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Westraven Finance Ltd T/A Brinkspeed

Record number:  001/2007

In the matter of Part VIIA of the Central Bank Act 1942

Westraven Finance Ltd T/A Brinkspeed - Appellant

And

The Irish Financial Services Regulatory Authority - Respondent

Tribunal
Francis D Murphy
Geraldine Clarke
John Loughrey

Sitting in public in Frederick House, 19 South Frederick Street, Dublin 2 on the 24th and the 25th of July 2007

Decision Delivered: 31 August 2007

John Breslin BL instructed by Messrs McCann Fitzgerald, Solicitors for the Irish Financial Services Regulatory Authority

Wilson Sesan Olayinka for Westraven Finance Ltd.

DECISION:

On the 9th of May, 2005 Westraven Finance Ltd (Westraven) applied to the Irish Financial Services Regulatory Authority (the Financial Regulator) under Section 30 of the Central Bank Act 1997 (as inserted by Section 27 of the Central Bank and Financial Services Authority of Ireland Act 2004) for an authorisation to carry on a money transmission business.

On the 29th of March 2007 the application was refused under Section 31 of the 1997 Act.  By Notice in Writing dated the 26th of April, 2007 Westraven appealed the decision to the Irish Financial Services Appeals Tribunal (the Appeals Tribunal).

The Appeals Tribunal, having considered the arguments advanced and the evidence adduced, decided to affirm the decision of the Financial Regulator for the reasons set out hereunder.

THE APPEALS PROCESS:

On the 26th of April, 2007 Westraven lodged with the Registrar of the Appeals Tribunal (the Registrar) a notice of appeal in the prescribed form against the decision of the Financial Regulator.  On the 1st of May, 2007 the Appeals Tribunal consisting of
Francis D Murphy, Inge Clissman and John Fish agreed, at the request of Mr Olayinka, to waive the entire of the appeal fee payable under Rule 5 of the Rules of the Irish Financial Services Appeals Tribunal Rules 2007 (The Rules).

On the 14th of May, 2007 the Registrar delivered a copy of the notice of appeal to the Financial Regulator and informed the Regulator that the time for delivery of a response prescribed by Rule 4 (5) of the Rules was extended to 28 days.

The response of the Financial Regulator was delivered to the Registrar on the 7th day of June, 2007 and a copy thereof was collected by Mr Olayinka on behalf of Westraven at the Appeals Tribunal offices on the 15th day of June, 2007.

On the 15th of June, 2007, the Chairperson of the Appeals Tribunal designated Geraldine Clarke and John Loughrey to constitute with him the Appeals Tribunal for the purposes of the Appeal.

The Appeals Tribunal ordered that a Directions Hearing be held at the offices of the Appeals Tribunal in Frederick House on Monday the 2nd of July 2007 at 10.30am and the parties were notified accordingly.

At the Directions Hearing, it was directed or agreed (among other things) as follows:

  1.  That the Appeal would be heard on Tuesday the 24th of July, 2007 in Frederick House and on succeeding days if necessary.
  2. That the hearing of the Appeal would be conducted in public.
  3. That each party would provide to the Registrar for transmission to the other party a statement or proof of the evidence to be given by any witness intended to be called by him.
  4. That the correspondence and documentation furnished to the Registrar would be taken as proven without further evidence.

The delivery of the documentation by each party to the Registrar was completed on the 19th of July, 2007 and duly transmitted by the Registrar to the other party.

Evidence on behalf of Westraven was given by Mr Olayinka, Mr Ayo Akande and
Mr Bamidele Emmanuel.

Evidence was given on behalf of the Financial Regulator by Mr Conor Ryder,
Mr Neil Kennedy and Ms Sharon Donnery.  Oral submissions were made by Mr Olayinka and Mr Breslin.  The latter supplemented his oral submissions with detailed submissions in writing.

At the conclusion of the hearing, the Appeals Tribunal reserved its judgment.

THE BACKGROUND:

Westraven was incorporated in Ireland on the 12th of March 1999. The issued shared capital was €2 divided into two ordinary shares of €1 each, of which one is held by Mrs Olakumbi Olayinka and the other by Mr Wilson Sesan Olayinka, each of whom is a director. The registered office of the company was situated at 11, Cluain Aoibhinn, Trelleckstown Road, Naas, Co Kildare. The business of Westraven operated at all times from the Retail Centre, Naas Road, Newbridge, Co Kildare. It commenced the money transmission business in October 2001 and the first accounts of the company were made up to the 31st of December of that year.

Mr Olayinka was born in Ibadan, Nigeria, and had considerable experience in financial matters prior to the formation of Westraven. The greater part of the business of Westraven in the years after its incorporation related to the transmission of monies from Ireland to Nigeria.

The accounts of Westraven for the first three years show that there were a relatively small number of employees varying between three and six and a growing business which incurred a small loss every year. The evidence given to The Appeals Tribunal confirmed that money transmission businesses were frequently undertaken by small enterprises.

