BVI fines Mossack Fonseca USD440,000 for compliance failures

Thursday, 17 November 2016

The British Virgin Islands Financial Services Commission (FSC) has fined the BVI branch of Panama law firm Mossack Fonseca USD440,000 for multiple breaches of record keeping, risk assessment and customer due diligence regulations.

The firm, which was the target of a massive leak of client documents in April this year, was described by the BVI FSC as contravening 'numerous sections' of the Anti-Money Laundering and Terrorist Financing Code of Practice 2008 (AML CoP), and the BVI Regulatory Code 2009.

The enforcement action specifically refers to:

  • failing to establish and maintain a written and effective system of internal controls for forestalling and preventing money laundering and terrorist financing (s11 AML CoP);
  • failing to carry out risk assessments in relation to each customer/one-off transactions (s12 AML CoP);
  • failing to undertake customer due diligence (s19 AML CoP);
  • failing to engage in enhanced customer due diligence (s20 AML CoP);
  • failing to review and update customer due diligence in the manner required (s21 AML CoP);
  • failing to ensure identification and verification is carried out with respect to written introductions by third parties (s31 AML CoP);
  • failing to maintain due diligence and identity records (s43 AML CoP);
  • failing to carry out obligations, duties and responsibilities of the compliance officer (s43 and s45 of the BVI Regulatory Code 2009).

The fine is the largest ever issued by the FSC, and follows an investigation that included a six-month on-site compliance inspection focused on reviewing 'specific aspects of the company’s anti-money laundering and risk management procedures', said the BVI government.

The FSC also appointed a 'qualified person' to recommend corrective action required to bring the firm into compliance. It has also amended its risk assessment framework to more consistently detect potential concerns to reduce the risk of non-compliance, whilst also devoting additional resources to assessing the full compliance of all BVI licensed corporate service providers.

BVI Premier and Finance Minister Orlando Smith said the FSC has conducted its investigation 'in the face of intense international scrutiny' and had cooperated fully with requests from other law enforcers who are conducting their own independent investigations.

However, Robert Barrington, Director of non-governmental organisation Transparency International said the fine was inadequate and that if the BVI had established a public register of beneficial ownership 'it is possible that the problem could have been detected far sooner, if not prevented in the first place'.


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