Issues were uncovered at Weighbridge Trust during an on-site inspection by the Guernsey Financial Services Commission in 2015 and again in 2017, when it was discovered that the licensee had failed to address the initial issues, after which a full investigation was launched.
William Cairns, who founded the company in 1978, was fined £133,000 and banned from senior roles in the industry for 10 years and six months, and Du Preez Vermeulen, an executive director for four years until March 2018, was fined £35,000 with a 25-month ban.
Paul Conway, who was predominantly managing director of the business for 13 years up to 2015, and Linda Dowding, an executive director who spent 10 years with the company until 2016, were both fined £30,000 and banned from the industry for three years.
All agreed to settle with the commission at an early stage in the enforcement proceedings and were given a discount on their fines and prohibitions.
The commission’s investigation unearthed that the company managed a specific group of trusts for a long period of time without ever recording accurately who the settlors and beneficiaries were.
Tens of millions of pounds were identified to be flowing through these trusts, including £16m. over the course of five years from 1999 where the licensee was unclear who the actual account holder was. Client agreements were signed by the licensee with no mention of third parties who were considered to be the real underlying clients, and who it knew had benefitted from millions of pounds through these structures.
The commission viewed the agreements as being ‘deliberately misleading’.
In another case the licensee used a trust’s funds to purchase $28m. worth of shares through a holding company without undertaking due diligence. Two years later the shares were valued as being worthless. The commission believed the transaction was a way to enable the underlying client to receive all the cash assets of the trust without paying tax on it. Poor record-keeping and monitoring was frequently identified, with a retrospective review on one trust client revealing an unknown opening balance of £4m.
Proper books and records were not always kept. In January 2017 it was identified that there were 800 sets of accounts outstanding, spread across 325 clients.
In 2015 it was identified that there was no compliance monitoring programme; the business risk assessment did not adequately address the specific risks of products, services and activities undertaken by the licensee; and there were deficiencies in customer due diligence and monitoring and risk reviews.
When the commission inspected again in 2017 this had not been properly addressed.
In the cases against all four individuals the commission said that they had failed to demonstrate that they acted with probity, competence, soundness of judgment and diligence and specifically linked them to some of the most serious transactions uncovered.
Mr Vermeulen and Mr Cairns, who left the business in 2017 but remained a shareholder controller until 2020, also had an undeclared conflict of interest with the loan of a large sum of money from the latter to his colleague.
The GFSC said it viewed the licensee as a ‘repeat offender’, with failings identified during on-site visits in 2015 and still in 2017.
‘The commission believes that the licensee’s failings in relation to the monitoring of these specific trusts and the failings in relation to record-keeping in relation to these trusts, resulted in the risk that statutory reporting to relevant authorities would have been delayed and thus undermining those relevant authorities’ ability to discharge their functions,’ it said.