Sterling Asset Management has petitioned the Grand Court for a judicial review of a $299,050 fine imposed by the Cayman Islands Monetary Authority for the investment management firm’s anti-money laundering (AML) failings.
The company asked the court for a decision that imposing the fine did not fall under the legal powers granted to CIMA and that the fine should be stayed until it is ordered by the court.
The company claims the regulator’s action should be quashed because it was incompatible with Article 19 of the Bill of Rights, which prescribes that all administrative actions must be lawful, rational, proportionate and procedurally fair.
CIMA fined the Jamaica-based investment company in May for its failures to identify ultimate beneficial ownership, sources of funds, as well as the purpose and nature of business relationships of some of its clients. In addition, CIMA said Sterling had not applied enhanced due diligence measures and failed to conduct and document all appropriate sanctions checks.
The regulator said it detected the breaches during an onsite inspection after similar issues had been identified in an earlier AML audit.
Sterling is the third company that has challenged CIMA’s anti-money laundering enforcement in court.
In May 2021, two entities of the Maples Group – Maples FS and Maples Corporate Services – were granted a judicial review of how the regulator interprets and applies certain provisions of the Anti-Money Laundering Regulations in practice.
Maples Group claimed CIMA had imposed obligations that were not required under the regulations and were disproportionate in the context of the services provided.
In October 2021, the court allowed corporate services provider Intertrust to appeal a decision notice by CIMA, which had 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”.
Both cases are still before the court.
Sterling Asset Management said in its court filing that it has been operational for 18 years. Many of its about 600 clients are retired professionals, senior company executives and business people investing for their retirement.
The court petition asserts that CIMA “has the power to issue fines for systemic or major breaches only”. It adds that the regulator “has no power to issue fines in respect of discrete minor failings by a regulated entity whose systems are compliant and/or it is unreasonable for CIMA to impose fines for minor failures”.
Sterling claims that some of the alleged breaches for failure to comply with the AML regulations occurred when the relevant provisions, such as sanctions checks or identifying beneficial owners, were not in force and before the cut-off point allowing the regulator to impose fines.
In applying the fines, CIMA had also ignored that sanctions checks were risk-based and not absolute and any alleged breaches had not “given rise to genuine risk”.
Other alleged breaches were for failures to provide documentation that CIMA had not requested, the court filing said.
Sterling further disputes that it has a history of non-compliance, and asserts that it has remediated any potential breaches identified in earlier inspections.
The company asked the court to stay the application of the fine until the appeal has been heard.
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