Artemis Trustees helped clients obscure ownership structures, failed to scrutinise suspicious transfers of millions, and missed red flags on sanctioned individuals - it was fined £450,000
- Guernsey Financial Services Commission fined Artemis Trustees Limited £450,000 for serious and systemic failures to monitor financial crime risks involving high-risk clients with links to Libra and Russia.
- Investigation uncovered cases where Artemis helped clients obscure ownership structures, failed to scrutinise suspicious transfers of millions through high-risk jurisdictions, and missed red flags on sanctioned individuals.
- Firm maintained massive review backlog with 85% of files outstanding in 2016, some entities not reviewed since 2002 establishment, and misclassified high-risk clients as standard risk.
- Directors and staff accepted significant share gifts from client without proper approval, creating conflicts of interest, while firm lacked policies on staff dealing in client company securities or handling cryptocurrency risks.
- Director misled regulator in 2017 about progress reducing outstanding action points, and firm failed to make timely disclosures to Financial Intelligence Service despite identifying multiple suspicious indicators.
The Guernsey Financial Services Commission has published details of why it imposed a £450,000 penalty on Artemis Trustees Limited following an investigation that uncovered serious and systemic failures to monitor and manage financial crime risks.
Senior figures involved at the time have also been fined a total of £383,500 for their roles in what happened, with one of them banned for more than five years.
The GFSC published material this month that brings to a conclusion a four year period when its findings where challenged in court and saw some of the bans it had intended to impose dropped.
The commission imposed the firm's penalty on 24 June 2022, but it has only now published the details of widespread breaches of anti-money laundering regulations and codes of practice by the licensed fiduciary firm.
Artemis Trustees Limited, incorporated in March 2001 and licensed in August 2002, provides trustee, directorship, administration, secretarial and nominee shareholder services. The company's primary business involves establishing and administering trust and corporate structures through joint licensees.
The investigation commenced following a full risk assessment conducted in December 2018, which revealed that the licensee failed to identify red flags on potentially suspicious client activities, failed to identify and manage conflicts of interest, and maintained a significant backlog of outstanding action points from periodic file reviews, a repeat failing from 2016.
The commission found that Artemis failed to comply with the Criminal Justice (Proceeds of Crime) Regulations, 2007, the Handbook for Financial Services Businesses on Countering Financial Crime and Terrorist Financing, the Code of Corporate Governance, the Code of Practice for Trust Service Providers, and the Principles of Conduct of Finance Business.
Libyan client case exposes serious failings
One of the most serious cases involved a Libyan national, referred to as Mr A, who established a business relationship with Artemis in 2002. Mr A was involved in high-risk business activities with the Libyan government.
Following Colonel Gaddafi's death, Mr A requested that Artemis change the name of his trust and replace him as beneficiary with a family member. A director of the licensee suggested establishing a new trust that would not name Mr A as settlor, would exclude him from beneficiaries, and would have no link to the original trust.
The changes were asked for shortly after Gaddafi's death, amounting to what the commission described as a serious indicator of potential impropriety that should have been scrutinised. Instead, a director suggested methods by which Mr A could deliberately disassociate himself from and obscure connections to the original trust.
Artemis was subsequently informed that Mr A's brother worked for a Libyan government organisation under EU sanctions and was being investigated for misappropriating government funds. The brother was also subject to an Interpol Red Notice. Despite awareness of adverse media regarding Mr A and his brother, including allegations that the government organisation gave contracts to Mr A's companies, the licensee took no effective action.
Shortly after adverse media appeared, Mr A contacted Artemis from an unknown email address requesting distributions from the new trust to bank accounts in Turkey. Over subsequent months, a significant proportion of the trust's assets were transferred to Turkish bank accounts in Mr A's name - despite his deliberate removal as beneficiary - allegedly for a family member without a bank account.
The commission found that Artemis failed to effectively scrutinise transfers of millions of pounds, dollars and euros potentially linked to financial crime, or consider whether these were disguised distributions to Mr A given his request to be removed as settlor and beneficiary amid contemporaneous adverse media.
Russian PEP case reveals monitoring gaps
In another serious case, Artemis established a business relationship in 2006 with a foreign registered company ultimately owned by Mr B, a high net worth Russian politically exposed person. Adverse media identified by the licensee stated Mr B had alleged links to organised crime in Russia.
Between 2006 and 2013, legal ownership of the company changed from Mr B to Mrs C, a family member. Artemis was unaware of the change until 2013 and remains unaware of when it occurred or why.
In 2016, the licensee discovered ownership had changed again in 2014, with 80.2% held in declarations of trust favouring Mrs C, while Mr B indirectly held significant shareholding through various vehicles, potentially disguising his position. Artemis only became aware because of a bank request, not its own monitoring.
In early 2018, Mr B was subject to US sanctions, but the licensee took no action despite knowledge of the sanctions. Later in 2018, adverse media reported Mr B had made Mrs C owner of multiple companies and assets previously belonging to him, suggesting attempts to hide assets. No action was taken.
