Appleby set aside $500,000 to pay BMA fine
It has been claimed that law firm Appleby set aside $500,000 to pay a fine from the Bermuda Monetary Authority.
The news came as fresh revelations from a massive cache of documents hijacked from the Bermudian-founded company in a cyberattack were revealed.
The documents — dubbed the “Paradise Papers” — said that Appleby earmarked the cash for a fine, which was later settled in secret with the financial watchdogs.
A director of the firm wrote to government regulators in the British Virgin Islands that it had “settled” the fine after Appleby admitted it had failed to follow up on BMA recommendations to tighten its anti-money laundering procedures.
The director added that there was no “public censure” and that the BMA had “agreed to keep the matter entirely private”. The BMA was asked a series of questions yesterday, including why Appleby had been let off the hook over public disclosure of the enforcement action and the amount of the fine.
The regulators did not reply by press time.
The BMA has had the authority since 2008 to make public its sanctions under the Proceeds of Crime (Supervision and Enforcement) Act, although it was not required to.
The fine levied on the First Bermuda Group in 2010 was made public and last year the BMA said its policy had changed and that it would publish details of fines and other sanctions.
David Burt, the Premier, used a press conference yesterday to mount a defence of Bermuda's regulation of big business.
He said the island was an “open, transparent jurisdiction” with a vigorous regulatory framework”.
The International Consortium of Investigative Journalists' examination of 13.4 million documents also revealed that a BMA audit of Appleby subsidiary Appleby Services (Bermuda), based in Hamilton's Victoria Street, found “key or highly significant” problems in nine areas.
Almost half of the files looked at by the BMA lacked information on the origin of clients' money managed by Appleby Services. The authority added there was “no evidence” that Appleby identified risks of money laundering and terrorism financing — and highlighted that Appleby had failed to adopt recommendations from an anti-money laundering and antiterrorism financing on-site report.
Although the BMA failed to respond to questions from The Royal Gazette, it told the ICIJ that it did not discuss enforcement decisions and confirmed the 2016 policy change on publication of sanctions taken.
The BMA letter to Appleby Services, signed by Marcia Woolridge-Allwood, director of banking, trust, corporate services and investment in April, 2014, said: “The company did not develop a remediation plan following the 2013 on-site review.
“Internal AML/ATF control, compliance monitoring and oversight weaknesses were repeated as high-risk findings in both the 2013 and 2014 on-site reports.
“It was noted that during the 2014 on-site visit that the compliance department was not providing a suitable assessment on the adequacy of the company's AML/ATF systems and controls.
“These omissions have heightened the authority's concern about the firm's regulatory compliance and control environment and its failure to demonstrate a co-operative approach to the authority's mandated remediation initiatives. These issues will be escalated within the authority for consideration of enforcement action as indicated in the cover letter and draft report provided on December 23, 2014.”
The letter added that the December 2014 report could be shared among Appleby companies — but warned that it could not be shown to anyone other than the firm's own outside auditors, without written permission from the BMA.
The BMA letter said: “Whilst we performed limited sampling of files, we do not carry out any of the checks and tests that would be appropriate to an audit inspection and therefore may not identify all the control deficiencies in the areas we reviewed.
“It remains the responsibility of the board and management to ensure that adequate controls are in place and working effectively.”
A statement from Appleby released on Sunday said that none of the coverage of the leaked documents had suggested Appleby had done anything illegal.
It added that it had responded to ICIJ questions last month and mounted an attack on some of the coverage on the grounds it was “taken out of context”.
And Appleby told the ICIJ: “As a law firm, Appleby has never had any concerns raised at all by its regulators in respect of its AML or ATF compliance.”