Intertrust fined $4.2M over AML failings

| 14/05/2021 | 78 Comments
Cayman News Service
CIMA and Cayman Islands Stock Exchange offices in George Town

(CNS): One of Cayman’s leading corporate service firms has been fined more than CI$4.2 million for breaches of anti-money laundering regulations. CIMA said the fine was imposed because of the company’s “pervasive and protracted history of non-compliance” with AML rules and its failure to remediate the breaches. CIMA said Intertrust had failed to verify the sources of funds, get documentary evidence on the nature of their clients’ business, identify beneficial ownership, accurately consider risk or properly monitor clients.

In a public notice posted on its website Thursday that revealed the whopping fine, CIMA said the sanction was imposed following a recent on-site inspection and after similar failings had been identified during previous visits. The regulator also implied that this was a warning to other firms as it would ensure compliance with the enhanced regulatory regime.

In an email circulated to clients in the wake of the publicly disclosed fine, Intertrust said it would appeal. It said the fine had been imposed in regard “to aspects of our client due diligence and know your client (KYC) records”, and that CIMA had increased the scrutiny on local service providers after Cayman wound up on the Financial Action Task Force (FATF) grey list.

“The administrative fine we have received relates to historical remediation plans we had already been working with CIMA to address by putting enhanced local customer due diligence and KYC measures in place,” MD Daniel Jaffe said in the email. “As part of our next steps we will be working with our Counsel and following an appeals process in response to the fine so we can reach a balanced conclusion.”

The news that Intertrust is facing such a large fine comes after Maples revealed that it intends to seek a judicial review regarding how the regulator is applying the new more stringent regulations on its business.

One of the main reasons that Cayman was grey-listed was due to a lack of enforcement and reluctance to pursue prosecutions against those in the financial services sector. CIMA, which has historically been accused of reticence when it comes to scrutiny of the offshore sector, appears to be upping its game.

In the notice regarding the Intertrust fine, the regulator said it was important that firms had the necessary policies in place and complied with regulation to prevent Cayman-based entities being used as conduits for financial crime. CIMA said it would be vigilant in its enforcement of the AML rules.

Meanwhile, Jaffe claimed Intertrust was “absolutely committed to… ensuring that we continue to maintain the highest standards of compliance with the Cayman Islands stringent regulatory framework through our important role as gatekeeper.”

See the CIMA notice here.


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Category: Business, Financial Services

Comments (78)

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  1. Anonymous says:

    It seems to me that not only do we have to deal with OECD and CFATFA but our own regulators are determined to put companies out of business and more people out of work. The financial services industry is faced with some CIMA staff who have no clue what the various structure are, how they operate and the difficulties of actually getting “properly” notarized documentation, proof of source of wealth for existing clients and structures which were created over 50 years ago, etc., particularly during covid. For example, their requirements for notarized ID are beyond anything required anywhere else. The amount of the fine is ridiculous. Do they not realize when they have finished destroying the financial services industry, they too will be out of a job?

    • Anonymous says:

      Yes, Clients can be difficult. Corporate Services is no easy feat when dealing with annoyed & sassy Clients. When data collection gets difficult this is where the Senior Managers/Compliance Directors/Client Attorney(usually Locally-based) need to intervene and let the Client (or Client’s Direct Contact for KYC-AML Docs) need to be informed of it’s non-compliance & repercussions for continued non-compliance.

      In the Offshore Compliance World many people are intimidated by diplomatic, respectful Administrator-Client disagreements that may result in job loss, demotion, or poor performance reviews (affecting year-end bonus). If it’s that much fear in conducting a corporate service administration job, perhaps the Executive Level Employees responsible for the Corporate Services SWOT Analysis & Cost-Revenue Analysis need to step-in to make the final decision on what to do about a non-compliance Client. (1) Do the SP retain non-complianct clients & risk potential CIMA sanctions or (2) Do the SP risk international scrutiny for non-compliant clients/structures under investigation or in on-going court matters. Whatever Management decide, “may the chips fall where they may”. Case in point, CIMA levies $4.2mil fine on InterTrust Corporate Services for KYC-AML Failings.

