Bust Guernsey finance company and owner fined £210,000 for handling Russian investments
The Guernsey Financial Services Commission (GFSC) started its investigation into ITI Trade Ltd in September 2022, following the suspension of the company's licence a few months prior.
The firm has since ceased trading but provided investment and brokerage services to high-net-worth people and investors, with the majority living in higher-risk jurisdictions.
The Commission found "much of the business was conducted in Russia", despite strict sanctions on the country due to the war in Ukraine.
The GSFC discovered that ITI Trade's trading levels significantly increased in the first half of 2022, following Russia's invasion of Ukraine, with their assets rising by more than 440%.
The Commission ruled that the company did not consider "relevant high risk factors", adding that a significant proportion of the firm's clients posed "a high risk of money laundering".
The GFSC imposed a £175,000 fine on ITI Trade and charged Director Alex Phil, formerly Alexei Filatov, £35,000.
Mr Phil is also banned from holding a supervised role in financial services for two years and 10 months.
The news follows the latest Moneyval report, where independent financial auditors urged Guernsey to improve its investigation and prosecution of money laundering.
The report also found that the island had failed to respond to financial crime in five out of 11 areas.
As part of the GFSC rules, companies must consider "the extent of its potential exposure to the risk of money laundering and terrorist financing".
The Commission judged that ITI Trade had failed to regularly assess relationship risk assessments and take into account relevant high-risk factors.
The company's customers were sourced by the firm's sister company in Russia, but ITI Trade did not know the identity of these 108 people.
The GSFC also found that one customer was linked to a $100 million insider trading scandal and was fined by authorities in another jurisdiction.
The Commission concluded: "The firm had very little knowledge of its customers and failed to demonstrate that it had effective oversight of the outsourced service providers, to mitigate the risks present in its outsourced model.
"This led to widespread and systemic breaches of the regulatory requirements of the Bailiwick that arose at all stages of the customer relationship, from onboarding to day-to-day management and monitoring.
"The failings are particularly concerning due to the large proportion of high-risk customers, the source of funds and wealth of which was unknown to the Licensee.
"The Licensee failed to assess the money laundering / terrorist financing risk of its customer relationships, taking into account all of the relevant risk factors, both prior to the establishment of the relationship and periodically thereafter."
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