On the 15th of September, 2003 money transmission businesses were made subject to certain provisions of Section 32 of the Criminal Justice Act 1994 (the 1994 Act) which required persons engaged in those businesses to adopt measures to prevent and detect offences of money laundering. On the 1st of February, 2004 the remaining provisions of Section 32 of the 1994 Act became applicable to money transmission businesses. Those provisions required that reasonable measures should be taken to establish the identity of persons to whom the business provided services and an obligation to retain for five years the originals or copies of certain documents or materials. On the 8th of July, 2005 Section 32 was amended to extend the requirement to adopt prevention and detection measures to offences of financing terrorism.

The business of money transmission was not subject to regulation by the Financial Regulator before January 2005. Indeed, Mr Olayinka had inquired on the 11th of April, 2002 from the Central Bank whether the business then carried on by Westraven required an authorisation and was informed that it did not, as was then the case.

The Central Bank and Financial Services Authority of Ireland Act 2004 (the 2004 Act) provided (amongst other things) that as from the 1st of January, 2005 a person should not carry on a money transmission business (or other regulated business) unless the person was the holder of an authorisation issued by the Central Bank and Financial Services Authority of Ireland. The 2004 Act expressly provided a moratorium or period of grace for persons then carrying on a money transmission business by providing that the restriction should not apply to them until six months after the commencement of Section 27 of the Act of 2004 which, in the event, was the 1st of July 2005.

THE APPLICATION FOR AN AUTHORISATION:

On the 9th of May, 2005 Westraven applied to the Financial Regulator for an authorisation to operate a money transmission business.  The letter of application enclosed eight documents, one of which was a questionnaire to be completed by each of the directors and executives.  To the questionnaire was annexed a declaration which included the statements following:

a)    I have furnished the information set out or referred to in this questionnaire at the request of the applicant whose name is set out on page 2 [Westraven]  of this form and  which is an applicant for (or has been granted) an authorisation under the Central Bank Act 1997 (as amended) and I am aware that the Authorisation and Supervision Requirements and Standards that the Financial Regulator must be satisfied that executive directors and senior executives are fit and proper persons and have appropriate competence and experience in enable them to fulfil their duties and that non executive directors are fit and proper persons and have suitable relevant experience.

  b)       -----------------

  c)   declare that : -

  1.  I have truthfully and fully answered each question in this questionnaire, and have disclosed any other information which might reasonably be considered relevant to the purpose of furnishing this form set out in Paragraph (a) above and
  2.  I will promptly notify the Financial Regulator of any changes in the information which I have provided and will supply any other relevant information of which I  may become aware  at any time after the date of this Declaration”

That declaration was signed by Mr Wilson Sesan Olayinka, the other director and an executive of Westraven.

The documents enclosed with the application for an authorisation included an agreement between Travelex Money Transfer Ltd (Travelex) and Westraven dated the 12th day of November 2004.  Under that agreement, Travelex appointed Westraven its representative on a non-exclusive basis in Ireland and the United Kingdom and entitled Westraven to offer certain money transfer services in accordance with the procedures specified therein.

The application for an authorisation and the accompanying documents were assessed and processed by the Financial Institutions and Funds Authorisation (FIFA) Department of the Financial Regulator.  The officer of that Department primarily responsible for the investigation was Mr Conor  Ryder who worked under and reported to Mr Michael Deasy, the head of FIFA.

The examination of the application of Westraven was only one of many undertaken by the Financial Regulator in 2005.  The Appeals Tribunal was informed in the course of the hearing by it that about 40 persons applied for an authorisation to carry on a money transmission business when that requirement was introduced on the 1st of January 2005.  Again, Mr Ryder explained to the Appeals Tribunal that discussions took place between the Financial Regulator and interested parties in relation to the process to be adopted.  Application forms were in draft and available to the applicant in April 2005, and that draft was subsequently approved. At the same time, the “Guidance Notes” were provided to applicants. 

As part of the assessment process, Mr Ryder wrote to various agencies including the Garda Central Vetting Unit and HM Revenue and Customs.  In addition, he wrote on the 4th of July, 2005 to Mr Leon Isaac, marketing director of Travelex.

By letter dated the 10th of June, 2005 Mr Ryder wrote to Mr Olayinka seeking specific information in relation to the business and affairs of Westraven. In his reply dated the 13th of June, 2005 Mr Olayinka confirmed that there would be 100 agencies by June 2005 and 300 agencies by the first quarter of 2006. He said that the agency expansion was mainly for the rest of the world transactions via Travelex. 

On the 8th of July, 2005 a Mr Ronald Donders of Travelex contacted Mr Ryder. He informed him that he was concerned about the possibility of Westraven obtaining an authorisation.  Mr Donders made reference to an investigation of Westraven by the German financial regulator and claimed that Westraven owed Travelex €43,000.  Mr Donders was also recorded by Mr Ryder as saying that Travelex had ceased their business relationship with Westraven. 

On the 17th of August, 2005 Mr Donders wrote to Mr Ryder in the following terms:

“Re Your letter 4th July 2005 with reference cr mm
In reaction  to your letter:

We know Mr Olayinka as director of the company “Westraven Finance Ltd t/a Brinkspeed”.

