FBG fine blamed on slack identity checks

BERMUDA MONETARY AUTHORITY FINES FIRST BERMUDA GROUP $100,000 FOR BREACHES OF ANTI-MONEY LAUNDERING REGULATIONS

Authority Uses Expanded Powers Under Bermuda’s Enhanced AML Regulations

First Bermuda Group Customer Deposits Remain Safe

The Bermuda Monetary Authority has fined First Bermuda Group (FBG) $100,000 for a number of compliance failings related to the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (“the Regulations”). The Authority has further decided that it should publish details of its action in this case.

An on-site inspection by the Authority found that the company’s internal controls in relation to anti-money laundering fell well below the standards set by the regulations. This is the first such action the Authority has taken using its powers under the Proceeds of Crime Regulations (Supervision and Enforcement) Act 2008, which include the ability to impose financial penalties on non-compliant firms.

The Authority had given due notice that it would take enforcement action where it found evidence of serious breaches. In its Statement of Principles dated March 2009, which sets out the Authority’s approach to the use of enforcement powers, it is stated that the Authority would not hesitate to exercise its enforcement powers in circumstances where the alleged breaches were sufficiently serious. 

The enforcement action taken in the case of FBG relates to weaknesses in internal controls only. No evidence of actual money laundering has been uncovered and the security of customers’ deposits is not threatened by the issues in internal controls identified. The institution is meeting its regulatory capital and liquidity requirements and the compliance failings that led to this action by the Authority should not raise concerns about the safety of depositors’ money.

The decision to take enforcement action and the size of the penalty applied to FBG reflect the serious nature of the internal control failings, which occurred throughout a period of some 16 months after the Regulations became effective in January 2009.  In setting the amount of the penalty, however, the Authority took into account the early admissions of the company and the work it has done since to remedy the deficiencies. Further details are contained in the summary decision notice which can be found on the Authority’s website.

“In taking this action, we are demonstrating that we are prepared to use all the supervisory tools at our disposal to ensure high standards are maintained in the Bermuda market and that individual firms are fully compliant with their regulatory obligations.” said Jeremy Cox, Chief Executive Officer of the Authority. 

“Having the ability to make our enforcement actions public supports this goal, and the Authority intends as a matter of policy to make full use of this power,” he added. “We wish to make it clear to the market, and companies should take note, that the Authority will not hesitate to take similar action against any firm where we find that essential anti-money laundering controls are lacking or are being implemented ineffectively. It is in all our interests that Bermuda’s regulatory standards are not compromised in any way.”  

“In the Authority's view, the compliance failings in FBG's case were comprehensive and serious and warranted the use of immediate enforcement action,” Mr. Cox stated. “In setting the amount of the financial penalty, however, the Authority took into account the steps FBG has taken since the commencement of the enforcement action to address the issues in its anti-money laundering controls. The company has strengthened its management team and, working in full co-operation with the Authority, has established both a comprehensive action plan and additional resources to resolve the matters that led to the enforcement action and enable it  to operate in compliance with the Regulations.’’

First Bermuda Group
Eugene Bean, Chairman, First Bermuda Group Ltd. (FBG):

“FBG is committed to working with our regulators to ensure a financial environment of the highest standard. FBG wishes to thank the BMA for allowing us to reach a quick settlement and conclusion to these unfortunate events.

  “The Bermuda Monetary Authority has recognized the extent and significance of the remedial efforts initiated by FBG and that there was no evidence of money laundering attached to any account. As stated by the BMA, FBG deposits remain safe. We believe we now adhere to the very highest principles of Anti-Money Laundering and Anti-Terrorist Financing regulations.

“The specific regulations of which we were in breach related to current customer contact and photo ID details, ongoing monitoring of customer relationships, the effective implementation of our Policies and Procedures Manual and staff training on Anti-Money Laundering and Anti-Terrorist Financing regulations.

“We would like to thank our clients for assisting FBG in providing the necessary customer identity documents and taking our requests seriously to ensure we are now compliant with the new Proceeds of Crime Regulations.

“The financial position of First Bermuda Group remains strong as reflected in our financial statements attached.”