The Grand Court has granted Sterling Asset Management leave to appeal a $299,050 fine imposed by the Cayman Islands Monetary Authority for the investment management firm’s anti-money laundering (AML) failings.
The fine is stayed until after the appeal.
CIMA fined the Jamaica-based investment company in May for its failures to identify ultimate beneficial ownership and 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.
In its court application, Sterling said some of the alleged breaches occurred when the relevant provisions of the AML regulations, such as sanctions checks or identifying beneficial owners, had not been in force.
CIMA had also ignored that sanctions checks were risk-based and any alleged breaches had not “given rise to genuine risk”.
In addition, the Fine Notice had not explained in detail why various matters raised in the company’s response were rejected.
CIMA had also not given any reasons for the way it exercised its discretion to levy the fine.
Other alleged breaches had been for failures to provide documentation, such as transaction monitoring records, that CIMA had not requested, the company argued.
In his judgment, delivered on 11 Nov., Justice Ian Kawaley granted leave in relation to Regulation 31 of the Monetary Authority’s Administrative Fines Regulations and the question whether breaches occurred before the relevant provisions were in force.
He further allowed the appeal regarding the missing explanation for how CIMA quantified the nine separate fines. Kawaley said the regulations seemed to require a quasi-judicial explanation.
“It is difficult to see how the bare assertion that ‘the imposition of a discretionary fine is appropriate in the circumstances’ can be said to comply with this procedural requirement,” the judge wrote.
While there was no express obligation on the authority to explain why it rejected certain arguments raised by the company, Kawaley said section 19 of the Constitution creates a constitutional right to receive reasons for administrative decisions, which made it arguable that reasons for rejecting matters should be explained.
He refused to allow an appeal in relation to the missing transaction monitoring documentation on the grounds that they were not requested. The judge said Sterling’s management had accepted some degree of non-compliance after CIMA reviewed 12 client files, and vowed to remedy it.
Kawaley said he would defer consideration of the argument that sanctions checks were risk-based and there had been no genuine risk until the next hearing but expressed doubts about its merit.
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