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MONTREAL — from www.montrealgazette.com – A Montreal company has been providing online payment services for sites that sell dangerous drugs over the Internet and has been accused of doing the same for a site that distributes child pornography, the Montreal Gazette has learned.

AlertPay is an online payment service provider, similar to PayPal, that allows people to pay for goods and services on the web. It primarily uses credit cards to enable these purchases. However, since the beginning of October, AlertPay, which counts 7.7 million members worldwide, has not been able to provide its members Visa and MasterCard services because one of the company’s banks, Norway-based SEB Group, suspended AlertPay’s account.

This wasn’t the first time AlertPay had credit card payments suspended this year. In March, Wirecard, a German-based processor of MasterCard payments, terminated its relationship with AlertPay. In a lawyer’s letter, a copy of which was obtained by the Gazette, Wirecard stated the termination happened because AlertPay was providing online payments for a site that peddled child pornography, and another site that provided illegal gambling services.

The letter was actually addressed to Ceptum Ltd., an AlertPay partner company based in the United Kingdom that processes AlertPay payments in Europe. Montreal resident Firoz Patel, who is the CEO of AlertPay, was the largest shareholder of Ceptum Ltd., according to the most recent public records from last year. Reached this week, Patel said he is not a shareholder of the company.

The letter claimed a site called nn-usenet.com made child pornographic content available and payment for the content was received through an AlertPay account via Ceptum Ltd.

“On this site, images are made available to the user which show sexual acts of children between 11 and 14 years of age,” the letter states.

Wirecard refused requests for an interview on the subject, saying the matter was before the courts. A spokesperson for SEB also wouldn’t comment.

Patel said Wirecard has trumped up allegations as an excuse to keep Ceptum’s money.

He added that AlertPay takes its responsibilities seriously as a payment provider and a member of the Association of Sites Advocating Child Protection, and has been diligent in reporting any child pornographic activity it has come across to the relevant authorities.

Patel said nn-usenet is a site that lists numerous newsgroups, and the Wirecard letter referred to one specific person, who he said was using the site to exchange pornographic material involving children for money. He said the person in question was receiving money through a personal AlertPay account, not a corporate one.

He further explained that private individuals can receive small amounts of money through AlertPay accounts, and the company only investigates if a person receives a spike in transactions and it’s not clear why.

Patel said when made aware of the incident by Wirecard, AlertPay shut down the relevant account.

Wirecard further accused Ceptum of providing payment for a company engaging in gambling, called bingocanada.com.

Patel said this claim is bogus.

“Wirecard has made assumptions, and now they’re holding on to our money, and we’re trying to fight them,” Patel said.

AlertPay has also been criticized in the past for having provided payment for a drug known as mephedrone, which is sold online under the code name “plant food,” or “bath salts.”

It became a popular party drug in the United Kingdom, and in March, 2010, a very public suicide brought it into the spotlight.

Max Llewellyn, 18, from Rhondda, South Wales, became depressed after using the drug and hanged himself. His family said it was too easy to get the drug by ordering it online and receiving it through the mail.

The family urged AlertPay to stop providing online payment for the drug, and the area Member of Parliament wrote a letter to AlertPay to that effect.

At the time, AlertPay’s operations director, Elsworth Weekes, told the South Wales Echo newspaper it would not stop processing payments for mephedrone because the substance was legal in the U.K.

Mephedrone was made illegal in the U.K. last year. It is also listed as a controlled substance in Canada.

Patel said when the drug was made illegal in the U.K., AlertPay stopped providing payment for it.

However, a quick search on the web turned up the website mephedrone-europe.com, which advertises that it sells mephedrone in several forms, and says it accepts AlertPay as a method of payment, by sending customers email requests for money through the AlertPay system.

Another site that advertises it accepts AlertPay payments is plantfoodstore.co.uk, which sells a popular drug in the British clubbing scene similar to mephedrone called Benzo Fury.

The plantfoodstore website said that Benzo Fury is the “newest British legal high.” The site also advertised itself as the “best place to buy Plant food, naphyrones, nopaines and methamphetamine.”

According to The Daily Telegraph, Benzo Fury is taken by users of party drugs such as ecstasy to come down from their highs. It is currently legal in the U.K., although health authorities warn it has similar dangers to mephedrone and should also be banned.

Tim Nixon, a spokesman for AlertPay, said the company suspended the account of plantfoodstore.co.uk more than a year ago, and the company has been asked to remove the AlertPay logo from its site.

“Unfortunately, AlertPay does not have control over what a merchant displays on their website, and some merchants do not update their site after we suspend their accounts (although we do ask them to),” Nixon wrote in an email. “However, ultimately this AlertPay account was not active and not receiving payments since 2010.”

Mark Bishopp, a former senior vice-president of strategic development for a competing online payment company called Allied Wallet, said that in the days after AlertPay lost credit-card processing last month, Allied Wallet received many applications from disgruntled AlertPay customers looking for a new service provider. He said, however, he had to reject many of sites that applied to Allied Wallet because they engaged in questionable or unethical activity.

“Websites that used to deal with AlertPay, when they applied with us we saw: ‘Oh, you’re an MLM (multi-level marketing) scheme that doesn’t actually sell anything, so we decline you.’ (Other companies that applied) sell research chemicals, which is another way of saying bath salts (a code name for mephedrone and similar drugs). I had numerous sites like that that reached out to me.”

Bishopp said some of the companies that applied to Allied Wallet have warnings on their websites saying their products are, “not for human consumption,” although the blogs on those sites have instructions on how to ingest the products.

“These people think they can get processing anywhere and sadly, they eventually can, which is why these (payment) companies exist,” Bishopp said.

Bishopp added it’s the responsibility of payment service providers like AlertPay to know what’s being sold through their systems.

He said that the payment providers, not the merchants, are the ones that have a relationship with the credit card companies, so with every purchase made through AlertPay, that company actually takes ownership of the goods being sold for a fraction of a second, in what’s known as a ‘flash title’.

“It’s up to the payment service providers to monitor the website and possibly test some of the products,” Bishopp said. “Technically, they’re supposed to be doing site visits once a year. It doesn’t happen often, but it’s in the cardholder agreements.”

Patel said AlertPay has been the victim of a smear campaign by a former employee who he said is striking out on his own to form a competing company.

“So when you have a lot of rumours that go out and they are persistent, it becomes very difficult to ignore by service providers,” Patel said.

Patel said Monday he expected AlertPay to have Visa and MasterCard processing back up this week or early next week.