  2. Anonymous says:

    Will CIMA be ok to accept the cash, when Intertrust were found not to check the source of funds? How will CIMA get comfortable the money from Intertrust is clean?

  3. Anonymous says:

    We have an inexpensive, user-friendly AML data management system which saves us all this hassle. I can’t understand why everyone else doesn’t.

  4. Anonymous says:

    Seems that AML regime failures are attributed to the service providers, who are attached to the large law firms and transactional lawyers.

    Why would the PPM-led Unity government have given AML regime monitoring responsibility to CILPA and CARA to operate ultra vires?

    It looks like the larger law firms, who are breaching the AMLRs, have a lot of explaining to do in relation to CILPA and CARA.

    This is hypocrisy at its finest.

  5. Anonymous says:

    The Walkers and Ogier partners must be having a little chuckle, they dodged a bullet there.

    • Anonymous says:

      They sure did (dodge a bullet). Now, Maple Legal Services is left the argue Intertrust Corporate Services’ failed compliance, including corporate client records that were under remediation. If your not careful, those Corporate Services mergers & management services buy-out can really leave you a “wealth of problems”. Through their lawyers, let’s hear what the Directors have to say.

      • Anonymous says:

        Can’t blame mergers and buyouts. Anyone taking on clients in such a manner would use common sense and re-assess everything.

        The real issue here is CIMA wanting service providers to follow a risk based approach, but upon any inspection, CIMA expects a prescriptive approach. Any firm with an aversion to regulatory fines must therefore verify everything, and keep re-verifying until doomsday.

        • Anonymous says:

          The entire premises of a corporate services job is the vet & re-verify, whether if its an existing client or on-boarding inherent for merger or management buyout.
          Corporate Electronic Data Systems are developed or enhanced to identify client/company risk, by way of a predetermined criteria; yes, including source of funds. However, often times, incomplete and incorrect KYC/AML information (entered in data systems) contribute the to breaches upon Regulatory Review–obviously.
          Though the data systems may not be very user-friendly, there is excuse to collect corporate information and not properly & accurately complete client records- with periodic re-verification periods in order to bring client info current.
          Understanding of corporate structures & superb organizational skills is what’s needed most for such a job. The data systems & clerical processes differ across organizations- that is, from one Corporate Service Provider to another- and will be learned as apart of in-house training.

    • Anonymous says:

      Not sure that they are in the clear.

  6. Anonymous says:

    $2k per annum per entity for RO fees, say Intertrust have 5,000 entities = $10mm each year for doing nothing. Then add on their other service offerings, directors, lawyers etc all of which income is pure gravy.

    They should have taken their license that actually would have sent a proper message.

  7. Anonymous says:

    Should cover the loss of $$$ from the tourism trade.

  8. Arthur Rank says:

    I recall that when I first arrived in Cayman, my main task was to shift my operation to the new “real world ” of know your client/AML ” regulations, then just appearing. The general view inside my operation and in others was a sort of bewildered mix of annoyance at this unnecessary nonsense, and a feeling that all that was required was to pass the regulations and carry on as before. There was a definite band of old schoolers that preached a brand of annoyance at unwarranted interference in our business. I remember one visiting lawyer giving a lecture on the line that assisting tax evasion was assisting fraud, he found little or no support, after all, we have no tax, so how can any Cayman assistance be fraudulent. It would be nice to think that by now people understand that the Island cannot be associated with bad money or law breaking, some of the comments above make me wonder!

    • Anonymous says:

      Arthur – there’s no suggestion of wrong doing, money laundering or fraud here – most likely Intertrust have some uncertified or missing KYC docs, they are behind on their periodic reviews, and then new big one for CIMA is source of funds, which isn’t adequately covered in the AMLRs or at least the legislation doesn’t match how CIMA is applying it.
      There’s too many people one here happy to let their belly rumble without having a clue as to what they are speaking of

      • Anonymous says:

        The best is recieving a finding for IDs that are not certified to CIMAs standards and then CIMA sends over IDs for their accounts that are not certified to their own standards.
        Classic lol.

