Case Study:
CPG is an international, regulated financial services firm, whose head office is based in London (UK).
Lisa is CPG’s newly appointed MLRO/Nominated Officer and has been tasked by the Board of
Directors with reviewing AML/CTF compliance within the firm. As part of her review, Lisa conducts
interviews, reviews files, meets the Board of Directors and analyses reports from the regulator. Her
primary findings include two particular issues of concern.
1) It seems that there are a number of Politically Exposed Persons (PEPs) whose files have been
classified as low or medium risk, but examination of the files suggests they ought to be high
risk. One in particular is Kostya Babaev (KB), a national from a high-risk jurisdiction who is
based in London.
KB’s wealth originates from the oil industry, but he has many different business interests,
including an Art and Antiquities business and ownership of a professional football club. He
now lives in London but maintains close links with the high-risk jurisdiction, where his
brother is a member of the government.
There have been many rumours that KB’s businesses have strong links with the organised
crime but there appears to be no factual evidence to substantiate the rumours. KB is
regarded as an important client by CPG as he has bought several large properties over the
last five years in different capital cities and is currently interested in buying a significant
number of apartments in the south of England.
The files Lisa reviewed stated, as the reason for the purchase of the apartments, that KB
anticipates a growth in ‘holidaying at home’ over the next few years and these would be an
excellent investment.
There was a further observation in the files that in meetings with KB, he was reluctant to
give anything other than the bare minimum of information and when pressed he always
became agitated and aggressive. There seemed to be a lack of significant due diligence
information and the files suggested that CPG wished to keep him as a client at all costs.
2) In her general role reviewing AML/CFT compliance within the firm, Lisa also notes that there
appear to be a very small number of internal ML suspicion reports, not commensurate with
the size of the firm and number of accounts operated.
a) Evaluate the risks and issues raised by the scenario. (50 marks)
b) Advise Lisa as to what action she should take. (50 marks)