The biggest anti-money laundering (AML) fine in Cayman’s history has been levied on corporate services provider Intertrust.

The $4.23 million fine was imposed on Intertrust by the Cayman Island Monetary Authority has imposed discretionary fines for breaches of the AML regulations. It is the largest-ever penalty handed down by the financial regulator for AML failings.

The Cayman Island Monetary Authority (CIMA) reports that the fines are the result of Intertrust’s “pervasive and protracted history of non-compliance” with the AML regulations and the company’s failure to remediate significant breaches. According to the financial regulator, the breaches stems from, “Intertrust’s application of customer due diligence measures, the failure to verify the source of funds and to obtain documentation on the purpose and nature of business relationships.”

This is in addition to the corporate service provider’s failure to identify beneficial owners, to perform ongoing monitoring and to consider all relevant risk factors. The fines followed an onsite inspection by the regulator in February 2020.

Similar shortcomings identified in onsite inspections

CIMA reports that similar findings had been identified in previous onsite inspections. Intertrust, which has more than 4,000 employees in 30 jurisdictions, was quick to issue a statement on the matter declaring that, “the breaches alleged are administrative in nature.” The company emphasised, “there is no suggestion that Intertrust has engaged in or facilitated its clients engaging in money laundering activities.”

The fines, which were made public in an enforcement notice issued by CIMA gives Intertrust 30 days to lodge an appeal against the fines. However, in its statement, the company explains that it is, “currently engaged with counsel to consider all available options in response to this notice”.

“Intertrust recognizes the seriousness of the matter and is committed to making every effort to fulfil its role as gatekeeper,” the company statement added. The fines were made public on the same day Maples Group announced that two of its entities – MaplesFS Limited and Maples Corporate Services Limited – had been granted a judicial review of the way the Monetary Authority applies the AML regulations in practice.

Maples said the regulator had changed what is required under the AML regulations without informing or consulting service providers. The obligations imposed by CIMA on its service companies were neither necessary under the regulations nor proportionate in the specific context, the group said.

CIMA under international pressure

Cayman’s financial regulator is under international pressure to impose heavier fines, after the Financial Action Task Force (FATF) last February placed the country on a grey list of countries, whose AML practices are under increased monitoring. Cayman is undergoing a 15-month period during which it must implement an action plan agreed with FATF.

The international standard setter in the AML space is among others demanding stricter sanctions for financial institutions that breach the regulations and for those who do not accurately identify the beneficial owners of Cayman entities. As a result of the FATF greylisting, Cayman is expected to also be added to the European Union’s money laundering blacklist when that list will be updated.

Given the closer AML scrutiny with which Cayman has been placed by FATF, CIMA has declared that it will treat AML breaches “with particular seriousness and take appropriate enforcement or other actions where necessary”.