        Rookie examiners and BOGUS findings.

        Curious to know just exactly what the findings where for Intertrust and what type of methodolgy was used to determine severity, pervasiveness etc. A sample of 20 files out of a book of 15k?
        As for remediation efforts, you think it’s easy to remediate 15k client files? Without hiring 25 ppl…. training said 25 ppl and then getting clients to have their shit notarized and send etc.

        Bc the rookie examiners never worked in industry they think everything is at the snap of a finger. Not how it works. You cant even find 25 ppl to do a remediation. Outsourced elsewhere at times.

        And where is the Risked based approach? They want everything for all levels of risk.
        Ugh! They are frustrating!

        I’ve heard an executive based elsewhere say, CIMA is a new regulator and needs to mature, as it’s clear they are struggling within themselves. A friend of mine responded, they’ve been around for 25 years… they should be mature enough by now.

        Starts at the top. Why is there no mandate for leadership change? Most central bank heads have term limits. It would add fresh perspective and insight. Top has to change.

        • Anonymous says:

          Sounds like you think the job is too difficult. Maybe you are not the correct person to get it done?

      • Anonymous says:

        And of course CIMA is now looking to flex its muscles to get the CFATF off its back. No one doubts CIMA/Cayman is in a difficult position, and fines and penalties were to be expected, but they should remember that the CFATF wants them to act proportionately.

        The CIMA statement regarding the audacity of Maples in judicially reviewing them was something else. CIMA is a regulator, not a court. Maples is entirely within its rights to pursue action against them if they don’t think it, as a public body, is behaving appropriately. I hope Intertrust appeal too. Otherwise where does all this leave other licensees?

        • Anonymous says:

          I agree. The CIMA response sounds as if they consider themselves firmly above the law.

        • Anonymous says:

          CIMA are a court – as well as police officer, prosecutor, judge, jury and executioner.

          Where is the counterbalance? Where is the arbitrator? Where is the appeals process? Where is the independent third party oversight?

      • Arthur Rank says:

        I am sure you are right, there was no money laundering or fraud, but it seems there must have been some wrongdoing! And thats the point, there has been, maybe still is, some assistance or just a blind eye from some in the industry on the grounds that it isnt our business to interfere, the only way to ensure that ceases is to have documentary evidence. Boring, but necessary if we are to avoid the accusations from the outside world. Maybe you are also right that there is insufficient attention to “source of funds”, and yet, that is the core of the issue, if the source smells, then little else about the business is good for our jurisdiction. It is interesting to see how many disagree with my point of view on this, in a way, that illustrates my point, deep down in this issue there seems to be a reluctance to accept that KYC/AML measures are necessary, until that changes, the Island can expect to criticised, and that ultimately leads to exclusion!

        • Anonymous says:

          The reason so many people disagree with your point of view is that nobody at any of these service providers wants to facilitate money laundering. It’s that it is beyond the point of knowing who your client is and making a reasonable effort to verify their source of funds. Not only do the regulations emphasize form over substance, they make us treat every client like a criminal. It’s terrible for business, and CIMA itself is making it up as they go along. Everyone, including CIMA, is doing the best they can in the circumstances, but it’s wrong of them to treat industry as the enemy. They can help industry by publishing clear policies and rules and they continually fail to do so.

      • Anonymous says:

        $4.2m is not for missing a couple of certifications…..now a blatant disregard for the regulations that was possibly utilized for money laundering or tax evasion….yeah at least…they deserved this since Grand Island Fund.

  9. Anonymous says:

    CIMA knew exactly where to go to find a sacrifice. This was long overdue.

  10. Anonymous says:

    Wonder if any of these fines are collected? For that matter, wonder how much of CIG revenues comes from fines in general?
    Wonder if they even know? I wonder, wonder…..

