Cyber-Fraud- Central Bank Takes Action

Author:Mr Seán O'Reilly
Profession:Ronan Daly Jermyn

Appian Asset Management ('Appian'), an Irish based and owned asset manager, has been fined €443,000 by the Central Bank for breaches of regulation regimes covering client asset protection, anti-money laundering, and fitness and probity. This was the first imposition of a sanction by the Central Bank where there has been a loss of client funds from cyber-fraud as a direct result of the firm's regulatory breaches

The breaches, which have been admitted by Appian, led to the loss of €650,000 of a client's funds as a result of cyber-fraud. The Central Bank, following an investigation, stated that Appian's failures were in the following areas:

it had defective controls to protect client assets against fraud; it had inadequate policies and procedures to monitor transactions, detect and report money laundering and provide its staff with appropriate training; and it failed to ensure that an employee, performing a role that might expose Appian to financial, consumer or regulatory risk, was fit for that role. These failures led to the success of a fraudster who, posing as the real client over a two month period, requested the liquidation of €650,000 of the client's assets to be paid into two third party UK accounts.

The Central Bank found that Appian had processed the request despite the presence of a number of red flags, signalling potential fraud and money laundering. For example, the e-mail correspondence from the fraudster contained a number of spelling and grammatical errors which were not consistent with the profile of the real client, that of a competent businessperson. The fraudster induced Appian to pay the proceeds of the redemption in to two separate corporate accounts outside of...

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