ZEDRA should have known what risks were associated with Client A.

The GFSC investigation unveiled alarming risks in Client A, particularly concerning financial crime and its ownership structure.

Here are the critical issues identified:

1. Concealed Beneficial Ownership:

1. Mr. X, a company director linked to a troubled UK property development group, was potentially the true owner of Client A, attempting to mask this connection. This raises serious alarms about Client A being used to mislead investors and possibly launder illicit funds.

2. Neglecting Red Flags:

1. The Licensee and Mr. Borman overlooked significant warning signs in their relationship with Client A, especially when the client sought to engage in transactions that deviated from its original purpose.
2. A proposed loan from Client A to Mr. X, funded by Mr. Y, should have raised immediate concerns about the legitimacy of these dealings.

3. Inadequate Risk Assessments:

1. The Licensee failed to conduct thorough risk assessments for Client A, neglecting critical factors such as ties to the construction industry and the ongoing criminal investigation involving Mr. X.

4. Insufficient Client Due Diligence:

1. Enhanced measures to verify the source of funds and wealth were not applied, particularly regarding Mr. Z, whose finances were linked to Mr. X.

5. Flawed Onboarding Procedures:

1. Weaknesses in onboarding processes led to insufficient scrutiny of Client A's information, allowing a new business form to be approved despite glaring errors.

6. Poor Record-Keeping:

1. The Licensee's failure to maintain adequate records and control systems hindered effective monitoring of the risks associated with Client A.

Observations

• These findings reveal a critical failure to manage financial crime risks and highlight serious deficiencies in compliance and due diligence within the Licensee.
• To prevent such situations from arising, an independent review is crucial.
• However, how many license holders truly have a robust independent function in place?

Solution

• Comsure can provide the second and third-line defence your business needs to fortify its operations.
• Contact us today for a complimentary consultation and take the first step towards safeguarding your business.
• Mathew Beale - Chartered FCSI
• mathewbeale@comsuregroup.com
• No 1 Bond Street Chambers, St Helier, Jersey, Channel Islands, JE2 3NP
• T (Jersey) +44 1534 733-588 /+44 7797 747-490

Source:  

•  Zedra Trust Company (Guernsey) Limited and Mr Colin Andrew Borman.

• https://www.gfsc.gg/news/zedra-trust-company-guernsey-limited-and-mr-colin-andrew-borman.