TelexFree can’t control Brazilian recruitment?
On June 13th 2013, Acre’s Public Prosecutors were granted an injunction against TelexFree. Amongst other things, this injunction saw TelexFree face fines of R$100,000 a day ($42,500 USD) if they signed up any more Brazilian affiliate investors or paid out any existing ones.
Since then it’s been an open secret that top Brazilian affiliates have instructed their downlines to resign with TelexFree fraudulently using bogus details. Typically the credentials used suggest that Brazilians signing up as TelexFree investors are doing so from the US.
As of yet Acre’s Public Prosecutor’s haven’t made a move on this issue, although the Judge handling the case recently demanded TelexFree hand over their affiliate database.
Suggesting that an investigation is underway and fines might be forthcoming, TelexFree lawyer Andé Andrade summed up the current situation to iG:
I have no way of knowing if your registration is made by you from Brazil or by someone who lives in the United States.
Telexfree does not accept registration of affiliates in Brazil. We are very clear about it.
Now, if you are on the site (…), and put in U.S. data, with a (credit) card that is registered in the United States, I have no way to say whether you are who you say you are. I can not investigate whether you are who you say you are.
iG note that TelexFree ‘deny responsibility for any payments made by the company to affiliates in Brazil‘. They also observe that it’s entirely possible to select Brazil as a country of residence when depositing investment funds with TelexFree’s payment processor, i-Payout.
The payment system used by the company, called an eWallet, also allows the indication of Brazil as a place of residence.
Debit cards used for withdrawals, according to affiliates, can normally be sent to Brazil and used for withdrawals at least seven Brazilian banks.
According to Andrade, Telexfree International does not have to control these transfers.
“The payments are made using international credit cards. (As TelexFree) I do not have to know what the fate of that payment is,” said the lawyer.
“As Telexfree, I have no control over the issuance of debit cards [ through the eWallet]. They have control over shipping it somewhere as they are the company operating the card.”
Sorry what?
I’d wholly agree that it’s not up to TelexFree’s affiliates to investigate whether or not the new investors they are recruiting are Brazilians signing up with fraudulent information, but it’s certainly the responsibility of the company.
June was eight months ago, and you’re telling me TelexFree is still officially claiming it has no idea where it’s affiliates are signing up from?
One of the first things they should have implemented was a photo ID check, or at the very least some “Know Your Customer” controls.
Know your customer (KYC) refers to due diligence activities that financial institutions and other regulated companies must perform to ascertain relevant information from their clients for the purpose of doing business with them.
Know your customer policies are becoming increasingly important globally to prevent identity theft, financial fraud, money laundering and terrorist financing.
KYC controls typically include the following:
-Collection and analysis of basic identity information (referred to in US regulations and practice a “Customer Identification Program” or CIP)
-Name matching against lists of known parties (such as “politically exposed person” or PEP)
-Determination of the customer’s risk in terms of propensity to commit money laundering, terrorist finance, or identity theft
-Creation of an expectation of a customer’s transactional behavior
-Monitoring of a customer’s transactions against their expected behaviour and recorded profile as well as that of the customer’s peers
You and I know that bit in bold is precisely why TelexFree haven’t implemented even the most basic Know Your Customer policies. For a lawyer of theirs to claim they have no responsibility to do so or even the capability to implement any such identity checks is absolute horseshit.
Quite clearly a daily fine of $42,500 would qualify the signing up of a Brazilian affiliate investor as “risk” that should be evaluated.
And with Acre’s Public Prosecutor’s Office confirming two days ago that the IRS are investigating TelexFree in the US, TelexFree’s lack of Know Your Customer policies becomes even more significant.
And if they’re going to hide behind their ewallet, then it begs the question as to what i-Payout are doing. If Brazilian affiliates are signing up on fraudulent details then i-Payout clearly don’t give a crap who is sending and transferring money through them either.
The impression I get is that, as long as new investor money continues to flow in from all corners of the world, nobody at TelexFree appears concerned where the money winds up or how it’s distributed through the scheme.
Andrade did not admit that Telexfree still continues to make payments or registrations to Brazilian affiliates. He stated he also does not know if new Brazilian investors may end up having their invested funds frozen, as did those who invested before the June injunction, but argues that TelexFree will continue to “pay everyone who works for us daily”.
Sounds to me like enforcing the terms of the Acre injunction are long overdue.
If TelexFree can’t be bothered implementing adequate KYC policies to effectively prohibit Brazilian investors from jumping on board, I’m sure coughing up $40,500 USD a day in fines will get them motivated quick smart.
First, they could determine where someone was signing up from in many cases by looking at their IP address! So they’re obviously trying to hide behind excuses.
Second, if taking credit cards, they would likely to be able to look at the billing address for the credit card in order to verify both someone’s identity and where they are likely from.
