First Atlantic Commerce (FAC) was thought up back during the heady days of the dot-com boom by Andrea Wilson while she was on maternity leave. Having worked at Bank of Butterfield and at IBL, she had seen a need for a way to provide Internet settlement for credit card payments.

She found a Bermudian partner, and she set up FAC with a strategy for an Internet payment gateway that could be certified for both the bank. At the time both the banks were using First Data and Wilson said it made sense to have a payment gateway that would bridge the Island to the mainland that would be certified to First Data.

First Data put FAC in contact with a programmer who helped them create the gateway - a software that allows FAC to capture and process or capture and retrieve card payments off the Internet and put it into the existing credit card structure - and the company was born.

"Instead of being a point of sale terminal, what we do is say, I am now going to take this transaction off the Internet, and I am still going to process them in the same way, it is just a different way I am capturing them, right? So that is all it was, was a new way of getting the data," said Wilson.

Once that was in place, they certified with First Data in June, 1998 and launched an advertising campaign to market into the US market.

"At this point we were not Caribbean, we were in Bermuda and we were looking at the US market, because that were the dot-com boom was," said Wilson. "And people started taking interest, they started in saying why would we want to be offshore, what was the benefit. We didn't really have the `Why Bermuda' structure in place at that point. We didn't have the story, we didn't have the marketing story because we didn't really fully understand what all those benefits were in the beginning."

But as FAC went forward as more and more people became interested, they went to Government with AS&K and put forward a proposal for a private act that would allow them to put e-commerce dot com companies into segregated cells.

The legislation - First Atlantic Commerce E-commerce Act 1999 - was approved in the middle of 1999, and allowed FAC to use the captive model for e-commerce through virtual corporations or more commonly called e-suites.

Under the Visa and MasterCard rules a company must have a corporate presence on the Island - and this became a less expensive way of helping US or European companies set up shop.

"They allowed us to do business because they were legally sanctioned... so as long as the bank, the financial institution that was doing business with that virtual corporation, had completed their due diligence and of course the Know Your Customer, then everything would be in accordance with local laws. We do it today in the same way," added Wilson.

"So the model became more attractive and we could say, the business is great, come and do your business in Bermuda, we can offer a, b and c, it is a good jurisdiction, there is a lot going on, there is good telecommunications, we have got banking infrastructure. You can leverage security in the region, just to include your market and expanding your client base because we are part of that region (For the purposes of card processing Bermuda is part of the Latin America and Caribbean).

"So it opened up these businesses who typically had not envisioned marketing outside the US to allow them now to have presence in a jurisdiction that would allow them to do that."

She said that the other more compelling element from a business administration perspective was that once they established their business and their dot com business here, they didn't have to charge sales tax to consumers that were purchasing from the site, so it lowered the entry price of that item being sold.

And this business model of the segregated cell, with no sales tax and a jumping off point for the Caribbean and the Latin American region was a big hit right away.

Wilson said: "We had at the peak, before we ran into some difficulties, about 275, which does not seem a lot of customers in the grand scheme of things but when they were doing a lot of processing, you don't need a significant hundreds and hundreds of customers to make it a viable business.

"Thing were going very well and we were getting support from the card association," she added."

Visa International entered into a joint marketing agreement and MasterCard International worked with them from a vendor perspective.

"We had the support of the card associations, which is really big in our industry," she said. "They are like the Gods of the business and you really need to have their support in order for the banks to become your clients, for the merchants to become your clients, they want to know that you have some reputation and reputable value, which we did."

So the company continued growing until the beginning of January, 2000. This was during the height of the e-commerce boom and FAC could hardly keep up with demand.

"There were more enquiries, more submissions and more applications coming into FAC than we could keep up with," said Wilson. "We were getting 45/50 a day requesting we do business."

She said they had an arrangement with the Bank of Bermuda, which was the only bank accepting Internet acquiring merchants, and the new customers were referred into the bank as part of their standard referral process to have the required due diligence done.

Unfortunately, a few of those, four to be exact, turned out to be white collar fraudsters," she said. "We did not know this in the beginning, everything was all happening very fast.

"Within about six weeks FAC recognised that there were suspicious volume patterns of transactions. Their volume increased significantly over a short period of time, which, when you are in the industry, is a red flag, something is going on there because that is not the normal natural pattern of sales."

So Wilson took the database logs to scrutinise them and put them into spread sheets to look at what the patterns were.

"I wanted to see how it was being done, what card numbers were being used with what PIN numbers... and I recognised a pattern of suspicious fraud."

That was in March, 2000, and she had her team take a look at everybody that was doing some significant volume and did the same exercise.

"It turned out there were four that seemed to be connected in some way. We did not know what the connection was at the time, we had no idea because you can't tell by looking at processing records what that is, you just know that something is up," said Wilson. "They are all doing something very similar, which is a red flag."

She called Bank of Bermuda and the fraud squad and when they all met up they realised they had a problem "that we had a potential fraud on our hands.

