The Bermuda Monetary Authority has fined Estera Services in Bermuda US$500,000 for anti-money laundering failings.
The trust business, which was spun-off from Appleby through a management buy-out in 2015, received the civil penalties for not complying with the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008, and specifically deficiencies in its customer due diligence and enhanced due diligence regime, internal controls, and risk assessment.
The weaknesses were discovered during an on-site inspection by the authority in late 2016.
The Bermuda Monetary Authority said the deficiencies “were historic and pre-dated the acquisition” and required Estera to rectify the failings by 31 Dec. 2017.
“The remediation was not, however, completed within that time frame,” the authority said.
Estera received considerable media attention after the trust services firm’s previous owner Appleby was the victim of a data breach in 2016, which led to the so-called ‘Paradise Papers’ coverage of offshore transactions a year later.
Internal documents from the firm were first obtained by German newspaper Süddeutsche Zeitung, which shared them with the US-based International Consortium of Investigative Journalists. The ICIJ then coordinated the Paradise Papers project with 380 journalists from 96 media organisations in 67 countries.
Appleby said the confidential information was stolen from the firm in a criminal cyberattack and sued the BBC and The Guardian newspaper in the UK for breach of confidence.
Both media organisations defended their coverage, saying it was in the highest public interest and showed “how the powerful and ultra-wealthy secretly invest cash in offshore tax havens”.
When the lawsuit was settled in May 2017, the parties issued a joint statement saying they had resolved their differences.
The joint statement also noted that most documents belonged to the trust and fiduciary arm of the group, which later became Estera, and were not legally privileged.
“It is now clear that the vast majority of documents that were of interest in the Paradise Papers investigation related to the fiduciary business that is no longer owned by Appleby and so were not legally privileged documents,” the statement said at the time.
Bermuda’s Proceeds of Crime Regulations have been in effect since 2009. The regulator said the case highlighted the importance of licensees having up-to-date anti-money laundering and anti-terrorism financing policies and procedures in place. These must be appropriate, effective, and fully implemented in order to avoid the risk of financial products or legal structures being used as a vehicle for money laundering or terrorist financing.
The case also showed the importance of licensees remediating the findings of the authority within reasonable time frames, the Bermuda Monetary Authority said.
In a statement, Estera said its client records have now been fully updated and independently reviewed.
“Estera Services (Bermuda) Ltd can confirm the portfolio is compliant with regulatory requirements. Estera has invested significant capital and resources to implement enhanced client-related procedures to maintain the highest standards of compliance,” the statement added.
Editor’s Note: The article was amended include the statement by Estera.