The United States Department of Justice has recently released the details surrounding the sentencing of an individual for his rule in processing unauthorized withdrawals of millions of dollars from consumer bank accounts.
Neil Godfrey was sentenced to serve fifteen months in prison by Judge Eduardo Robreno in the Eastern District of Pennsylvania. Judge Robreno also ordered Mr. Godfrey to pay a $50,000 fine and entered a $100,000 forfeiture money judgment.
In 2015, Mr. Godfrey pleaded guilty to a charge of wire fraud. Information described how, while working as a payment processor, he knowingly enabled fraudulent merchants to withdraw money from consumers’ bank accounts without the consumers’ knowledge or consent.
“Payment processors who knowingly facilitate consumer fraud commit a federal offense,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “We are committed to protecting consumers from unknown withdrawals from their bank accounts, and we will prosecute any individual who knowingly assist these fraud schemes.”
According to the DoJ, Mr. Godfrey used a Santa Ana, California processing company named Check Site Inc. to assist at least two fraudulent merchants. The merchants operated or worked with websites that purportedly offered subscriptions, clubs, sweepstakes or payday loans.
In many instances, the DoJ states, the websites were bogus and designed to harvest consumers’ bank account information. Instead of providing consumers with payday loans or other services advertised, the merchants operating the websites used the bank information provided by the consumers to withdraw money from the consumers’ bank accounts.
The DoJ also states that, using Check Site, Mr. Godfrey knowingly processed the merchants’ fraudulent withdrawals and provided the merchants with access to the banking system.
As part of the criminal case, Mr. Godfrey admitted to using payment devices called remotely created checks to facilitate fraud schemes. Once the fraudulent merchants had obtained consumer names and bank account information, the merchants created RCCs, which Check Site submitted through the banking system to the consumers’ banks.
Unlike an ordinary check, an RCC is generally honored without the signature of the account holder. When the RCCs were processed, Check Site kept a fee and transferred the remainder of the withdrawals to the merchants.
According to charging documents, Mr. Godfrey used banks that were willing to facilitate these transactions and ignore the red flags raised by these transactions. The charges also alleged that Mr. Godfrey assisted the fraudulent merchants stay off the radar of bank employees and regulators so that the fraud could continue.
For example, according to the DoJ, Mr. Godfrey advised merchants how to change the names of their companies and set up the facade of a legitimate company to defeat banks’ attempts at due diligence.
In an email message quoted in the charging documents, Godfrey advised a fraudulent merchant that “the lesson we have learned is that we must trick the [bank] folk. It means you need to set up some type of website front. What we need to do is set up a legitimate website selling anything you can think of – that is what you get approved on. It is irrelevant if anything is ever sold there – just so it exists. . . . In the mean time we set up false credit card approval etcetera. It is this we use to run the transactions. Yes, there will be a lot of returns, but what we do is send through transactions over the next few weeks that don’t have high returns. They stop looking and then we can run the regular stuff. . . . [A]fter several months we junk that company and go to another company.”
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