The licensee also failed to monitor a loan the company received around 2008 from an associated company. Artemis lacked the loan agreement and for 10 years failed to have necessary documentation, oversight and understanding of the transaction.
Charitable trust abused for personal payments
Artemis was trustee of a charitable trust supposed to promote education, health, culture and spiritual development in Africa, India and Europe. In 2017, the licensee made a payment that was actually a birthday gift to an individual who was not a beneficiary, outside the trust's purpose.
In another instance, the charitable trust paid university fees for an individual whose father was a senior manager in a natural resource company part-owned by settlor Mr D. The father was also vice-chairman of a subsidiary operating a mine in Guinea, a high-risk country, part-owned by the Guinean government.
A director of Artemis correctly identified this could constitute disguised remuneration and breach the trust deed. However, the director then suggested an alternative method, paying Mr D personally who could settle the fees himself. The commission found that Artemis failed to effectively scrutinise bribery and corruption risks of facilitating payment in deliberate circumvention of trust deed provisions and failed to consider whether payments breached The Prevention of Corruption Law, 2003.
Source of funds verification failures
Over eight years, Mr A's trust received substantial funds, with almost 40% received via money exchange companies, well known as potential vehicles for illicit funds transmission. Money exchange companies did not maintain records of who deposited funds, preventing Artemis from ascertaining whether Mr A was the source.
While the licensee received translated contracts and invoices from Mr A as evidence, using money exchange companies concealed where funds originated. Artemis could never establish that funds received through exchange companies matched those detailed on contracts and invoices. There was lack of correlation between contract amounts and amounts received, with the licensee simply accepting highly suspect justifications from Mr A.
In a separate case, Artemis provided director, administration, secretarial and nominee services for a company owned by Mr E, a Polish politically exposed person. Between 2006 and 2007, the company received substantial loans from a foreign entity with which Artemis had no business relationship. The licensee confirmed that at the time it had not ascertained the ultimate beneficial owner, source of funds or source of wealth for these loans.
When Artemis contacted the foreign entity's administrator in 2018 -11 years later - it was told the owner could have changed several times and the administrator had no information on the funds' origin. The licensee contacted the administrator again in 2021 and was eventually told the funds originated from Mr E himself. Artemis has since discovered Mr E was a director of an infrastructure company that had been subject to investigations including allegations of bribery and corruption, creating potential that the loan source was linked to proceeds of crime.
Massive review backlog exposed
Artemis's policy required high activity high-risk clients to be reviewed annually, lower activity high-risk clients to be reviewed every other year, and standard risk clients to be reviewed every three to five years. Between March 2014 and September 2019, there was a constant backlog of periodic reviews.
In 2016, 85% of total files had outstanding reviews, comprising 93% of high-risk clients and 82% of standard risk clients. Later that year, 93% of high-risk reviews remained outstanding, totalling 208 reviews, of which 159 had been outstanding for more than 12 months. Some entities had not been reviewed since establishment, going as far back as 2002. In March 2021, 20% of the client base still had overdue reviews.
The commission also found serious failures in risk classification. Artemis initially rated Mr B's company as high-risk. In 2016, the risk assessment was reviewed and the company was reclassified from high-risk to standard risk due to Mrs C being formally recognised as ultimate beneficial owner (not considered a politically exposed person).
However, the licensee failed to consider critical risk indicators: not being informed of the ownership change from Mr B to Mrs C between 2006 and 2013; potential that the new structure obfuscated true ownership by Mr B; previous adverse media linking Mr B to organised crime in Russia; and the fact that the business relationship remained associated with Mr B, still considered a politically exposed person.
Artemis then failed to review this risk assessment when it became aware of the second ownership change, despite additional politically exposed persons and ownership layers. The company remained rated as standard risk until late 2018 when it was reclassified as high-risk, six months after Mr B had been sanctioned by the US and three months after adverse media surrounding Mr B and Mrs C was published.
In another case, a Guernsey registered company incorporated in September 2011 as a special purpose vehicle for a high-value asset purchase was initially rated as high-risk due to the ultimate beneficial owner being politically exposed person Mr E. A 2018 review identified that the risk assessment had not been reviewed and updated since 2011, seven years after onboarding. According to Artemis's policy, this should have been done annually.
Conflicts of interest not properly managed
Artemis provided administration services to a Guernsey registered company involved in natural resource extraction in Burundi, a high-risk country. Founder Mr D gifted shares in the company to Director A (a director of Artemis), another director of the licensee, and a trust administrator at the firm, conditional on a successful initial public offering. Following the IPO, shares held by these individuals were worth a significant sum.
According to the licensee's gift policy, staff must not accept any gift likely to conflict materially with duties the company owes clients or induce breach of duty. Cash or cash equivalent gifts required prior written approval of the compliance manager, and any gift over £500 required prior approval of the managing director.
The commission saw no evidence of prior written approval by the compliance manager. Director A and the trust administrator's shares were approved by the managing director. The board was notified only retrospectively six weeks after receipt.
The receipt of such significant gifts breached Artemis's own policy and created risk that Mr D could influence Director A, another director and the trust administrator. Risks associated with this potential conflict were only identified after gifted shares had been transferred and were not effectively managed or minimised at the appropriate time.
