The Guernsey Financial Services Commission (GFSC) has fined trust company Hansard Limited and five of its current and former directors.
The company has no business relationship or connection with the FTSE-listed Hansard Global PLC group, or any of its member companies, including Hansard Worldwide.
Hefty fines
Hansard Limited has been handed a £140,000 ($187,412, €165,583) penalty. The directors were given the following:
- Andrew Neil Parr, director since March 2006 and managing director since January 2015, was fined £56,700;
- Alan Peter Northmore, director since 2009, was fined £56,700;
- Philip Clive Blows, has been a director since June 1992 and was managing director until December 2014, was fined £56,700;
- David Samuel Lloyd, money laundering reporting officer since April 2010 and a director since March 2013, was fined £44,100; and
- Lynn Giovinazzi, compliance officer between October 2010 and May 2018 and a director between January 2014 and May 2018, was fined £44,100.
In total, the company and individuals were hit with £398,300 in penalties.
The fines follow an investigation by the GFSC, which found that Hansard Limited had “failed to monitor and manage the financial crime risks associated with its customers”.
The GFSC said: “This was particularly concerning due to the licensee’s stated high-risk appetite and the large proportion of high-risk clients.”
Hansard Limited provided services to clients in a wide range of jurisdictions, including those which are “regarded as posing a higher risk of money laundering, terrorist financing and/or bribery and corruption” and the business’ risk assessment also noted that the clients “are involved in a wide range of activities, some of which pose an enhanced risk of money laundering, terrorist financing and/or bribery and corruption”.
The 2019 investigation found that 75% of Hansard Limited’s clients were rated as “high-risk”.
Findings
The Guernsey regulator found several key issues during its investigation. The first was that the firm “failed to properly conduct and document relationship risk assessments prior to the establishment of a business relationship”. It said that there was “no evidence of initial risk assessments on some of the files examined by the commission”.
The regulator also said that Hansard Limited “failed to carry out sufficient enhanced due diligence” as well as “failed to monitor existing high-risk business relationships”.
The firm had a process of monitoring and oversight meetings, which were held quarterly for clients that were politically exposed persons (PEP) and six-monthly for other high-risk clients.
The GFSC said: “It was apparent from the client files reviewed by the commission that this enhanced monitoring process was ineffective at times. The monitoring and oversight meetings on occasion failed to record transactions that occurred during the period under review.”
Also, the trust firm “failed to adequately document the decision to exit a client”.
The regulator said that the firm’s written policy was to seek to terminate a client relationship where the client’s conduct gave reasonable cause to believe or suspect involvement in illegal activities. But the GFSC said on one occasion the firm “took appropriate steps” but did not “exit” a relationship with a client.
Lastly, the regulator found that Hansard Limited “failed to ensure effective review of compliance with the regulations and handbook”.
Individuals
All of the directors fined by the GFSC were found to have “failed to demonstrate that he acted with competence, soundness of judgement and diligence”.
Parr “failed to identify” a client as a PEP when signing off a risk assessment for a trust; and “failed to ensure” the decision to exit the relationship with a client was adequately documented.
Northmore “failed to identify” a client as a PEP when signing off a risk assessment for a trust; “failed to query” why it had taken over a year to ratify a multi-million pound distribution to a client; and “then failed to identify the distribution in the relevant monitoring and oversight meetings”.
Blows signed a trust deed and a client agreement in 2010, but the GFSC found that there was “no evidence available that a risk assessment was completed prior to these documents being signed”; and “did not ensure that the licensee’s procedures and controls were appropriate and effective with regard to the licensee’s high-risk appetite”.
Lloyd “failed to query” why it had taken over a year to ratify the multi-million pound distribution to a client; and “then failed to identify the distribution in the relevant monitoring and oversight meetings”; “failed to ensure” the decision to exit the relationship with a client was adequately documented; and “did not ensure that the licensee’s procedures and controls were appropriate and effective with regard to the licensee’s high-risk appetite”.
Lastly, Giovinazzi “failed to identify” a client as a PEP when signing off the risk assessment for a trust; “did not ensure that the licensee’s procedures and controls were appropriate and effective with regard to the licensee’s high-risk appetite; and “failed to ensure that the compliance monitoring programme was formally documented”.
Discounted penalties
The GFSC said that Hansard Limited had “identified some” of the issues it found prior to the on-site visit, “in particular the lack of a formal compliance monitoring programme and errors in reviews being undertaken”.
“Steps were already being taken to remedy these issues prior to the on-site visit”, the regulator added.
Following the on-site visit, Hansard Limited agreed to a risk mitigation plan, which it confirmed to the regulator had been completed. This included appointing a third-party to review the effectiveness of its newly established procedures.
The trust firm has also appointed an independent non-executive director and has also agreed to establish an independent audit function, which will annually review the effectiveness of its anti-money laundering and countering the financing of terrorism procedures.
The GFSC said the firm and directors “co-operated fully with the commission” at all times of the investigation.
The firm and the directors agreed to settle at an early stage of the process and this has been taken into account by applying a discount in setting the financial penalties.
Move forward
A spokesperson for Hansard Limited told International Adviser: “The board is understandably very disappointed with the outcome, whilst acknowledging the findings, but believes a settlement allows a line to be drawn under the matter so that the company can move forward and concentrate on its clients and future development.
“The announcement acknowledges that several of these historic issues had been identified by the company prior to the GFSC’s on-site visit and steps had already been taken to remedy these issues.
“It also acknowledges that a remediation plan was completed, which included external reviews of the company’s current procedures.”