  11. Anonymous says:

    This is a prime example of Service Providers getting ‘compliance’d out of business’. CIMA has to make an example but hitting a small fry SP doesn’t send enough of a message to the industry.

    So, now it’s either invest in enhanced compliance processes (via staff or automation) and therefore increase fees to clients – at the risk of creating an expensive jurisdiction to do business in. Or, weather the low profit margin storm for 18 months in the hope that this dark cloud has a silver lining.

    No doubt a Big Brain can weigh in on this speculation.

  12. John says:

    This is all being done in a wasted effort to convince the EU powers to take the Cayman Islands off the grey list.

    They won’t be happy unless we have the same Corporation Tax rate that they have.

    The money would be better spent buying the EU commissioners a first class ticket here and ask them to try to open a bank account or set up a company. After a few frustrating hours we’d be off the lists forever 😉

  13. Anonymous says:

    Is it a coincidence that Maples applying to courts as Intertrust fined… Or delaying tactics….

    • Anonymous says:

      More fines and enforcement action by CIMA are coming.

      • Anonymous says:

        I wouldn’t like to be in the position of a licensee who has undergone a recent inspection with findings. Some of those findings may be fair enough, but many will result from CIMA adopting a position which is simply not reasonable. Reading into the terms of their press release, CIMA seem to have refused to engage with Maples to try to reach an objectively reasonable outcome from an inspection report. Just because CIMA is in a difficult position with the CFATF does not give it the right to do whatever it likes. Or at least it shouldn’t be able to do so. And if it can, our industry is in deep trouble.

  14. Anonymous says:

    Trying to kill the golden goose

    • Anonymous says:

      Nah, you need to cook it first. Too tough otherwise.

    • Anonymous says:

      Golden goose for who though???? In reality the profits from these corporate services firms go to a very rich few. I will not be sad to see them taken down a peg or two.

      • Anonymous says:

        You should be sad as these businesses employ many Caymanians at substantial salaries. Bad news for the financial industry is bad news for more than just the owners of these firms.

      • Anonymous says:

        To state the obvious. It’s not about the profits but about the costs. The rent and staff costs spent on island. Would you rather the work be done in Halifax?

  15. Anonymous says:

    CIMA is garbage.

    • Whatever says:

      For CIMA to throw any weight at all—- this had to be have identified by an outside party. I bet my right arm that they knew for years and didn’t do anything.

      • Anonymous says:

        CIMA is now under pressure for its failures to take action against the large law firms (and affiliated service providers) that have been in breach of AML regulations for years, as well as in breach of other related laws.

        Let’s see how many partners in the Offshore Magic Circle law firms are criminally prosecuted and, perhaps, others in governmental positions, public authorities and public bodies and, especially self-regulated bodies (such as, for example, the Cayman Islands Legal Practitioners Association and Cayman Attorneys Regulation Authority.)

  16. 10th Generation Caymanian says:

    Thank you CIMA. It is important fine all the big firms that believe the rules do not apply to them.

    • Anonymous says:

      Found the generational GIG & CIMA worker!!!

    • Anonymous says:

      We (the Caymanian people) need to see prosecutions of partners in the big law firms as well as directors in the large service providers, who have been in flagrant breach of the law (particularly AML regulations).

      Let’s see which MPs and government officials (as as the AG) get exposed.

      It’s now time to prosecute and jail all these corporate and governmental criminals.

  17. Anonymous says:

    On a scale of economics this was probably well worth the risk and now move on to deal with the clean up in aisle 11. Reminds me a little of the financial behemoths risk reward mentality especially when the cruise lines incurred massive repeated fines for throwing trash overboard against the cost of proper disposal. Next question should be what happens if they go it again

  18. Anonymous says:

    But the actual money laundering inherent in fronting is still fine, right?

    • Anonymous says:

      Of course. Our robust enforcers do not care about actual money laundering of that nature, especially where well connected and influential people are involved.