The licensee failed to have effective suitable oversight of the management and control of potential risk of Director A, another director and the trust administrator committing an offence under The Prevention of Corruption Law, 2003.
Furthermore, while providing services to the company, these individuals were in a position to access sensitive, non-public information and documents. Artemis had no policies, procedures or controls regarding staff dealing in stocks or securities, and more importantly, did not have an appropriate policy for dealing or acquiring shares of client companies.
Cryptocurrency controls inadequate
Artemis provided director and administration services to a Guernsey company with two foreign subsidiaries involved in building data centres for renting out for mining cryptocurrency. The company entered into an agreement with a third-party investor to receive investment subscription by way of Bitcoin.
The licensee understood the company's bank had a policy of not accepting funds derived from cryptocurrencies. Despite this, the company's bank account received three tranches of investment from a company involved in over-the-counter trading of cryptocurrencies in respect of the third-party's investment by way of Bitcoin.
The commission found that Artemis did not have an effective policy and had no controls in place to adequately monitor and manage the risk that funds received were derived from cryptocurrencies.
Misleading information provided to regulator
In 2016, the commission conducted a full risk assessment finding significant outstanding action points, many related to anti-money laundering and countering the financing of terrorism issues. The regulator implemented a risk mitigation programme requiring Artemis to provide a plan to reduce outstanding action points to a manageable level and regularly update the commission.
In October 2017, Director A informed the commission that outstanding action points had been reduced to a manageable level. Based on this information, the regulator concluded there was no longer an ongoing requirement for updates on outstanding action points.
Subsequently, during another full risk assessment in December 2018, the commission discovered Director A had failed to explain the full extent of issues and there remained a serious issue with outstanding action points. The regulator reviewed compliance reports to the board for March 2016 to September 2017, which showed a significant number of action points remained outstanding.
Director A reported to the commission the number of outstanding action points aged one month or older, rather than the total number, which was significantly greater. As a result, Artemis did not deal with the commission in an open and co-operative manner.
The regulator concluded there was serious potential danger to the Bailiwick's reputation as an international finance centre, and the licensee's procedures were not appropriate or effective to ensure timely and full disclosures of suspicious activity to the Financial Intelligence Service.
Aggravating and mitigating factors
The commission identified several aggravating factors. The licensee's clients included high-risk clients, some of whom were politically exposed persons, based in high-risk jurisdictions, and some of whom Artemis was aware had adverse media reports related to them.
The breaches were of an extremely serious and systemic nature and exposed the licensee and the Bailiwick to the very real risk of being used to facilitate financial crime and thereby damaging the reputation of the Bailiwick as a finance centre. Artemis had a previously poor compliance history, particularly in relation to outstanding action points. The licensee allowed acceptance of substantial gifts and settlement of a considerable debt via payment of shares, without appropriate and effective policies, procedures and controls to manage associated risks.
However, the commission also acknowledged mitigating factors. Following an on-site visit by the regulator in 2018, Artemis completed a further risk mitigation programme, including appointing a third-party to review the effectiveness of its new procedures.
The licensee appointed four additional directors, including creating a new role of chief executive officer and appointing a person independent of the ownership of the firm in that role. Artemis also appointed a non-executive director, a role which the licensee previously did not have.
The licensee expanded its compliance resources, including hiring a separate money laundering reporting officer and money laundering compliance officer. Artemis appointed a third-party to assist with compliance and undertake a programme of internal audit. The licensee self-reported the number of outstanding periodic reviews in March 2021 and issues regarding one company.
The individuals that faced regulatory action
On 4 June 2026 the GFSC imposed financial penalties on Ian Charles Domaille (£125,000), Ian Geoffrey Clarke (£40,000) and Margaret Helen Hannis (£22,500).
Their cases had been challenged in court and then redetermined, resulting in lower fines and the prohibition orders in the Commission's original 2022 decision are no longer present.
Robert Archibald Gilchrist Sinclair, Artemis Trustees managing director from incorporation until June 2019, did not challenge the 2022 findings against him. He was fined £196,000 and banned for 5.6 years.
Q&A
Q: What was the size of the penalty imposed on Artemis Trustees Limited?
A: The Guernsey Financial Services Commission imposed a financial penalty of £450,000 on Artemis Trustees Limited on 24 June 2022.
Q: What were the main failures identified in the investigation?
A: The investigation found serious and systemic failures including failure to identify red flags on suspicious client activities, failure to manage conflicts of interest, massive backlogs of client reviews, inadequate monitoring of high-risk politically exposed persons, failure to scrutinise suspicious transfers of millions through high-risk jurisdictions, and misleading the regulator about progress on compliance issues.
Q: What steps has Artemis Trustees taken since the failures were identified?
A: Following a 2018 on-site visit, Artemis appointed four additional directors including a new independent chief executive officer and non-executive director, expanded compliance resources with separate money laundering reporting and compliance officers, appointed third-party assistance for compliance and internal audit, and completed a risk mitigation programme.
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