But they still did not know for sure what the merchants were up to. The accounts were immediately frozen and they stopped processing immediately and the Bermuda police brought in.

"We went back and looked through the application materithe fraud squad, they were Canadians, so he called the Royal Canadian Mounted Police (RCMP) in Canada and we were put on to the Vancouver task force,"

They came under Project Emptor, the RCMP's task force to track down and prosecute deliberate telemarketing fraud.

"At first we did not know all of this, and we heard about it (telemarketing fraud) after the fact," said Wilson. "So we were speaking to Project Emptor, and we mentioned these individuals names that were behind the merchant accounts, and we said, okay, these are the four names that we have, are any of these involved in anything that you are doing. And we got a hit right away.

"They said what have you got, we are very interested, please tell us what you know about these people, yes they are under investigation, what have you done to prevent them continuing on, so we went through and we had a number of conversations."

Wilson said that the US body the Federal Trade Commission who was working with Project Emptor on the fraud, called her and asked if she would serve as one of their witnesses and provide depositions on behalf of the US government.

"It is like a soap opera. I should be on Oprah," said Wilson, half way through her story. "I had a wonderful investigator to work with at the Federal Trade Commission. She and I we put together whatever materials they needed, we were very co-operative."

FAC had its Bermuda lawyers involved to make sure that they were not exposing the company and over a period of eight months they prepared a number of depositions to assist the US in getting extradition orders.

The Federal Trade Commission files consumer action complaints against victims and FAC could provide them with victim information, which they could pull from their transaction databases.

"We provided them with legal depositions from me, as the expert witness, if you want to call it that, and they presented that to the RCMP task force which allowed them to go in and arrest them," said Wilson.

"And in December, 2000, the man behind one of the four who was determined later to be the head, the ring leader behind the whole thing, was arrested."

The man's name was Tim Babuin, a 25-year-old Canadian with a huge fortune, houses and boats from the wealth he had gleamed from pensioners in his telemarketing fraud.

"Basically the papers were filed and a successful extradition order was granted to the US government," added Wilson. "They were in and out of the courts over a year. He was in Vancouver, and the extradition order was to pull him in to the States so they could try him on Federal wire fraud, and that is a capital crime and it is prison time.

"He got jail time for it. The Department of Justice got involved because they became the litigators, they were acting on behalf of the criminal - the Federal Trade Commission acts on behalf of the civil - and acts on behalf of the victims and the people have been ripped off, or scammed or deceived."

She explained that they used the word deceived because the victims were technically consenting. When the fraudsters called they consented, but it is called "deceptive consent".

"It is not like they are just taking your credit card and using it, they are phoning and saying "You have won, give us your credit card" and they say `yes' no problem here is my card'. So it is a deceptive tactic to get card and charge it," added Wilson.

"The scam was `we are representing Visa and MasterCard and your number has been drawn in a lottery that Visa and MasterCard are supporting for the British Premium Bond and please can you confirm you card number by turning it over and reading the number on the back of the signature panel'.

"And these people they were targeting were primarily the elderly and people who were not as intuitive to what is happening and they were willingly giving their card number over the phone."

They would then charge them anything from $299 to $5,000 depending on what it was they were saying on the telephone.

Wilson added that the product they were selling actually exists, British Premium Bonds, which does have a lottery element to the process.

"So what they were saying was Visa and MasterCard were sponsoring one of those lotteries. Again it was the well orchestrated scheme," said Wilson. "I don't know how much money they took, but what they processed was a lot.

"The component that was done here was $22 million - just through here."

Not everything that was processed was settled but that is how much went through FAC.

"I just know that there was a piece and we were involved with that piece," added Wilson.

"We got so involved on the evidence side, because they were relying on our evidence to be able to put these people behind bars. I had a corporate obligation to be involved. I couldn't walk away, I didn't want to walk away, I wanted to make sure there was an end to this."

The Federal Trade Commission and the RCMP came to Bermuda and for a week they all went through all the evidence.

"We went through every letter, every transaction, who was what, all the due diligence reports, we looked at all the passport copies that had been provided. We got all the files from the bank and looked at all of that, and all the depositions were done at that time. Our Bermuda lawyers were there and the bank had their input there as well. And then they went away and by December they had enough evidence to indict."

Wilson said the Canadian and US authorities were aware of what Babuin, as Director of Nagg Holdings, had been doing.

"His strategy was to do processing for eight weeks, and then up and leave, and do eight weeks somewhere else and then up and leave and do eight weeks somewhere else, and then up and leave," said Wilson.

"Here they got six weeks. Normally it would take eight weeks before anyone worked out what was happening. They start very slowly, they peak, and then they drop. If you think of a credit card processing cycle, you get your statement every four weeks, so they would charge your card, you wouldn't get your statement until two or three weeks later, and by the time you realise what has happened, and you go to charge it back they were gone. They were in and out.

