Declaration of Lionel Danenberg — PayServices v. FRBSF

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UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF IDAHO 
 
PAYSERVICES BANK, 
 
 
Case No. 1:23-cv-00305-REP 
 
 
Plaintiff, 
 
 
 
 
 
DECLARATION OF LIONEL DANENBERG 
v. 
 
 
  
 
 
 
 
 
  
FEDERAL RESERVE BANK OF  
 
SAN FRANCISCO, 
 
 
Defendant. 
___________________________________  
DECLARATION OF LIONEL DANENBERG  
I, Lionel Danenberg, declare as follows: 
1. 
I serve as the proposed Chief Executive Officer of PayServices Bank. 
2. 
I also serve as the registered agent for PayServices Bank in the aforementioned 
legal action and possess a thorough understanding of the case’s documents, records, and pleadings. 
3. 
I was a party to all written correspondence exchanged between PayServices Bank 
(“PayServices”) and the Federal Reserve Bank of San Francisco (“FRBSF”) throughout the 
process for applying for a master account with the FRBSF. 
4. 
I was in attendance during every meeting between PayServices and FRBSF. 
5. 
During these meetings, FRBSF expressed admiration for PayServices’ business 
model’s simplicity and its departure from conventional banking risks. 
6. 
PayServices’ business model effectively reduces barriers for small and medium 
enterprises seeking engagement in legitimate import and export activities via lawful ports under 
the supervision of United States Customs and Border Protection. 
7. 
PayServices’ proprietary technology represents a significant advancement 
compared to the capabilities of traditional banks. While conventional banks typically possess only 

the accountholder’s identity, PayServices’ technology comprehensively captures the “who,” 
“what,” “where,” “when,” and “how” factors prior to initiating a transaction, ensuring compliance. 
This technology establishes end-to-end traceability via a “compliance passport,” revealing 
identities of all permitted transaction parties, linking financial activities, physical goods, and legal 
compliance. For instance, the technology can identify products unsuitable for sale in a specific 
state due to regulatory restrictions. 
8. 
PayServices positions itself as a foundational payment bank, distinct from 
traditional lending-oriented banks. By concentrating on compliance standardization and efficient 
fund movement, PayServices collaborates with financial institutions, insurance companies, non-
bank lenders, and governments requiring reliable data and access to the “compliance passport.” 
This secure and scalable infrastructure ensures real-time information sharing among transaction 
stakeholders. PayServices complements rather than competes with established banks, specializing 
in commercial transactions and compliance information standardization. 
9. 
PayServices’ product facilitates seamless transactions involving banks, merchants, 
and tariff-collecting governmental agencies. Its technology addresses administrative process gaps, 
ensuring accurate valuation of goods passing through lawful ports. 
10. 
PayServices provides individual accounts to individual depositors and handles 
processing of payments for goods and services, similar to any other traditional bank. 
11. 
PayServices’ bank does not issue loans. It does not issue credit. It does not pay 
interest on deposit because the deposits are available on demand.  
12. 
Customer deposits are used exclusively to pay for (a) transactions that the 
customers enter into; (b) the collection of customs fees in the cases of international transactions 
subject to such fees; and (c) PayServices’ transaction fee.   

13. 
Customer deposits are not used to finance any other transaction, such as a bank loan 
or purchase of securities. 
14. 
The preliminary approval for a charter from the Idaho Department of Finance 
provides that it will maintain a cash reserve of 100 percent of its total deposits. 
15. 
In its pursuit of a Master Account issuance, FRBSF Federal Reserve Bank of San 
Francisco received exhaustive documentation detailing PayServices' compliance with the U.S. 
Bank Secrecy Act and Cybersecurity standards. These materials included, but were not limited to, 
the company’s Compliance Management System Manual, Cybersecurity Manual, and Business 
Plan. All materials filed with the State Chartering Authority, the Idaho Department of Finance, 
were provided to FRBSF. 
16. 
The company’s risk management framework incorporates best practices and 
principles adopted by the Federal Financial Institutions Examination Council, National Institute 
for Standards and Technology (NIST) cybersecurity standards, and other leading industry 
standards cited in the Examination Manuals issued by the U.S. Office of the Comptroller of the 
Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). 
17. 
Each of these documents was drafted with the assistance of or solely by the 
company’s legal counsel. Together, they include hundreds of detailed endnotes citing the 
authorities upon which PayServices relied in developing the particular policy or program at issue. 
18. 
An examiner who is both a Certified Anti-Money Laundering Specialist (“CAMS”) 
and a Certificate Fraud Examiner with the Association of Certified Fraud Examiners (“ACFE”) 
completed an assessment of a copy of the CMS Manual. The examiner provided a certification 
letter providing that the program complies with federal law.  

