Growing case backlog for financial regulator

The Cayman Islands Financial Reporting Authority, charged with tracking and analyzing suspicious financial transactions, has a growing backlog of cases as the number of reports from financial institutions grows, according to the authority’s recently released 2013-2014 annual report.

Between the 2012-2013 and the 2013-2014 fiscal years, according to the report, cases jumped from 392 to 558. In that time, the backlog increased at about the same rate from 173 to 239, with some cases dating back two years. With the increased numbers, more cases have been referred to police and overseas authorities.

Authority Director Lindsey Cacho, in a letter at the beginning of the annual report, states, “The year has seen a significant increase in the number of suspicious activity reports … admittedly, such large numbers posed an uphill challenge to the analytical staff.”

Suspicious activity reports are used by many government and financial institutions to try to identify money laundering, terrorist funding, drug trafficking and other financial crimes. This week, authorities in Switzerland announced they were investigating, among other leads in the FIFA corruption case, 53 suspicious activity reports on FIFA-related accounts in Swiss banks.

Senior Crown Counsel Adam Roberts, who serves as legal advisor to Cayman’s Financial Reporting Authority and answered questions on the authority’s behalf, declined to give updated numbers on the case backlog. He refused to speculate on why the backlog is growing, but wrote in an email to the Cayman Compass, “Reasons for delay and backlog are myriad and diverse.”

In the budget for the upcoming fiscal year, the Legislative Assembly increases the FRA budget by 10 percent, from about $700,000 to more than $770,000.

Financial institutions that see questionable transactions, like a large, unusual deposit, are required to submit a suspicious activity report to the Financial Reporting Authority. The authority can then refer cases to the Royal Cayman Islands Police Service or other law enforcement agencies in Cayman or abroad.

The FRA sent 120 cases to RCIPS in the 2013-2014 fiscal year. In the year before, the FRA sent 58 cases to police. Police did not respond to questions about those cases by press time.

The FRA is also the point of contact for other countries to request information about financial crimes that may have involved companies in the Cayman Islands.

The report states the FRA sent information overseas on 88 cases in the last fiscal year. The authority shared information based on 47 requests from foreign law enforcement agencies and voluntarily sent out information on another 41 cases. Most of those voluntary disclosures, 37, went to the United States.

Mr. Roberts declined to say if the FRA is assisting U.S. or Swiss authorities in the ongoing FIFA investigations. Court records filed in the U.S. FIFA cases indicate that authorities in Cayman provided information to investigators as they built cases against CONCACAF president Jeffrey Webb and others, including details about wire transfers to and from an account held by Costas Takkas at Fidelity Bank (Cayman) Limited.

Most cases at the FRA come from banks, with 200 last year. The authority also received cases from securities brokers, trust companies, service providers and overseas financial authorities. Last year, the FRA received 69 cases from overseas financial intelligence units, according to the annual report.

Half of the reports filed with the ERA in the last fiscal year relate generally to suspicious activity. More than 20 percent had to do with suspected fraud, and almost 10 percent related to possible money laundering. The rest of the reports came from a combination of suspicions of corruption, tax evasion, drug trafficking and similar crimes.