Internet brokerage, the fraudulent scheme in which thousands of Albanians become entangled

An investigation conducted by the Albanian Center for Quality Journalism has identified at least 80 unlicensed brokerage companies, which operate in Albania and defraud foreign citizens, evade taxes and expose young adults to serious legal repercussions.

Blerta*, 23 years old, started a business in January dealing with “computer data processing,” even though she had never planned to do so.

After three years working as a telephone operator in a call center in Tirana – where she advertised grocery products for Italian clients – she gave in to the temptation of changing jobs for higher income.

She is still trying to persuade Italians, only this time she is urging them to invest in company stocks and bonds, foreign currency exchange, cryptocurrencies, gold, silver and everything else that can be traded. The trade is executed through electronic platforms that function as an online stock market.

She was asked by the company that offered her employment to open her own business and formally work as an external consultant, in exchange for the infrastructure and the trading platform, where potential investors buy and sell stocks.

She accepted the offer without hesitation. A hefty monthly income compared to the average income in the Albanian labor market was at play.

“The company representatives told me that I would earn around a thousand Euros per month. I was skeptical at first, but I’m already making 700 Euros a month, and I believe that I’ll soon earn 1,000 Euros or even more,” she said.

An investigation of the Albanian Center for Quality Journalism revealed that Blerta is only one of thousands of young adults in Albania which were led by dreams of big revenues to engage in a profession where all that is required is speaking a foreign language and the ability to be convincing.

The center has identified 80 companies, which now operate as brokerage firms (sale and purchase of company shares on behalf of the clients) and they are constantly looking to hire more people as they advertise continuously on the webpage njoftime.com.

However, this dream may turn into a nightmare as the investigation proves that all the aforementioned companies are not licensed to carry out their activities, are involved in tax evasion, and are often part of fraudulent schemes that deprive citizens around the world of their savings.

The testimonies collected by the Center also show that these companies expose their employees – which are registered as independent business entities – to criminal offenses of fraud.

The oversight and regulatory institutions such as the Financial Oversight Authority and the Bank of Albania have revealed to the Center that they are aware of the phenomenon, even though to date there is no record of any actions against these companies. FOA (in Albanian AMF-Autoriteti i Mbikqyrjes Financiare) pointed out that, due to the serious risk posed by these fraudulent schemes, they have officially alerted other law enforcement agencies.

The General Directorate of Taxes and the State Police, two institutions tasked with the investigation and oversight of such commercial activities, were asked by the Center to comment on these issues, but failed to provide any information by the time this article was published.

A fraudulent scheme

During the last few months, the establishment of companies which trade stocks and bonds on electronic platforms in Albania, has turned into an epidemic. All over Tirana, young men and women engage in aggressive and direct recruitment campaigns.

Online employment agencies have created a special category for those who are interested to get jobs in brokerage firms or Forex (sale and purchase of currency on behalf of the clients).

In social networks photos from the movie The Wolf of Wall Street are used to illustrate the job.

 

An unlicensed brokerage company in Tirana. The photo was taken from advertising page lajmerime.com

Potential employees are promised the same: a minimum salary of 450 to 500 Euros a month, an average of 700 to 1000 Euros, and if someone is talented and dedicated to the job there are no limits to profits and income.

Five employees and former employees of these companies told the Center for Quality Journalism that promises related to salaries are generally kept.

However, what is not mentioned out loud is the fact that these companies perform their activities illegally.

The Albanian legislation for financial activities stipulates that companies that trade in foreign currency exchange should be licensed by the Bank of Albania, while those which offer brokerage services should be licensed by the Financial Oversight Authority.

The companies identified by the Center perform their activities on electronic platforms, and therefore require licensing from both institutions.

In case an Albanian company acts as an agent for a broker licensed by a foreign regulating authority this company must obtain approval from FOA (in Albanian AMF), to operate in the territory of Albania and periodically report to this institution.

FOA told the Center that this institution has licensed only three brokerage companies to perform their activity in Albania, or act as an agent of a broker-dealer licensed in a foreign country.

Eurotrade Securities, Smartcom and Prodata Securities are the only companies that are licensed by the authorities to perform brokerage activities in Albania, or use Albania as a basis of operations for brokerage activities in foreign countries.

The other companies identified by the Center that deliver brokerage and Forex services are registered with the National Business Center as call centers, marketing companies and providers of financial advice.

The manager of Global IP Center, a company which is recruiting for employees online, admitted that they do not have a license to operate in Albania due to the fact that the company only acts as an agent for a brokerage firm in Bulgaria.

“The company’s headquarters are in Sofia… We only act as intermediaries, while all the payment procedures are carried out by them over there… We perform our tasks on the internet, without the need to apply for a NIPT (Business Registration and Identification) in Albania,” he said.

These companies are clearly involved in tax evasion as they are carrying out activities that are completely different from those stated in the process of registration of the company, but business analysts are concerned of even greater dangers concerning these commercial activities.