"But we were smart enough to freeze their accounts before they realised, before they knew that we knew. So there was money in the accounts that we froze and at the same time the money they had wired to their bank account I got a Mareva injunction (to freeze their bank accounts).

"We filed the injunctions with a bank in Nevis, to close their accounts down there. So we knew where the money had gone, we just didn't know how much was there.

"And of course within a few days we knew that they knew we had an injunction on their accounts, because I was subject to a number of threatening phone calls and e-mails, that were really abusive, very abusive. It was very scary. I was frightened, definitely. I did not know who I was up against.

"I had some comfort from the police department that the names were being put at the airport to not allow them to come in. So again I did not know who I was dealing with.

"This is the challenge of e-commerce. You are dealing with people you may never meet. You don't look in the whites of their eyes when they open their account. And no amount of due diligence and looking at a passport can ascertain the character of these people. The due diligence the bank did came back negative, there were no problems, no previous criminal history, nothing. They were using their own names, for the first time."

She said that Babuin was known by more than 15 different aliases in Vancouver according to the reports with a whole host of different companies used in the fraudulent dealings,

And she explained just how clever his scam was. "He was not doing business defrauding Canadians, so he had not broken Canadian law or defrauded Canadians. He was not an entity of the United States, although he was defrauding, or deceptively deceiving is what I should say, US citizens, he wasn't a US company, so they couldn't get him. So and because he was doing his processing offshore, there was no money trail.

"It was very clever. So not only had he deceived the US people, but also the Canadian people. And it was not until we got on to it, and we were the ones that tied it all together and said, this is what we think is happening, that he was caught.''

The case got together in May, 2001 and by December, 2001, they arrested him, and they did it at night and they raided his staff his people his rooms, they confiscated his cars and his boats and all his property. He was just 25 years old.have heard that they ran Before trying to move his scam through Bermuda, Wilson said she believed he had been doing this for 18 months.

"So they were taking money from banks, from consumers for 18 months, but they could not connect them that was the problem. He was doing it under so many different names and many different bank accounts and so many different companies that they could not make the ties. He was using the Bahamas, Costa Rica, St. Lucia, Nevis, Canada. He was not wiring money to the States, he never ever wired money to the States or they would have known right away. It was very clever. But it takes people even more clever to get them," she said.

And just last month, on June 16, he appeared before a US magistrate judge and was sentenced to eight years after plea bargaining down from 17 years after a man-hunt that included the FBI, the RCMP, and of course FAC.

And now, after more than two years tied up in the red tape of the US and Canadian law, FAC is set to re-launch itself, and reposition itself once again as a player on the global processing market. "What we have learned over the past two years we have put into the rebranding," said Wilson. "We have re-focused and we have introduced new policies. Now the focus is more on using Internet payment methodologies for traditional retail.

"So you take something like a cell phone and it connects like this and the pizza delivery boy or taxi has a terminal that is connected to a cellular number and you swipe the card and that message then goes out to the cellular network and they put it on the Internet and our gateway takes it off to the processor. So now we have transitioned from being www.joesbarbecuesauce.com to talking to phone technology about integrating our solution as the telecommunications background to transfer messages from their wireless phones.

She added that FAC has also just introduced an new technology which allowed hotels to process their bills more easily. Instead of having to swipe a card, they enter the number in their system and the transaction is verified over the Internet, to remove any delay and remove wired up connections and having terminals in the back office where a card is swiped.

"We also have online reporting, so they can pull off six months of history instead of pulling through receipts. The banks right now don't offer that, they get confirmation on statements, but somebody has to reconcile them. Now it will allow them to go in and look and see all the transactions they have done."

And she said if there was a problem with a customer from two months ago, they can go online, find the information, the folio number, the authorisation and easily deal with the matter.

"It simplifies their job," she added. "You are restricting access by user so you have to identify yourself by user, so it is tracked and audited. We know who did these transactions, as opposed to having a terminal at the counter that just sits there and can be there accessed at any time. So it adds to the security."

So far four hotels have signed up with one a large international hotel in Cancun.

"My objective from the business perspective was to target the small, mid-size cottage colonies, or the more remote resorts where they have jungle adventures or volcano resorts in the Caribbean because getting a phone line to them is probably a bit of a challenge," said Wilson. "But you know what? They are very well wired because they access everything through satellite or cellular, which is very well covered. So it was the land-line issue we were trying to solve and we have had very good uptake."

Wilson hopes now she can put the past three years behind her, and use the legal knowledge she has gained to help her business and in drawing up contracts.

"I have had so many people say to me, just walk away," said Wilson. "But this is my company, it is my reputation on the line and the reputation of my company on the line, I can't morally swallow that so many people were affected and knowing what I know and not providing some way to help them get some redress."

She added: "I think the thing that has to come out of this is that nobody lost. We went down, we came back up, we recovered and they are in jail. We successfully prosecuted him and did what we had to do and nobody here lost anything, that is the good part. And hopefully this is the last time I have to tell this story."