Capital International Limited (‘CIL’) was fined £119,596 by IOM FSA for failings in AML/CTF/CPF.

The IOM FSA Published on 12 September 2024 a Public statement concerning the imposition of a civil penalty under the Anti-Money Laundering & Countering the Financing of Terrorism (Civil Penalties) Regulations 2019 in respect of Capital International Limited (‘CIL’) –

The civil penalty is £170,851, discounted by 30% to £119,596 (the “Civil Penalty”).

BACKGROUND

1. CIL was selected to be part of the Foreign Politically Exposed Persons (“FPEP”) thematic project undertaken by the AML/CFT Division of the IOM FSA.
2. The FPEP inspection (during April 2022) identified certain instances of historic contravention of the Anti-Money Laundering and Countering the Financing of Terrorism Code 2019 (the “Code”).

CONTRAVENTIONS OF THE CODE IDENTIFIED BY THE INSPECTION INCLUDED:

1. The procedures and controls during the inspection did not enable CIL to fully demonstrate management and mitigation of all risks as required by the Code. (Paragraph 4(1)(a)(i) of the Code).
2. In specific FPEP files reviewed, the Customer Risk Assessments needed to contain the expected level of detail on assessing certain risk factors. (Paragraph 6(3) of the Code).
3. Because of 3.2, the Business Risk Assessment must fully regard the Customer Risk Assessment, explicitly covering the risk posed by foreign PEPs. (Paragraph 5 (3) (f) of the Code).
4. In certain FPEP cases reviewed, the source of funds and / or source of wealth information and documentation needed to be in full compliance with the requirements. (Paragraph 8(3)(e) of the Code).
5. The ongoing monitoring process of CIL’s FPEPs was ineffective in certain circumstances. (Paragraph 14 (4) & 13 (1) of the Code).

WIDER LEARNING POINTS FOR THE INDUSTRY FOLLOWING THE FPEP THEMATIC PROJECT

1. Compliance with the Code is a legal requirement; the IOM FSA is committed to taking appropriate and proportionate action to address contraventions of the Code.
2. The higher ML/FT risks posed by business relationships involving FPEPs, who are more exposed to the risk of bribery and corruption, demonstrate the increased importance of onboarding processes, including appropriate sign-off and sufficiently establishing ‘Source of Funds’ / ‘Source of Wealth’.
3. The ineffectiveness of these controls will also affect a relevant person’s ability to conduct effective and appropriate monitoring, including scrutiny of transactions, which may result in unusual or suspicious activity not being identified in the proper circumstances.
4. Without the appropriate, effective procedures and controls being in place or not being operated adequately, a relevant person will be unable to manage and mitigate the identified risks of ML/FT and conduct the business utilising a risk-based approach as required by the Code.
5. The IOM FSA has several powers to address identified non-compliance with the Code. These include, but are not limited to, the issuance of a direction and/or public statement, the imposition of civil penalties, or the commencement of criminal proceedings under the relevant legislation. The circumstances and nature of an entity’s non-compliance with the Code will determine the action(s) taken by the IOM FSA.
6. Active engagement and cooperation with the IOM FSA gives the best possible opportunity to resolve matters in a timely and constructive manner and, where appropriate, to minimise the likelihood of the IOM FSA taking further action concerning instances of non-compliance with the Code.
7. The IOM FSA will publish details of ongoing and concluded matters when it is in the public interest.

SOME FURTHER DETAILS

PUBLIC STATEMENT CONCERNING THE IMPOSITION OF A CIVIL PENALTY UNDER THE ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM (CIVIL PENALTIES) REGULATIONS 2019

Capital International Limited (‘CIL’)

1. Action

1.1 The Isle of Man Financial Services The IOM FSA (the “The IOM FSA”) makes this public statement under powers conferred on it under section 13 of the Financial Services Act 2008 (the “Act”) and under regulation 5(7) of the Anti-Money Laundering and Countering the Financing of Terrorism (Civil Penalties) Regulations 2019 (the “Regulations”).

1.2 The making of such public statement supports the IOM FSA’s regulatory objectives of, among other things, securing an appropriate degree of protection for customers of persons carrying on a regulated activity, reducing financial crime and maintaining confidence in the Isle of Man’s financial services industry.

1.3 CIL was selected to be part of the Foreign Politically Exposed Persons (“FPEP”) thematic project undertaken by the AML/CFT Division of the IOM FSA. The FPEP inspection (during April 2022) of CIL by the IOM FSA under section 15 of the Act (the “Inspection”), identified certain instances of historic contravention of the Anti-Money Laundering and Countering the Financing of Terrorism Code 2019 (the “Code”). The IOM FSA has deemed it proportionate, reasonable and appropriate in all the circumstances, that CIL be required to pay a civil penalty imposed under the Regulations.

1.4 the IOM FSA acknowledges the constructive dialogue between CIL and the IOM FSA, and gives credit for those pre-identified actions and the programme of remediation completed by CIL management prior to, during and after the FPEP thematic inspection.

1.5 The civil penalty is the sum of £170,851, which is discounted by 30% to £119,596 (the “Civil Penalty”). The level of the Civil Penalty reflects the fact that CIL co-operated fully with the IOM FSA and agreed settlement.

1.6 As with all discretionary civil penalties issued by the IOM FSA, the level of the Civil Penalty is calculated as a percentage of CIL’s income in accordance with the Regulations. The absolute amount of the Civil Penalty relative to the absolute amount of other civil penalties that have been imposed by the IOM FSA previously is not necessarily indicative of the relative seriousness of the contraventions identified in each matter – the level of a civil penalty (calculated on a percentage basis) is determined each time on the facts of a particular matter and regard is had by the IOM FSA to the level and the percentage of civil penalties imposed in other matters.

1.7 Noting the scope of the inspection (as set out in paragraph 1.3), it is important to highlight that the historic contraventions identified were limited to those under the Code. It is also noted by the IOM FSA, that there were significant mitigating factors in this case, and this has been taken into consideration in the level of Civil Penalty being applied. CIL completed a programme of remediation prior to, during and after the FPEP thematic inspection.

2. Background

2.1 CIL has been licensed with the IOM FSA to undertake the regulated activities of Class 2 – Investment Business and a Class 3 – Services to Collective Investment Schemes since 5 August 1996.

2.2 The Inspection was conducted by the IOM FSA in April 2022, and this identified contraventions of the Code by CIL in certain FPEP cases (the “Contraventions”).

2.3 The final inspection report was issued to CIL by the IOM FSA on 18 August 2022.

2.4 CIL has engaged positively with the IOM FSA throughout this matter in a timely and constructive manner.

SOURCE

https://www.iomfsa.im/fsa-news/2024/sep/public-statement-concerning-the-imposition-of-a-civil-penalty-under-the-anti-money-laundering-countering-the-financing-of-terrorism-civil-penalties-regulations-2019-in-respect-of-capital-international-limited-cil/