The Guernsey Financial Services Commission (GFSC) has fined Crescendo Advisors International Limited for £203,000 ($241,885, €229,447) over compliance failings.
The regulator has also fined the firm’s managing director Hamish Few for £33,810 as well as ban him from holding the position of controller, director, money laundering reporting officer and money laundering compliance officer for a period of three years and four months
The Commission “considered it reasonable and necessary” to make these decisions having concluded that the firm and Few “failed to ensure compliance with the regulatory requirements and failed to meet the minimum criteria for licensing” set out in Schedule 4 of the Protection of Investors Law.
The GFSC said the findings in this case were “serious”. The Commission’s investigation into Crescendo Advisors International Limited commenced at the end of 2019 following an on-site visit to the firm in August 2019 as part of the regulator’s Thematic Review of Source of Funds/Source of Wealth in the Private Wealth Management sector.
Crescendo Advisors International Limited provides discretionary investment management services to private clients and a small number of non-Guernsey collective investment schemes. It is part of the Crescendo group of companies.
Background
From its incorporation in 2008 until July 2017, the firm was administered at different times by three locally based service providers that each provided compliance officers and money laundering reporting officers (MLROs) to the business.
Since then, it has operated as a standalone licensee with a physical presence in Guernsey and has outsourced its compliance function.
Few was involved in the administration and latterly the oversight of the day-to-day business of Crescendo Advisors International Limited throughout his employment with each of the three different administrators from 2008 until August 2015, when he left the firm’s then administrator.
He joined the firm’s final administrator in July 2016 and was then appointed senior manager of the firm in December 2016 and has been managing director since January 2018. He has also acted as the firm’s MLRO since March 2019.
Findings
The regulator said it found that Crescendo Advisors International Limited “had no direct contact with its clients”. Its business model meant that it was “reliant on information provided by relationship managers who were employed by another company in the group based in Switzerland”.
The outsourcing agreement between the firm and its group counterparty was “inadequate” and its board “failed to ensure it was amended in a timely manner”.
The firm also “failed to demonstrate that effective mind and management was in Guernsey – simply operating a rubber-stamping process for investment decisions, despite being a licensed investment manager”.
In particular, the Guernsey regulator said the firm:
- failed to properly conduct relationship risk assessments, taking into account relevant high-risk factors and to regularly review relationship risk assessments;
- failed to understand the ownership and control structure of a customer and identify politically exposed persons;
- failed to carry out enhanced due diligence;
- failed to monitor transactions and activity;
- failed to ensure appropriate and effective anti-money laundering and counter terrorism financing policies, procedures and controls;
- Had corporate governance failings; and
- failed to avoid, manage or minimise conflicts of interest.
The regulator’s investigation also found Few “failed to act with competence, soundness of judgement, diligence; or with the knowledge and understanding of his legal and professional obligations”.
The GFSC said that the firm and Few co-operated fully with the Commission, and they 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 and the duration of Few’s prohibition.