19. 
PayServices’ CMS and Cybersecurity Manuals provide a detailed set of policies for 
addressing money laundering and terrorism financing risks. They describe the company’s use of 
cutting edge technology, including technology that tags a user’s location and personal data and 
links it with the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) 
sanctions list; the use of a proprietary secure browser that it has developed which limits account 
access; and the use of technology that examines the specific characteristics of a user’s device to 
be sure that the device used to access accounts and handle transactions is the same as the device(s) 
authenticated to access the account, among other features. 
20. 
The Business Plan specifically explains that what makes PayServices unique is that 
each transaction between a merchant and a commercial buyer includes the use of a secure portal 
which holds the underlying documents to facilitate a transaction, including but not limited to the 
contract of sale, invoices, and any insurance taken for the transaction.  
21. 
PayServices literally oversees the transaction and controls the release of funds 
based on both parties’ approval that the underlying goods have been submitted, received, and 
conform to the terms of their agreement. It also restricts transactions on goods that are subject to 
customs bans imposed by the relevant countries – a feature designed to eliminate the trade in 
“illicit” goods. 
22. 
PayServices' technology functions analogously to a credit report, documenting 
illicit activities within the “compliance passport” for transparent disclosure among participating 
financial institutions, aiding informed decisions. 
23. 
FRBSF has exhibited no concerns regarding the shared materials and explicitly 
assured that the comprehensive application mitigated risks, enhancing the safety and reliability of 
the U.S. financial economy. 

24. 
Plaintiff's application features official government endorsements from nations 
maintaining favorable relations with the United States, advocating for implementation of improved 
controls and transactional transparency through PayServices' compliance passport. 
25. 
PayServices' team comprises individuals with extensive backgrounds in finance 
and business, boasting multilingual proficiency, extensive global work and travel experience, as 
well as holding key positions within prominent financial institutions, including Fortune 10 and 500 
companies within the nation. 
26. 
One of the proposed directors is a former Executive Director at the World Bank. 
Another director served as a senior vice president at Republic National Bank, one of the fifteen 
largest banks in the United States during his tenure. In 1999, HSBC Bank acquired Republic and 
the director continued to serve as an officer for HSBC Bank. 
27. 
I have researched information regarding the credit unions listed in the Response to 
the Motion to Dismiss, at Section III. Their websites indicate that they are either self-insured or 
insured by a private third-party entity. 
28. 
It is worth noting that FRBSF has never raised any concerns or reservations about 
any members involved in PayServices’ business, all of whom possess impeccable track records. 
Notably, during the meetings conducted with the Federal Reserve Bank of San Francisco, 
PayServices explicitly inquired of FRBSF whether they harbored any questions, concerns, or 
potential issues, and consistently, FRBSF unequivocally affirmed the absence of any such issues. 
29. 
In a letter dated June 15, 2023, Jennifer Gallagher, an “Assistant to the Board” of 
Governors of the Federal Reserve System, sent a letter to Senator Rubio’s office in response to 
Sen. Rubio’s inquiry regarding PayServices Bank’s application for a master account. Ms. 
Gallagher states that “the [Federal Reserve Bank of San Francisco] determined that it is unable to 

grant PayServices Bank’s request for a master account and financial services . . . .” The letter is 
attached hereto as Exhibit A of this declaration. 
 
I declare under penalty of perjury that the foregoing is true and correct. 
 
Executed on the 31st of August 2023. 
 
__________________________________ 
Lionel Danenberg 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
EXHIBIT A 

 
NONCONFIDENTIAL // SECURE EXTERNAL 
 
June 15, 2023 
 
The Honorable Marco Rubio 
United States Senate 
201 South Orange Avenue 
Suite 250 
Orlando, FL  32901 
 
Dear Senator:  
 
I am writing in response to the correspondence you received from your constituent, Mr. 
Lionel Danenberg, regarding PayServices Bank’s request for a master account and financial 
services with the Federal Reserve Bank of San Francisco (Reserve Bank) and the criteria used to 
review requests for accounts and financial services. 
 
As noted in your email, the Reserve Bank determined that it is unable to grant 
PayServices Bank’s request for a master account and financial services and communicated that 
decision directly to PayServices Bank on May 31, 2023.   
 
Federal Reserve Banks review all account requests under the Board of Governors’ 
“Guidelines for Evaluating Account and Services Requests” (Guidelines).1  The Guidelines 
establish a transparent, risk-based, and consistent set of factors for Reserve Banks to use in 
reviewing requests from depository institutions to access Reserve Bank accounts and financial 
services.  The Guidelines also include a tiered review framework to provide additional clarity on 
the level of due diligence and scrutiny that Reserve Banks will apply when reviewing access 
requests from different types of institutions.   
 
 
I hope this information is helpful.  Please let us know if we may be of any further 
assistance. 
 
Sincerely, 
 
Jennifer Gallagher 
Assistant to the Board 
 
1 87 FR 51099 (August 15, 2022). 
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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 
WASHI NG TO N , DC 20551

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