Liberty Reserve, the leading payment channel for traders in emerging and frontier markets, has come under fire and the firm has been taken out of operation, according to a report in the Tico Times. As reported, the owner of the South American based company has been arrested by authorities in Spain in alleged connection with serious financial crimes.
It is believed that Arthur Budovsky Belanchuk (39), owner of the popular Liberty Reserve, was arrested on Friday 24th of May in Spain as part of an international operation spearheaded by the United States and Costa Rican governments on financial crime. Mr. Belanchuk, a Costa Rican citizen of Ukranian origin, was under investigation since 2011 after authorities flagged his firm for money laundering. Apart from financial and general e-commerce, it is thought by the investigators that the company engages in illicit payments from criminal activity such as child pornography and drug trafficking.
Forex brokers have been benefiting from Liberty Reserve’s vast access as a payment provider, especially in countries where traders face difficulties in transferring funds. “Liberty Reserve was a ‘gift’ for several traders, especially after the State Banks’ (State Bank of Pakistan) changes to international money transfers”, said Masroor Ghoori an introducing broker and analyst from Karachi, Pakistan, in a comment to Forex Magnates. Liberty Reserve is a payment channel whereby people can send and receive secure payments without revealing their account numbers or identities.
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Forex brokers operating from heavily regulated markets such as the UK are obliged to use payment channels that are regulated, for example UK brokers use services provided by the likes of Money Bookers. Liberty Reserve (LR) an un-regulated service is used by several international forex brokers, such as; Marketiva, FXOpen, Markets, Instaforex and others.
Liberty Reserve has been widely used by traders where central banks restrict bank transfers to foreign entities; for example in countries such as Malaysia, Pakistan, Argentina, Nigeria and Brazil the company has been the preferred payment method. The service offers traders a fast and cost effective method with charges capped at $2.99.
Liberty Reserve’s website has been shut down and none of their international representatives in India or Malaysia were reachable for comment. Dery Rusdan one of the largest introducing brokers in Indonesia said in a comment to Forex Magnates: “We always thought that Liberty Reserve could have issues like e-gold but this was a shock, business will suffer.”
A Dubai based brokerage firm who wished to remain anonymous told us: “We average around $250,000 to half a million in monthly deposits, mainly from Asia and Africa.
Forex traders have faced issues with payment providers in the past, like with e-gold, a digital currency provider that was found guilty of money laundering by US authorities”.