Enforcement Action for 2014

Diana NedvidekHead of Enforcement

Enforcement Action for 2014

Warning Letter

Administrative Penalties

Licence Revocations

Cease & Desist Orders

Public Statements Directives Appointment of a

Liquidator

23 12 3 3 7 1 1

23 Warning Letters• 14 issued for contraventions of AMLTF legislation• 9 resulted from investigations initiated by complaints or from internal supervisory reviews conducted by regulatory divisions

• 55% trust corporate services providers • 30% investment business licensees • 15% insurance licensees

Examples of Contraventions• Failing to comply with the requirements for certification of

due diligence documentation• Appointing directors without obtaining the prior written

approval of the FSC• Carrying on unauthorised investment business without the

prior written approval of the FSC• Failing to appoint a compliance officer• Failing to ensure that records are maintained in a form that

can be easily retrievable

Examples of Contraventions• Failing to ensure that money laundering and terrorist

financing risks are assessed and mitigated• Failing to implement risk-based customer due diligence (CDD)

policies, processes and procedures• Failing to carry out internal testing• Failing to comply with the requirements for introduced

business• Failing to maintain the minimum contributed capital

applicable to a BVI insurer

12 Administrative Penalties• 2 issued as a result of contraventions of AMLTF legislation • 10 issued in relation to investigations by complaints or from internal supervisory reviews conducted by regulatory divisions

• 42% trust corporate services providers • 50% investment business licensees • 8% insurance licensees

Examples of Contraventions• Failing to carry out enhanced CDD measures in respect of a

high risk customer as required• Failing to comply with the requirements to establish an

internal control system, risk assessment, updating CDD information, and introduced business

• Failing to submit audited financial statements within the time frame specified within the respective Acts

• Failing to notify the FSC of the resignation and appointment of a director within the prescribed timeframe

3 Licence Revocations• all 3 revocations resulted from various contraventions of the Insurance Act• 2 of 3 cases, insurers had also failed to submit payments of their annual licence fees as required by the FSC Act

3 Cease and Desist Orders • 3 applicants for investment business licences were found to be carrying on unauthorised business without having obtained the requisite licence to do so.

7 Public Statements • 3 issued to inform the public that the entities’ licences had been revoked and therefore are no longer licenced and/or regulated by the Commission• 3 issued as a result of cease and desist orders issued to the applicants who were found to be carrying on unauthorised investment business• 1 issued to inform the public of the liquidation of an insurance licensee

1 DirectiveRequiring the licensee to cease and desist, with immediate effect, from accepting or binding any new risk or entering into any new contracts for any class or type of insurance business, pursuant to section 40(1)(a) FSCA as a result of its ongoing solvency issues.

1 Appointment of a Liquidator• a liquidator was appointed in the case of an insurance

licensee due to numerous regulatory failings

TrendsForged BVI Certificates and Licences

Financial Crimes (Unauthorised Forex Business)

Automatic Penalties for Late Filings

• Recent increase in the number of frauds and schemes being perpetrated using forged BVI incorporation documents

• Brought to the FSC attention through defrauded persons, persons suspecting a fraud, and those seeking the assistance of the FSC prior to making an investment and falling victim

• The industry should be mindful to inform their clients of these types of occurrences with the hope that they would safeguard all BVI documentation provided to help combat this rising trend and problem

Forged BVI Certificates & Licences

• Large number of complaints • Forex is one of, if not the single largest related problem area as

it relates to BVI Business Companies (BVIBC)• High level of risk (reputational and financial) posed by these

companies• As it stands the level of forex activity, including the number of

entities engaged in forex business, is unknown• many of the of the BVIBCs that market themselves as forex

brokers or dealers or purport to conduct licenced forex business are not licensed

Financial Crimes (Unauthorised Forex Business)

• S 4 of SIBA - no person shall carry, or hold himself or herself out as carrying on, investment business of any kind in or from within the Virgin Islands (VI) unless he or she holds a licence authorising him or her to carry on that kind of investment business

• S 4(2)(b) of SIBA – a BVIBC that carries on, or holds itself out as carrying on, investment business outside the VI as is deemed to carry on, or hold itself out as carrying on, investment business from within the VI

• The provision of foreign exchange brokerage services is not a separately regulated product within the VI.

Financial Crimes (Unauthorised Forex Business)

Therefore, the industry is being reminded to know your customers and your customers’ business.

Financial Crimes (Unauthorised Forex Business)

Commencing this year, the FSC will impose penalties on licensees who fail to submit audited financial statements, prudential returns, and other statutory submissions within the due date or extended due date.

Penalties for Late Filings