Suspected corrupt activities were among the top five reasons banks, companies or individuals made suspicious activity reports to the Cayman Islands Financial Reporting Authority last year.
The authority forwards all such reports to the appropriate enforcement agency when that is required. Not every report it receives is necessarily a bona fide instance of corrupt practices.
However, the authority noted that, both at home and abroad, anti-corruption measures related to banking and investment transactions were exerting some effect on the reports the agency received in the government’s 2012/13 budget year.
“Intensifying enforcement efforts against bribery and corruption in many countries have led to heightened monitoring and scrutiny of transactions that are linked to politically exposed individuals and to companies doing business with foreign government,” the authority’s report stated.
“In the Cayman Islands, the Anti-Corruption Law (2008) appears to be bringing the focus of bribery and corruption firmly into the minds of those operating businesses … which has led to more suspicious activity report filings that identify corruption as the primary suspicion. Most of these cases are predicated on unusual transactions of companies whose beneficial owners are politically exposed persons or related to politically exposed persons.”
A politically exposed person, in the jargon of regulatory compliance officers, can be either a politician or a relative of a politician who has close access or influence to a country’s political processes and decisions.
Although corruption-related reports increased to 19 for the year, those still made up a relatively small number of the suspicious activity reports received by the agency.
As is common, the largest number of those reports fell under the general category of suspicious activity, which can mean anything from a bank account showing activity out of line with a customer’s declared level of income, to wire transfers or withdrawals structured to avoid reporting thresholds of monitoring agencies in various jurisdictions.
The Financial Reporting Authority received 178 such reports in 2012/13, nearly 50 percent of all the suspicious activity reports it received.
“After detailed analysis … many of these reports fail to meet the statutory threshold and no link to criminal activity is established,” the authority reported. “Nevertheless, these reports form a vital part of intelligence gathering and help build a clearer picture of the money-laundering threat to the islands.”
Suspected fraud was the second most common reason for reports to the authority last year. Some 104 cases of suspected fraud were reported, making up 27 percent of all the reports to the agency. Most of the fraud reported occurred on the Internet.
“The Financial Reporting Authority has received reports about fraudulent overpayment schemes that target island-based online consumer-to-consumer shopping websites,” the authority noted. “The buyer claims to be from overseas and creates an excuse to make payment in the form of a cashier’s check, money order or personal check for more than the selling price. They then instruct the seller to wire them back the extra money. The check the buyer sends bounces and the seller is then liable for the total amount of the check.”
“Phishing,” or the acquiring of an individual’s personal information through the use of bogus electronic communications, is also still a major problem for the Cayman Islands, according to the reporting authority.
“The [authority] has also seen instances where previous communications via fax or email by customers to their bankers have been intercepted by fraudsters,” the authority stated in its report.
Other common instances of suspicious financial activity reports for the 2012/13 year included reports of money laundering [25 reports] and declined business [20 reports].