Zef Preçi, director of the Center for Economic Research, points out that Albania is becoming involved in an international fraud scheme, while companies implicated in this process are not only engaging in tax evasion, but are also giving the country a bad reputation.

Statements collected by the Center show that Albanian companies recruit up to 100 people to work on online brokerage firms. Each of the recruits undergoes a two-week training session regarding specific tasks they need to perform during the course of their work. Afterwards, they are categorized in three levels of expertise: the call center employee, who invites the potential client to consider investing in the platform; those who undertake the financial transaction with the client; and those who are considered financial consultants and advise the client on the steps they must take and in which stocks to invest.

“This scheme is much more than a case of tax evasion. Albania is now involved in an international fraud scheme and the phenomenon is putting down deep roots in this country,” he said.

According to him, the institutions in charge of supervising the financial markets must launch a massive campaign of public awareness on what is happening, must strengthen their oversight and fight this problem without losing any more time.

The defrauding of foreign citizens

Companies that recruit young Albanians as brokers for online stock markets target foreign clients from many countries around the world. This can be surmised by job offers on a wide range of languages: Italian, from English and Spanish to Portuguese, Arabic and Japanese.

On the other hand, the five employees and former employees of these companies told the Center that in 90 percent of cases these companies were not licensed by any authority of any country and functioned in complete informality.

The companies acquire the rights to use online brokerage platforms, put up websites which are disguised as legitimate brokerage or Forex trading companies and urge their customers to invest money, which is then transferred to untraceable bank accounts in tax haven countries.

The more money the clients invest in these platforms, the higher are the profits for Albanian brokers.

“When the client loses a lot of money, the managers immediately start celebrating with champagne. Bonus payments for brokers who persuade their clients to invest heavily, range from a few thousands Euros to luxury cars,” a former employee of an unlicensed brokerage company told the Center.

An unlicensed brokerage company in Tirana. The photo was taken from advertising page lajmerime.com.

However, when clients make a profit and insist on withdrawing funds from their accounts, the operators in Albania are ordered to cease all communications and break all contacts with the investor.

The FOA acknowledges this practice and describes it as a pyramid scheme.

“Unlicensed companies can pool resources with call center companies established in the territory of Albania to carry put marketing and financial services for clients in Albania or abroad,” FOA said in an email to the Center regarding this problem.

“They can turn out to be Ponzi schemes or ghost brokers, who disappear after receiving the funds from their investors,” was written in the FOA email.

The Bank of Albania also pointed out during an exchange of information with the Center that there is always additional risk when doing business with companies or individuals which are not licensed by regulating and monitoring authorities.

“Considering the fact that the trade of stocks and bonds through electronic platforms is on the increase, it is of paramount importance to inform the public and raise the level of awareness of investors of potential risks, which can ultimately result in the total loss of their investments,” BoA said in an e-mail.

Blerta, whose job is to call Italian citizens and convince them to invest in electronic platforms, points out that she is aware of being involved in a fraudulent scheme.

“I do not inform folks on the risks of the investment. I don’t tell them that we are unlicensed, and the most important part – that they are going to lose everything.

“I am sorry, but this is my job,” she says.

The fear of the young

Statements collected by the Center show that young Albanians consider their jobs in these ghost brokerage companies as temporary, as an opportunity to gain some quick money until they are presented with a chance to pursue their professional careers.

Lured by big profits, at first they do not think too much on the steps they are about to take.

“To be honest, I never questioned why the company I worked for asked me to register as a small business,” an employee of a brokerage company told the Center. “I just want to finish school and everything I am interested for the moment is money.”

But only a few months after they start working for these companies and become fully aware of the nature of this business, some of the young recruits are consumed by the fear of negative consequences that this undertaking might bring for them.

“During these last few weeks we started discussing among friends on why did we start a business in our names, and what does this really mean for us. We are concerned that if the company is exposed for the fraud they have committed, they may shift the blame on us,” Blerta says.

Zef Preçi, director of the Center for Economic Research, believes that forcing employees to start their own businesses and work as independent contractors for the company is merely a ploy to save the brokerage firm from fiscal obligations and avoid suspicions from tax institutions regarding the number of employees and high salaries.

On the other hand, Preçi said that managers of companies ask their employees to start their own brokerage firms as a way to share legal responsibilities for illegal activities towards third parties with other business entities.

The Criminal Code stipulates that fraud with commodities and currencies – spreading intentional inaccurate information on the increase and the decrease of stock prices and their fraudulent trade – are criminal offenses which are punishable with imprisonment from six months to three years.

When these offenses are carried out in collaboration with others or more than once, they are punishable by two to five years of imprisonment.

These provisions leave little room for interpretation on the risks that thousands of youngster are faced with following their involvement in these activities.

*The real name of the company employee is not revealed for security reasons.

The main photo is taken from an advertisement of an Albanian brokerage company on the webpage Lajmerime.com.

 

 Follow on Twitter: Fatjona Mejdini | Xhuliana Jakimi