Financial Reporting Authority – suspicious activity reports up 30 per cent

Suspicious financial activity, fraud, money laundering and other reports of finance-related irregularities increased by nearly 30 per cent last year, according to the Cayman Islands Financial Reporting Authority.
 
Those numbers are tracked by the authority, more commonly known as CAYFIN, each year and represent the 12-month period between 1 July, 2008 and 30 June, 2009 (Figure 1).
 
“The trend in 2008/09 has shown a significant increase over the five year average,” CAYFIN officials noted in their annual report (Figure 2).
 
Reports made to CAYFIN come from both inside and outside the Cayman Islands and constitute a wide variety of cases.
 
Many are not actual reports of financial crime or irregularities, but are merely unusual bank transactions that are completely legal once examined.
 
Others involve complex money laundering, drug trafficking or tax evasion schemes that must then be reported to law enforcement or financial regulators.
 
Of the 320 cases reported to CAYFIN last year, 34 per cent involved general reports of suspicious financial activity, 27 per cent involved alleged fraud and 11 per cent involved alleged money laundering.
 
In addition, securities fraud was alleged in five per cent of the cases, corruption reports made up four per cent, drug trafficking three per cent, and tax evasion two per cent.
 
Some 247 total cases involving alleged financial irregularity were reported to CAYFIN in 2007/08. Only 219 reports were made in 2006/07. 
 
The rest of the cases involved issues like organised crime, retrospective due diligence checks by banks, and a variety of other reports.
 
Depending on the nature of each report, CAYFIN decides either to take no immediate further action, or to pass on the information they receive to a number of regulatory or law enforcement agencies, including the Cayman Islands Monetary Authority, the Royal Cayman Islands Police Service, the Immigration Department, or various overseas law enforcement agencies.
 
Disclosures made to CAYFIN are kept in strict confidence, agency officials said. Anyone initiating a disclosure of suspect financial activity is immune from prosecution under Cayman’s Confidential Relationships (Preservation) Law and from claims in civil court, unless the person disclosing the information is the subject of the report.
 
The majority of the reports examined by CAYFIN come from banks or from overseas financial regulators. But attorneys, trust companies, business managers, fund administrators and money transmitters also passed on a fair number of suspect cases in 2008/09.

Reasons 

 
CAYFIN provided several examples of suspect financial activities, fraud, or money laundering cases in its annual report. These are actual cases where names of the individuals involved were withheld to protect their identities:
 
Money transmission – A foreign national was remitting small amounts of Cayman Islands currency to two different countries, $35,000 over a five-month period and $38,000 over a three-week period. All remittances were kept under the money transfer company’s reporting threshold. The foreign national’s transactions did not coincide with their stated occupation and salary. The RCIPS was notified.

Suspicious activity – A traveller who arrived in Cayman on vacation made three separate bank deposits in three banks over ten days. The man then made 12 cash withdrawals totalling slightly more than his deposits. CAYFIN officials said the separate withdrawals were made because the bank would not have paid such a large amount of cash out all at once. The information was disclosed to the man’s home country.

Fraud – A Cayman Islands resident set up a bank account with the stated purpose of receiving his salary from work. The individual then formed a separate company without the knowledge of his employer, according to the authorities. The individual then used his insider knowledge of contract bids to allow his company to win jobs from his employer. A fraud conviction was obtained in this case.

figureone

Figure 1: Total Cases by Financial Year