The Isle of Man Financial Services Authority has fined the Bridgewater Trust Company (IOM) of £ 225,085, it said in a November 24 notice.
An investigation identified a number of regulatory failures that led the regulator to require Bridgewater to pay a discretionary civil fine under Section 16 of the Financial Services (Civil Penalties) Act and Regulations 2015 of 321,550 £, reduced by 30% to £ 225,085.
“The level of the civil penalty reflects not only the seriousness of the breaches recognized, but also the fact that Bridgewater and the directors of Bridgewater cooperated with the Authority and agreed to a settlement at an early stage, through the process. decision-making of the Authority. “
Bridgewater has proactively made internal organizational changes to address identified issues and the Authority’s concerns, the statement said.
Bridgewater is authorized by the Authority in accordance with section 7 of the Act to undertake certain regulated activities of Class 3, Class 4 and Class 5.
In January 2020, the Authority carried out a surveillance inspection which, on the basis of a sample of files, identified breaches of the 2019 Code for the fight against money laundering and the financing of terrorism.
“Tickets are serious regulatory breaches compounded by the fact that a significant proportion of Bridgewater’s customers, when assessed against Code requirements, are classified as high risk. “
The regulator then appointed a third-party professional firm in accordance with Sections 14 and 23 of the Act to oversee certain transactional activities within Bridgewater and report on the extent and relevance of the financial crime framework of Bridgewater.
The costs associated with producing the report and appointing the third-party professional firm were significant and borne entirely by Bridgewater.
“After receiving the Section 23 report in November 2020, the Authority continued to investigate whether Bridgewater was able to convince the Authority that it remained ‘fit and appropriate’ to hold part or the all licenses granted under section 7 of the Act. , in accordance with the guidelines published by the Authority.
“To hold a license, a person must satisfy the Authority that he and his key personnel are fit and appropriate. Meeting this requirement is an ongoing obligation.”
Following the inspection, Bridgewater advanced its own remediation plan, hired additional professional advisers to support the process and provided regular updates on this to the Authority.
The regulator has conducted its investigation and has always been aware of the higher risk profile of Bridgewater’s customers.
The section 23 investigation, inspection and report each identified a series of issues which, when assessed in a reasonable and proportionate manner by the Authority against the guidelines and all relevant laws, have called into question the suitability and ownership of Bridgewater to continue to be licensed with certain Class 3, Class 4 and Class 5 Clearances. It has been determined that at all relevant times (i.e. the period between 2010 and 2021 inclusive), Bridgewater –
- had not fully complied with the Code’s requirements for conducting its business risk assessment;
- had not fully met the Code’s requirements for performing customer risk assessments;
- had not fully complied with the Code’s requirements for conducting its technological risk assessment;
- had not fully met the Code’s requirements for continuous monitoring;
- did not fully understand the use of complex structures in its business relationships and did not assess the risks of these structures accordingly;
- did not fully meet the Code’s requirements for establishing the source of client funds (and the source of wealth if applicable), and
- on the basis of the above, contravened paragraphs 4, 5, 6, 7, 8, 13, 14, 15 and 31 of the Code.
Administration officials, following the inspection, also determined that a number of entities administered by Bridgewater were not in compliance with their respective obligations under the Code.
“The Section 23 report (and attachments) details a number of recommendations deemed necessary by the third-party professional firm to ensure that Bridgewater’s financial crime framework was appropriate to mitigate the risks associated with his activities. 23 states that “the licensee has made, and is proposing to make, significant positive changes to its financial crime framework, which are to be welcomed. However, there is still work to be done for the licensee to license is satisfied that it is in full compliance with its regulatory obligations. ‘”
The s.23 report also identified a number of concerns regarding how Bridgewater identified and mitigated conflicts of interest within its existing client base. The investigation identified a number of conflicts of interest, personally related to each of the directors of Bridgewater, which were not recorded in the Bridgewater conflict register. Failure to register such conflicts of interest is contrary to the requirements of the Financial Services Rule Book 2016 (“the Rule Book”) and to Bridgewater’s own internal policies and procedures. The nature, extent and type of unregistered conflicts of interest were of such a nature and frequency that the Authority concluded that the civil sanction was necessary.
The regulator has determined that responsibility for any breaches identified with respect to Bridgewater rests with its directors and those who hold certain controlled functions at all relevant times.
“The Authority has identified issues that have prompted it to assess the suitability and ownership of persons exercising certain controlled functions at Bridgewater. Such assessments, by the Authority, have led it to conclude that persons occupying such roles are not fit and suitable for such roles in Bridgewater and, in some cases, in the regulated area of the island of Man and the Authority have therefore determined that it is appropriate, reasonable and proportionate for it to exercise its powers under section 10A of the Act to prohibit these titular roles from continuing to occupy these positions (“the prohibitions” ).
“Such measures were taken against Matthias Bolliger (director and director of client companies at Bridgewater from February 28, 2011 to January 20, 2015 and from September 27, 2019 to May 14, 2021), Stephen Corran (director, responsible for Compliance, Money Laundering Reporting Assistant Director, Director of Client Firms and Company Secretary at Bridgewater at all relevant times) and Brett Armitage (Director, Director of Client Companies and Head of Money Laundering Reports at Bridgewater at any relevant time). “
The regulator said it was confident that the imposition of the civil penalty on Bridgewater, along with other ancillary measures taken, reflects the seriousness of the non-compliance and the cultural issues identified. Without the changes and improvements in staff (to its board of directors and to those in controlled positions) made by Bridgewater, the Authority would likely have considered revoking its license. The Authority is satisfied that the directors of Bridgewater, at this time, recognize and accept the breaches of Bridgewater.
In accordance with the EDMP, Bridgewater entered into settlement discussions with the Authority and, after accepting the findings of the Section 23 report, inspection and investigation, sought to finalize and remedy quickly to problems.
The regulator expressed satisfaction that Bridgewater and the directors of Bridgewater have fully cooperated and engaged positively with the Authority’s EDMP.
The directors of Bridgewater, under whose direction Bridgewater was operating at all material times, accepted responsibility for the contraventions and related matters identified by the Authority.
As of the date of the settlement agreement between Bridgewater and the Authority, Bridgewater has put in place new procedures, hired additional staff at the board and executive level, and is committed to providing the ‘Authority for additional periodic reports in the future. At the time of the investigation, Bridgewater had already started a review of all of its procedures. Taken collectively, the Authority is convinced that Bridgewater sought to remedy the shortcomings that led to the imposition of the civil penalty and prohibitions.
As of the date of the settlement agreement, Bridgewater is actively collaborating with the AMF to ensure compliance with its regulatory obligations.