The majority shareholder and principal of a bank had been arrested and accused of enabling the bank’s customers’ participation in Carousal / VAT fraud schemes.
The board of directors were concerned about the allegations and wanted an independent firm to investigate the specific allegations and to identify whether there was evidence of any other frauds or criminal activity by the bank’s customers or by the principal. The auditors and regulators were also demanding that an independent investigation be carried out.
The board engaged KRyS Global to undertake the investigation.
After obtaining access to and reviewing the bank’s database of customer accounts, KRyS Global identified a number of sub-samples to review, based on qualitative characteristics, stratification, and random selection.
KRyS Global reviewed the bank’s anti-money laundering policies, interviewed a number of the bank’s management, and obtained access to the bank’s e-mail system.
For selected accounts, KRyS Global reviewed the Know Your Customer (KYC) client acceptance procedures for compliance with the policies and the law, the account transactions for inconsistent and suspicious activity, and the client file or e-mail correspondence for unusual activity.
KRyS Global’s findings and recommendations were provided to the board of directors within the stated deadline.
KRyS Global’s report identified serious risks to the bank, including a larger number of customer accounts, which indicated transactional activity consistent with VAT / Carousel schemes and/or the transaction activity was inconsistent with the stated business purposes (if obtained at all).
In a number of cases, KYC procedures on customer files were incomplete, such that the beneficial owner had not been identified and several customers should have been rejected under the bank’s policies as politically exposed persons and/or likely participants in criminal activity.
KRyS Global’s report was provided to the board of directors, auditor, and local regulator. It is believed that the bank subsequently strengthened its compliance requirements and enforcement culture.