Cases of financial crime with Cayman connections, especially when related to the offshore sector, have historically remained largely under wraps here.
But in a new report, “Money Laundering Typologies and Trends”, the authorities use examples of suspicious behaviour and real criminality that have touched Cayman as a way of helping people in relevant industries and law enforcement to keep a lookout for crime in many sectors of the economy.
While the financial services industry remains vulnerable to crime, over the years the procedures and regulations imposed on that industry have made it harder for criminals to use more traditional institutions to launder money or engage in other serious financial crime.
But other sectors, such as the property market, charities and trade in jewels and precious metals, have become targets for international and organised crime, terrorist financing or other offences. There are concerns that these sectors do not have the necessary safeguards in place, making them much more vulnerable to crime. While the report highlights how quickly staff in offshore firms often pick up on potential crime and make a report, there are many other industries where people are not paying attention.
Although the authorities are not completely transparent about the case studies, they do offer a glimpse into the emerging trends and styles that global and local villains use. The aim is to help people understand typical patterns of behaviour that would suggest potential criminality and report it as soon as possible.
As Cayman continues to focus on addressing the gaps and shortcomings in the regime, which were identified in the last review by Caribbean Financial Action Task Force, the new Anti-Money Laundering Steering Group compiled this report of the real life crimes that have touched Cayman in the hope that people can learn lessons from them.
The aim is to sharpen the use of law enforcement and regulatory intelligence to prevent local commercial sectors from being misused, officials said in a release.
The report describes past cases of terrorist financing (TF) and proliferation financing (PF, referring to weapons of mass destruction), as well as the challenge of money laundering.
“Although identities of persons and companies are not provided in the publication, the cases will make interesting reading for the public. No doubt it will raise their awareness of these types of crimes,” said Attorney General Samuel Bulgin. “But foremost this publication is for financial institutions and designated non-financial businesses and professions – a group that includes realtors, dealers of precious metals and stones, lawyers and accountants.”
One of the cases involved a local jewellery store that was at the centre of a multi-million dollar diamond theft. A merchant who had left a bag of extremely valuable jewels in a gentleman’s club in an undisclosed country was lucky enough to get the bag back but discovered some very rare pieces were missing. Despite offering a reward. the pieces were not returned until they turned up here. It turned out that a Cayman jewellery shop bought the precious items from a member of staff at the club who had taken the pieces from the bag.
The suspect thief told the local jeweller here that the diamonds were an inheritance and he sold them to him for just a few thousand dollars in cash plus around US$130,000 in other stones, even though the pieces were worth some $2 million.
Despite knowing the jewellery was worth much more than he had paid, the jeweller did not alert the authorities but sent the pieces to the Gemological Institute of America. However, the appraiser there recognised the jewellery as being stolen and an international investigation was launched and the players were eventually tracked down.
The report points out that there were around seven red flags that should have been spotted by the local jeweller. Despite taking a fraction of the value for the pieces and offering the jewels for sale in an unusual manner without any process certificate, the merchant here made no report, demonstrating the type of gaps in our anti-crime regime the authorities here now want to plug.
The report also uses the recent case of the local tennis club coach who stole around $300,000 from the club. Described in the report as a relatively unsophisticated fraud, the case is used as an example because of the trust the club’s board placed in the coach-manager Rob Seward, who was jailed earlier this year for over six years.
“At the heart of the matter is the internal governance of the company by its board of directors. The lack of corporate governance and scrutiny – even for a small non-profit organisation – exposed it to abuse and provided a perfect platform from which [Seward] exploited the company finances,” the report stated, as it pointed to the need for charities, non-profits and their retail banks to be more sensitive to cash transactions.
The government’s top lawyer said that providing the sample cases would help develop more effective policies and procedures to prevent, detect and respond to crime in future.
The data comes from the Financial Crimes Unit, the Royal Cayman Islands Police Service, the Cayman Islands Monetary Authority, the Financial Reporting Authority, the Department of Commerce and Investment and the General Registry, Cayman’s 2015 National Risk Assessment and international sources.
National Coordinator Elisabeth Lees said international consultants, Financial Transparency Advisors (FTA), are also continuing to support Cayman by facilitating interactive meeting and outreach sessions. She said the publication was an important step in fulfilling the CFATF’s recommended actions, outlined in its March 2019 report, for further strengthening Cayman’s regime, noting that Cayman has until February 2020 to demonstrate its progress.