Third, they could also set up it to where in order to earn commissions and bonus checks initially or after having earned $600, that you have to provide a U.S. social security number. A number of network marketing companies do this as once someone earns $600 or more, the company has to 1099 them to the IRS!
So, this whole notion that “we don’t know where they are really from” is bogus!
Finally, not only should TelexFree International (apparently the name of the U.S. operation, which they set up to be a separate entity from TelexFree, which is the Brazilian operation, and obviously done so that Brazil’s regulatory authorities could not affect their U.S. operation, and which would enable them to re-recruit those in Brazil as a means of circumventing the injunction against them in Brazil) not only should TelexFree International in the U.S. not allow any of the reps to recruit any one in Brazil, if they were smart, they wouldn’t be allowing their U.S. reps to recruit anyone outside of the U.S!
They are NOT legally operating in any foreign country that I am aware of!
Does anyone honestly think they’ve done the compliance work, i.e, registrations, acquired the necessary business licenses, received any necessary approvals, met the various requirements that some countries have like having a physical presence in the country, bank accounts, an authorized company representative or officer living in that country, etc.,that are required to legally operate in many countries in Asia, Africa, South America, Europe, etc?
They didn’t even have a VOIP license in Brazil at the time they were shut down there, resulting in them being fined by Brazilian telcom authorities.
TelexFree International is nothing more than a $300-$1500-$15,000 money game and could go down as one of the biggest, if not biggest, illegal pyramid schemes in the history of network marketing before it’s through!
They marketing an overpriced VOIP product/service for $50 a month that you can get from Skype (and it has more countries to call) for around $15 or VOIP for next to nothing or FREE from Google Voice and a few other sources. If there wasn’t a business opportunity attached, would anyone still buy their VOIP for $50 a month? NO!
In addition, they’re touting a “get paid to advertise” concept that’s been done before on a number of occasions, and has NEVER worked! Ad Surf Daily, Just Been Paid, JSS Tripler, and others ring a bell? In fact, several of the more well known “get paid to advertise” deals have had legal issues and/or been shut down by regulators!
How any one could sign up in this program at the moment is mindboggling! Don’t they read? Do any research?
It’s amazing the number of people in TelexFree/TelexFree International who are oblivious to the facts and reality and who evidently have no common sense even after finding out they were shut down in Brazil, had their assets frozen, prohibited from recruiting any people in Brazil, prohibited from paying any commissions in Brazil, losing 14 appeals in court to have the original injunction against them lifted, having been barred in Peru from taking people’s money there, and knowing they had the same program in the U.S. as in Brazil, and that an investigation would be likely in the U.S. as a result, and made further likely by the fact that Brazilian authorities knew the principals had fled to the U.S. to open up an operation there and would almost be certain to contact various U.S. authorities like the SEC, IRS, FTC, and U.S. Secret Service, among others!
It doesn’t take a genius to figure out if it was shut down in Brazil for being an illegal pyramid scheme, and U.S. authorities are even more aggressive in dealing with pyramid schemes, that if the same program was being promoted in the U.S., then it was likely to sooner or later be investigated by various U.S. regulators, with the outcome likely to be the same as in Brazil!
It sure demonstrates the lack of knowledge that most people in the network marketing industry possess when it comes to regulatory compliance, what constitutes a legitimate network marketing opportunity vs. an illegal pyramid scheme, how regulators determine if your program is an illegal pyramid scheme in their eyes, how to properly evaluate opportunities, etc., in addition to lacking any common sense!
TelexFree/TelexFree is a U.S. regulators dream! It has so many red flags it should be at the front of a Russian parade! They’re going to have a field day hitting TelexFree!
There are also Brazilian promoters telling affiliates to signup through proxies to make them appear to be from the US.
It’s normally the company itself that will be responsible for payouts, rather than the payment processor.
The company will need to select a solution for payouts that will give it enough control, e.g. for tax reporting purposes. Payouts aren’t solely about the transactions, it’s also about the accounting practice, taxes, VAT and similar factors.
Most payment processors seems to be operating “Merchant Account Services”, i.e. they’re PRIMARILY designed for commercial transactions = payment for goods and services. The fact that they CAN be used for other transactions doesn’t mean they LEGALLY can be used.
Transactions will normally generate different types of taxable events that will have to be reported differently, e.g. you can’t report payouts to affiliates as “purchase of services”.
The shutdown of TelexFree and its aftermath will probably become really ugly, much worse than ZeekRewards. The company owners are fraudulent in nature, they have constantly tried to bend the rules and bypass restrictions.
Blaming a payment processor for your own lack of control doesn’t make much sense when the primary responsibility will be your own anyway. The ones who DECIDE to make a transaction is the one that should have control.