Corporate services provider Intertrust has been allowed to appeal a decision notice issued by the Cayman Islands Monetary Authority for anti-money laundering failings, even though the 21-day notice of appeal period has passed.
Intertrust is seeking a declaration from the court that CIMA’s decision to issue the notice and the requirements contained in it were unreasonable and unlawful.
In June 2021, Intertrust had already been granted permission by the Grand Court to appeal the regulator’s fine, which was issued at the same time as the decision notice on 13 May 2021.
CIMA imposed a $4.23 million penalty for what the regulator called Intertrust’s “pervasive and protracted history of non-compliance with the requirements of the [Anti-Money Laundering Regulations] and its failure to remediate these significant breaches”.
CIMA had inspected Intertrust in 2017 and 2019 and identified a number of what it considered serious breaches of the Anti-Money Laundering Regulations.
Another on-site inspection in 2020 revealed further breaches of the regulations in relation to client files that were inspected. This prompted a warning notice in January 2021 and the decision and fine notices on 13 May.
The contested decision notice instructs Intertrust to conduct and document a full risk assessment on all clients within six months.
The corporate service provider must further collect the nature and purpose of the business relationship, client due diligence and know-your-customer (KYC) information for all high-risk customers within nine months and for medium- and low-risk customers within 12 months.
In addition, Intertrust was instructed to collect source of wealth or source of funds information for those risk groups within the same respective timeframes.
“To the satisfaction of the Authority, the Company shall hire additional resources in order to remediate and maintain the Authority’s requirements,” CIMA’s decision notice added.
Given the “serious” and “very serious” breaches of the Anti-Money Laundering Regulations that were identified by the February 2020 on-site inspection, and the company’s “protracted history of non-compliance” with the regulation as well as its failure to remediate these breaches, “there is sufficient information for the Authority to be of the opinion that, the Company is carrying on business in a manner detrimental to the public interest, the interest of its depositors or of the beneficiaries of any trust, or other creditors,” CIMA wrote.
After determining that the court has the power to grant an extension to file an appeal even after the deadline has passed, Justice Nicholas Segal ruled that it was appropriate to do so, provided Intertrust pays CIMA’s legal fees.
Given the lack of reasons presented why the deadline was missed, the Grand Court justice said the authority should not be out of pocket in having to deal with the leave application in the circumstances of this case.
The judge speculated that the delay was the result of a genuine mistake and the preoccupation of the company and its legal team with appealing the fine only and not also the decision notice.
Although the applicant should have known about the time limit, he said, it is unlikely that the company only wanted to mount a partial defence. There was also no indication that it was the intention to use the appeal process improperly to delay or interfere with CIMA’s enforcement action.
Intertrust’s case can also not be dismissed as frivolous or fanciful, the judgment noted. “The Appellant has raised a number of serious issues regarding the manner in which the Authority has acted, the justifications for and reasonableness of the requirements and the time limits imposed by the Decision Notice that merit review by way of rehearing and appeal.”
Intertrust argued, for instance, it was not clear what the authority meant by requiring the company to conduct “a full risk assessment” on all of its clients and that there were not sufficient reasons given for its decision.
Justice Segal acknowledged CIMA’s argument that Intertrust “had belatedly changed its tune and position”, after first accepting the authority’s conclusions and mapping out an action plan to remedy the shortcomings.
“I can also see the force of the Authority’s argument that its decisions and the requirements it imposed were reasonable and properly required by the serious breaches of the AMLRs which it considered to have been committed,” he wrote. “However, at this stage, as I have said, it seems to me that the Appellant has raised serious issues which justify and merit a hearing and I am certainly unable to conclude that the appeal is without merit and likely to fail.”