Enforcement Action for 2014

1. Enforcement Action for 2014 Diana Nedvidek Head of Enforcement

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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.

10. 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

11. 1 Directive Requiring 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.

12. 1 Appointment of a Liquidator a liquidator was appointed in the case of an insurance licensee due to numerous regulatory failings

13. Trends Forged BVI Certificates and Licences Financial Crimes (Unauthorised Forex Business) Automatic Penalties for Late Filings

14. Forged BVI Certificates & Licences • 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

15. Financial Crimes (Unauthorised Forex Business) • 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 licencedforex business are not licensed

16. 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 licenceauthorising 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.

17. Financial Crimes (Unauthorised Forex Business) Therefore, the industry is being reminded to know your customers and your customers’ business.

18. Penalties for Late Filings 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.