Topic Unauthorised business Onecoin Ltd, Dubai: Prohibition of involvement in unauthorised money remittance business
Following the cease and desist order to IMS International Marketing Services GmbH (IMS) on 5 April 2017, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) issued on 18 April 2017 a direct order to OneCoin Ltd, Dubai holding that the company is to immediately cease its business activities in Germany insofar as it is involved in the initiation, conclusion and settlement of the unauthorized money remittance business conducted by IMS through the execution of payments to IMS' accounts and the issuing of payment instructions to IMS.
The administrative action is by law immediately enforceable; it is based on § 4 (1) sentence 1, read in conjunction with sentence 4 of the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG).
The order may still be subject to judicial review.
Pursuant to section 4 (1) sentence 1 ZAG, BaFin ordered IMS to immediately cease the unauthorized money remittance business conducted with "OneCoin" investors for OneCoin Ltd, Dubai and not to further execute any pending business of this. BaFin had already imposed an account freeze on IMS' known active accounts in Germany pursuant to § 4 (1) sentence 4 ZAG on 17 and 20 February 2017, with the freeze also being immediately enforceable by law.
OneCoin Ltd, Dubai is part of a network of companies that market units of a virtual currency, which they declare to be a cryptocurrency, under the "OneCoin" name using a multi-level marketing structure both in Germany and around the world. On behalf of OneCoin Ltd, IMS made it possible for investors who wished to acquire "OneCoins" to transfer the payment for this to various accounts held by IMS International Marketing Services GmbH with different credit institutions in Germany and forwarded this money on behalf of OneCoin Ltd to third parties, in particular outside of Germany. This service offered by IMS is classified as money remittance business as defined in § 1 (2) no. 6 of the ZAG, which, as a payment service, requires authorization by BaFin in accordance with § 8 (1) sentence 1 ZAG. IMS neither had nor has the required the required authorization. Between December 2015 and December 2016, IMS accepted in total approximately 360 million euros on the basis of the agreement concluded with OneCoin Ltd. Approximately 29 million euros of this remains in the currently frozen accounts.
OneCoin Ltd is involved in the unauthorized business by virtue of the fact that it had investors make payments to IMS’ accounts and gave payment instructions to IMS. Pursuant to § 4 (1) sentence 1 ZAG, BaFin may not only order an enterprise – and the members of its governing bodies – which provides payment services without the license required under § 8 (1) ZAG to immediately cease business operations and to settle this business without undue delay. Pursuant to § 4 (1) sentence 4 ZAG, BaFin's powers also extend to enterprises involved in the initiation, conclusion or settlement of such business as well to the enterprise's shareholders and the members of its governing bodies.
BaFin does not have the right to decide as to the validity under civil law of the “OneCoins” sales contracts. It may therefore not answer questions of this nature.