Pacnet working to refund clients after US authorities lift sanctions

Irish Canadian payments processor Pacnet says it is working to ensure clients can access their cash following the lifting of sanctions against it by US authorities.

The US Treasury’s Office of Foreign Assets Control (Ofac) recently confirmed that it has dropped Canada- and Shannon-based Pacnet from a list of transnational crime organisations, ending sanctions against it that had been in place for a year.

Pacnet says that designating it as a crime organisation was wrong in the first place and effectively forced it out of business. Its general counsel, Paul Davis, confirmed that it is taking all possible steps to ensure clients' cash is returned to them.

Ofac’s move last year froze its US accounts and barred anyone in that jurisdiction from doing business with Pacnet. Following this, banks and finance institutions in other countries also froze funds held by the company for its clients.

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Pacnet recently asked a New York court to hold $5.2 million in client funds. The specific proceeding that the company took, known as an interpleading, means that Pacnet itself has no claim over the cash.

Instead, the company has asked the court to hold the money as both its clients or the US government may argue that they have a right to it. Mr Davis explained that it would be up to the court to adjudicate on any claims.

Not ‘culpable’

He noted that it also means that the court acknowledged that Pacnet was not “culpable” for the money; in other words, if the cash had been connected with some wrongdoing, Pacnet itself was not responsible.

The company does not have a final estimate of final amount due to clients. The figure may be up to $15 million. Pacnet had 500 banking relationships around the world, according to Mr Davis.

Pacnet had hundreds of clients, including the New York Times subscription service, Bloomberg Business Weekly, the Catholic archdiocese of Durban and American Airlines and Mastercard Gateway Payment Services.

Ofac used a controversial power, based on an executive order by former US president Barack Obama, that allows the office to designate businesses as crime organisations where they pose a threat to US citizens or its economy.

The office said that Pacnet companies were handling cash on behalf of mail fraudsters that were using various schemes to dupe vulnerable people out of their money.

However, in a deposition used in the interpleading hearing, Pacnet points out that Ofac’s grounds for this were vague and that the company was given a redacted version of the report on which the office based its actions.

Compliance unit

The deposition also states that Pacnet’s own compliance unit provided hundreds of suspicious transaction reports to the US authorities. It notes that facts and records available to the Washington authorities directly contradicted Ofac’s claims.

The office’s move put the company out of business, with the loss of 120 jobs, including around 20 in the Republic. “It was utterly devastating, it was wrong and it was unconstitutional,” Mr Davis said.

The group's attorney in the US, A Jeff Ifrah, recently told a trade publication that the US Treasury got it wrong and that the speed at which the group and those connected with it were dropped from the Ofac list implied this.

The Judicial Review Commission on Foreign Assets Control, whose members are appointed by the US Senate and House of Representatives, has already recommended that the controversial power used in the Pacnet case be subject to safeguards.