, often sitting in a cramped, dark office space, use a high-pressure sales technique to dupe their unwitting victims by phone. The callers try to con potential investors into buying shares that are either non-existent or so worthless they are impossible to sell.

The fraudsters often set up a company in one country, operate from another country and target victims in a third country, thus making it difficult to track them down and prosecute them.

Victims are often promised huge discounts and ‘secret’ stock tips by persuasive brokers, who often read from a rehearsed script. The brokers then supply them with fake documents and brochures, direct them to websites which contain false information and confuse them with technical jargon to make the entire operation seem legitimate.

Britain’s Financial Conduct Authority has estimated that up to £200 million ($342 million) is defrauded from unwitting British victims every year.

The ‘most effective legal framework’ in the region

The FIU has been working with the Seychelles’ Attorney-General’s office since 2011 to bring this case to court under the islands’ tough anti-money laundering laws.

According to the FIU, the case “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 investigative unit says that the chain of active compliance by the banking sector, investigation by the FIU, prosecution by the Attorney-General’s office and independent judicial arbitration by the courts is the reason Seychelles is well on its way to being recognized as “the most effective legal framework in the region by international organizations and experts”.