Scams typically operate in networks. The most important elements of these networks include payment processors and FinTechs. Nothing works without them. Moreover, payment processors know all about the people behind them from their KYC/AML checks. Or should know everything if they do their job properly. In the case of Bruc Bond UAB (formerly Moneta International UAB), the relevant regulatory body, the Bank of Lithuania, was of the opinion that the job was not done properly. Therefore, the regulator revoked the license of the company of the Israelis Eyal Nachum and Tamir Zoltovski. For serious and systematic violations of regulatory requirements and/or laws.
Watchdog and legal business facilitator
Financial institutions, as well as FinTechs, must not only act as service providers but also as watchdogs of the financial system. KYC/AML procedures have been a well-known issue over the last few years in the FinTech space. Regulators have often been lenient in order not to stall the growth of the industry. Some regulators established sandboxes for FinTechs to educate and prepared them for their regulated businesses as they are a very important enabling element for the future of our cybersociety. And we all know that the traditional financial system is not able to meet the demands of digitally networked business models with virtual organizations and mobile customers.
High-risk focused FinTechs are a regulatory challenge
It is a statistical fact that many Israeli FinTech start-ups have focused on the high-risk and dark world segments. These include adult business (aka porn), gambling and sports betting, sex trafficking, child porn, or investment scams. The hype of binary options between 2009 and 2018 took place parallel to the hype of FinTechs.
While high-valued FinTech brands such as TransferWise, Revolut, Monzo, or N26 have focused on the area of payment transactions with low margins, high volumes, and high costs, numerous Israeli FinTechs have focused on the attractive niche of high risk and dark world trading. High returns have been achieved with these products.
In pursuing their growth path, many FinTechs have neglected their role as watchdogs with the protecting the financial system from illegal transactions and money laundering, but as facilitators and implicit agents of cybercriminals.
Mission: Bypassing the system
Many of the Israeli niche FinTechs have often misunderstood themselves as solution providers for illicit business models.
Just like Eyal Nachum and Tamir Zoltovksi with their offshore companies in the Marshall Islands and Montenegro have built tailor-made solutions for many binary options schemes. Agreed, they were not the scammers but they made these investment schemes possible with their solutions. Knowingly and willingly. So what was their role then?
A look into the criminal record of the Montenegrin Atlas Banka around its customer Hermes Solution Podgorica DOO both shows that dozens of binary options scams were listed as customers. This despite the fact that financial market regulators in numerous jurisdictions have issued public investor warnings.
Hermes Solution Podgorica DOO was founded in July 2015. As was Payotech Ltd (d/b/a Payobin), which is registered in Israel. The two Lithuanian regulated companies International Fintech UAB and Moneta International UAB (now Bruc Bond UAB) were established in 2016.
All these companies were under the control of Eyal Nachum and his partner Tamir Zoltovski, i.e. a FinTech group of companies under central control. All these companies were involved in the daily business. In this respect, according to the documents available to FinTelegram, the two regulated Lithuanian entities were at no time independent companies. Such group structures must be disclosed to the regulator. Otherwise, it would be very easy to circumvent the regulations, wouldn’t it?