      It is astounding. Fronting appears so rife it is almost mainstream and yet not a single prosecution for decades. Why?

      • Anonymous says:

        Like all those empty restaurants on 7mile.

        I could name a few. All owned by a certain Canadian connected to high powered local it seems. But let’s not talk about that.
        I wanna know who Banks those bogus restaurants.

    • Jim says:

      We’re a tax haven, man – it wouldn’t be the same without it.

    • Anonymous says:

      That “BoBo” – don’t mess with that!

    • Anonymous says:

      Totally agree. Or you could talk about the high level of corruption and probably bribery… I mean head of CIMA was sort of connected to the Jeff Webb scandal but that’s ok right?
      A joke it all is. Everyone is in bed with each other.

      Small island problems.

      • Anonymous says:

        Sort doesn’t begin to describe it. Also tied into CarePay and Canover, but who is counting.

        Crazy thing is did CIMA’s board really approve the recent press release?

        https://www.cima.ky/cima-defends-decision-to-impose-aml-obligations-on-maples-group

        This does not end well.

      • Anonymous says:

        Conflict is everywhere (in Cayman). Even the CIMA Board is conflicted with past & present investigations & ongoing court cases. It’s just a world where you have to always employ the “trust, but verify” rule. This oxymoron exist for a reason and should be applied to everything in life, simply because people can’t be trusted. 😉

  19. Anonymous says:

    Finally!!!!

  20. Anonymous says:

    CIMA are clueless and will lead to the destruction of the Cayman financial services industry.

    The best part is, is that Cayman is on these lists because CIMA & CIG are negligent and can’t respond and provide information to FATF and other in time. In response to FATF findings, (caused by CIMA & CIG negligence), their way of resolution is to inspect every licensee, find a plethora of findings, and then hand out enormous and completely disproportionate fines.

    • Anonymous says:

      CILPA and CARA are doing the same thing, except they are acting unlawfully, unconstitutionally and ultra vires.

      What a mess Alden and the AG caused by attempting to give the keys to the legal profession (via CILPA and CARA) to the large law firms.

      It is at least encouraging to know that the real troublemakers are getting a taste of their own medicine.

      Wait until everything is revealed in due course. It is going to shock everyone at how blatant corruption has been rewarded.

      It time for the big law firms (and their service providers) to pay for their sins.

      A big storm is coming.

      • Anonymous says:

        CILPA and CARA seem wholly unconcerned by the unlawful practice of Cayman Law by hundreds of persons without practicing certificates, all over the world. This illegal activity appears to be often in the service of Cayman firms. The income they generate is the proceeds of crime, isn’t it?

  21. Anonymous says:

    Comments under the Maples/CIMA/JR story equally applicable here.

  22. Anonymous says:

    The legal firms etc employ people from CIMA so CIMA must be doing something right. There is high turnover of trained staff as the private sector courts them. Now when CIMA has to enforce things the private sector all of a sudden cries unfair? Cayman is on the “Grey List” from these firms not as a result of over regulation or lack of oversight by CIMA. I am not an employee of CIMA past or present. I get tired of hearing the regulators get bashed even the auditor general’s offices. These employees will never make the money these firms do. I didn’t hear of any private sector firm giving up bonuses or dividend payments to help others. Try so sit down!!

    • Anonymous says:

      The private sector courts them for two reasons. One, no one wants the job. Two, If a company has an ex-CIMA person doing the job, it looks good on paper. Surely an ex-CIMA person should know what they’re doing right? Problem, it’s those who can’t hack it in the private sector that take up CIMA jobs. It’s a vicious circle!

      • Anonymous says:

        I’ve seen some of the really incompetent people promoted in CIMA and then hired to senior positions in private sector….just to have the name of a senior regulator.

  23. Anonymous says:

    InterTrust, now that name has rang some bells over the last 2 decades. Not in the least bit surprised.

    • Anonymous says:

      They we’re asleep a the wheel when they were Close Brothers , it cost their clients a pile of money and a lot of ill feeling.

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