Guernsey’s Financial Services Commission (the Commission) has imposed penalties totalling over £2 million on Guernsey based Utmost Worldwide Limited and two of its employees.
In detail, the Commission imposed financial penalties of:
- £1,960,000 on Utmost Worldwide Limited (the Licensee) under section 39 of the Enforcement Powers Law;
- £35,000 on Mr Steyn under section 39 of the Enforcement Powers Law;
- £10,500 on Mr Watchorn under section 39 of the Enforcement Powers Law;
In addition, they imposed an order prohibiting Mr Watchorn from holding the roles of Money Laundering Reporting Officer and Money Laundering Compliance Officer for a period of one year and five months.
Serious and systemic findings spanning significant period
The findings in this case were serious, systemic and spanned a significant period – 2015 to 2025.
The Commission’s investigation considered the fundamental issue to be that the Licensee underestimated the degree of financial crime risk related to its life insurance business.
The Licensee is taking substantial steps to remediate.
This risk of financial crime was increased by the Licensee’s historic business model – the use of unregulated brokers for international business, operating in developing countries often with a weak financial crime infrastructure, a client base open not just to mobile international executives but also to local people and a business stretching back over decades when financial crime requirements were less rigorous than they are today. Whilst the Licensee changed its business model to cease writing business through unregulated brokers in 2016, many of the policies written prior to this date remain in force.
Multiple controls, albeit proportionately applied, are required to mitigate these risks.
Instead, the Licensee regarded its business model as low-risk (despite nominally rating a large volume of its clients as high-risk), and made little effort to contact or monitor its clients until a pay-out was required. At that point, any potential ‘dirty money’ was in the system and the likelihood of catching it was limited to a trigger-event review process, which was not always applied rigorously by the Licensee.
This approach to the mitigation of financial crime risks ran through the Licensee and is the cause of the several control failures identified.
The Licensee has proactively brought about operational changes across its business to address the issues identified and is taking substantial steps to remediate.
Background
The Licensee was incorporated in Guernsey in August 1993, under the name of Generali Worldwide Insurance Company Limited. It was licensed to conduct general and long-term insurance business, but predominantly wrote regular premium unit linked savings business.
Utmost Worldwide Limited was previously known as Generali Worldwide Insurance Company Limited
The Licensee was acquired by Utmost Group in February 2019 and changed its name to Utmost Worldwide Limited. Utmost Group’s business model is primarily focused on writing single premium policies to high net worth and ultra-high net worth individuals. As a result very little new business has been written by the Licensee since it was acquired by Utmost Group and the company has effectively been in run-off.
The Licensee had a worldwide client base that declined from more than 80,000 to less than 40,000 clients during the period reviewed by the Commission; including clients in jurisdictions within South and Central America, many of which are internationally regarded as presenting a higher money laundering risk.
The Licensee had engagements with the Commission in 2016, 2019, 2021 and 2022; all of which had resulted in some specific failings being identified.
Mr Steyn was the Chief Financial Officer of the firm from September 2012 to April 2020, a Director from 28th February 2019, and the Chief Executive Officer from 21th April 2020 to-date.
Mr Watchorn was the Nominated Officer/Deputy Money Laundering Reporting Officer from 16th August 2018 until 2025.
The Commission’s investigation commenced in April 2023.
GFSC findings
The Commission identified that the Licensee had had at one point approximately 22,500 high-risk clients, but based on its methodology would review less than 3.50% of those on an annual basis.
Less than 3.50% of their 22,500 high-risk clients were reviewed annually
The Licensee placed a significant reliance on a trigger-event, risk review process for the remainder of its clients (either high-risk, standard or low); a process that proved to be ineffective due to the ad-hoc frequency of the reviews, the quality of some of the reviews when actually undertaken, and the inadequacy of the Licensee’s monitoring and screening processes.
The very small number of high-risk clients that were subject to regular review, represented the Licensee’s highest risk cohort of clients, including Politically Exposed Persons. The Commission identified that these reviews were also ineffective due to the lack of customer contact, and the fact that CDD deficiencies identified during these reviews were not always remediated at the time, but deferred until a future review.
The Licensee was therefore unable to demonstrate a meaningful and up-to-date understanding of the financial crime risks of its clients, in particular, its high-risk clients. This led to widespread failings and systemic breaches of the regulatory requirements of the Bailiwick in relation to risk assessments, monitoring, and the source of wealth and source of funds of its high-risk client base.
The Licensee also became aware in 2014, that one of its third-party brokers operating in South and Central America had identified that some of its employees had been fraudulently altering client due diligence documents for approximately 1,900 of the Licensee’s clients. The Licensee recognised the potential money laundering risks posed by this fraud.
However, the Licensee failed to remediate this serious matter expeditiously, choosing instead to rely on its trigger-event risk review process to rectify deficiencies. This meant that 10 years after having identified the fraudulent behaviour, the Licensee had still been unable to remediate approximately 200 clients.
Mr Watchorn demonstrated views in relation to money laundering risks that did not accord with the standards the Commission believed appropriate for the specific nature of his role, particularly given the Licensee’s large volume of high-risk clients.
The Disclosure (Bailiwick of Guernsey) Law, 2007, makes it clear at Section 1(2)(b) that a suspicion of money laundering is not solely confined to the identification of criminal proceeds, but also to whether a ‘person is engaged in money laundering.’
The Commission’s investigation identified that Mr Watchorn often downplayed money laundering red flags (including adverse media) identified by employees of the Licensee.
The Licensee was required by the transitional provisions of the new Handbook, introduced in 2019, to review all its business relationships by 31 December 2021; but failed to comply with this statutory requirement.
The Commission said that in late 2023, the Licensee (led by Mr Steyn) embarked on a substantial remediation programme which includes implementation of a new risk assessment methodology and a significant change in the way it conducts regular reviews of its client risk assessments. The Licensee has re-rated all its clients and will now review them on a 1,3 and 5 year cycle according to the allocated risk rating (high, standard and low respectively).
The Commission anticipates that the level of remediation required by the Licensee may take a considerable period of time to complete.
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