Suspicious financial reports increase

Suspicious financial activity
reports presented to the Cayman Islands’ finance industry watchdog group have
increased steadily over the past four years, according to the Financial
Reporting Authority.

Attorney General Sam Bulgin sees it
as a positive sign for the country.

“It is an indication that
[financial] entities are taking their reporting requirements seriously,” Mr.
Bulgin told the Legislative Assembly last week. [It shows] this jurisdiction
will be hostile to those who wish to use it…for money laundering and terrorist
financing.”

The Financial Reporting Authority –
an independent six person agency – has revealed that the number of suspicious
financial activity reports in Cayman increased from 219 in government’s 2006/07
budget year to 358 in the fiscal year that ended as of 30 June.

However, that doesn’t mean more
suspicious financial activity is actually occurring.

In the 2009/10 budget year, the
authority decided that 187 of the 358 cases it was sent required no immediate
action. Forty-one of the 358 reports were still being investigated by the
fiscal year end.

The largest number of requests
processed by the authority (60) came from overseas jurisdictions.

Voluntary disclosures of suspicious
financial activity also declined during the 2009/10 budget year.

“The most significant decline came
from disclosures made to the Royal Cayman Islands Police Service, which
declined by 57 per cent,” the authority noted in its annual report.

According to the authority’s
report, banks still made up the largest single source of suspicious financial
activity reports during the last budget year, followed by overseas financial
intelligence units, trust companies, business managers, and money transmitting
operations.

“We have seen significant increases
in the number of cases filed by money transmitters which increased from eight
cases in 2008/09 to 24 cases in 2009/10,” the reporting authority noted. “Other
significant increases over the previous year came from trust companies…and
insurance managers.”

The five most common reasons
individuals or companies filed reports with the Financial Reporting Authority
were incidents of suspicious financial activity, fraud, declined business,
money laundering, and due diligence done retrospectively by companies.

A total of 66 foreign countries
were the primary subjects of suspicious activity reports filed with the
authority on international finance issues. The largest number of subjects came
from the United States and Canada.

The majority of suspicious activity
reports are still being made by local financial services providers, according
to the authority.

“A typical case can involve the
structuring of deposits and/or withdrawals, as well as electronic wire
transfers, in an attempt to remain under the radar of the reporting thresholds
of monitoring bodies,” the authority annual report stated, adding that cases
where account deposits do not fit the account profile is another area that
arouses suspicion. “If the deposits to the account are exceeding the expected
level of income, or if the account activity is not in line with the stated purpose
of the account,” the report stated.