Westraven Finance Ltd was appointed agent to our Company at the beginning of 2004 and proved to be an unreliable and troublesome partner. He was consistently late with payments. In addition, we extended credit to Westraven Finance on the basis of an evidence of payment which was sent by fax by Mr  Olayinka.  It later transpired that that fax and other faxes evidencing  payments had been falsified. We terminated our relationship  with Mr Olayinka on 9th January.  Westraven’s outstanding debt to us was €72,000.  Up to the present day, Westraven still owes TMT about €42,000.

Furthermore, I believe that Mr Olayinka registered a branch of Westraven Finance Ltd with Companies House in Aachen, Germany, and  that it operated as a money transmitter without a valid licence.  I also believe that the police in Germany are currently investigating this matter.  Please contact Siegmar Apitzsch KK (Germany police reference 608000-020767-05/0) Tel +49 -241-95773527.  Address: Lehnstrasse 17, 52146 Wuerselen”.

It was later, on the 5th of April, 2006 when a Mr Robert Cowling of Travelex sent an email to Mr Ryder in the following terms:

Following our conversation this morning, I have discussed the matter of Brinkspeed Ltd with Mr Isaacs and Mr Donders. 

Brinkspeed was stopped from processing transactions via the Travelex system in January 2005, 15 months ago, due to non payment of funds due to Travelex.  As I said on the phone, we have not terminated our contract with Brinkspeed, as Brinkspeed still owes Travelex the sum of approximately €35,000.  We have been using the contract in order to convince Brinkspeed to pay the money owing.  We have now a court judgment against Brinkspeed for the payment of the debt which has been endorsed by the Irish courts which is currently in the hands of the Sheriff.  As a result of our conversation today, we have decided that we will terminate the contract with Brinkspeed.

Further, when speaking to Brinkspeed’s lawyer, Mr Isaacs did not refer to the situation as a “temporary blip” or anything of the sort.  In fact, Mr Isaacs limited his comments to asserting that there was no possibility of a future relationship with Brinkspeed while the money owing remained outstanding.

I would like to clarify that we do not expect to enter into any further agreement of any sort with Brinkspeed or any company which the owners of Brinkspeed are involved in any way. We believe Brinkspeed’s conduct in this matter to be close to criminal and we are annoyed that Brinkspeed is dishonestly representing its relationship with Travelex and abusing our name and logo in the manner you mentioned.

I hope this clarifies the situation and is useful (to) you in your deliberations. I will contact you once the notice of termination has been sent in order to confirm that this has taken place”.

By November 2005, the Financial Regulator was not satisfied to grant the authorisation sought.  Instead he took the view that it would be desirable to inspect the premises in which business was carried on by about twelve persons (including Westraven) who had sought an authorisation to continue the business of money transmission.  In pursuance of that policy, (of which Mr Olayinka had not been advised) Mr Ryder communicated with Mr Olayinka on the 4th of January, 2006 suggesting a visit to the Westraven premises on the 27th of January, 2006. That date was unacceptable and Mr Ryder maintains he suggested the 24th of February, 2006 as an alternative date.  Mr Ryder did send an email to Mr Olayinka on the 21st of February, 2006 seeking directions to the premises of Westraven.  Again, Mr Ryder gave evidence of endeavouring to contact Mr Olayinka by telephone but failing to make contact.

On the 24th of February 2006, Mr Ryder attended at the office of Westraven in Naas, Co Kildare in company with his colleague, Mr Neil Kennedy.  It was the evidence of Mr Ryder that the Westraven premises had a deserted appearance and from inquiries which he made from an adjoining tenant, he took the view that they had been unoccupied for some time.  Mr Ryder reported this matter to his superiors in Dublin and as a result a letter was sent on the 27th of February, 2006 requiring Mr Olayinka to confirm in writing that he would immediately cease operating as a money transmitter.  The Regulator was seeking an assurance the business had been ceased.  The prohibition was imposed by law.

In response to that letter, Ms Sheila McConnell, Solicitor on behalf of Westraven, wrote to the Financial Regulator on the 3rd of March, 2006 disputing that a meeting had been arranged for the 24th of February 2006. 

In any event, a meeting was arranged and duly held at the office of the Financial Regulator on the 22nd of March, 2006 at which Mr Olayinka, his Solicitor, Mr Deasy, Mr Hennigan, Mr Ryder and Mr Kelly attended.  That meeting discussed a wide range of issues concerning the business of Westraven.  The issue of Travelex was raised by Mr Deasy, and Mr Olayinka replied that the relationship with Travelex had not ceased and that he was currently in negotiation to establish a way forward.  Again, it was Mr Deasy who inquired whether Westraven had any other operations outside of Ireland, and Mr Olayinka said that they were no longer active in Germany but had had a branch there up to two years previously. 

Arising from matters discussed at that meeting, further inquiries were made in England and Germany.

On the 22nd of March, 2006 Mr Deasy wrote to the German Federal Financial Supervisory Authority (BaFIN) seeking any information which they might have in relation to Westraven. 

In their reply dated 30th March, 2006 BaFIN confirmed that a money transmission business in Germany required a licence and that Westraven never held such a licence. BaFIN also informed FIFA that the Chief of police in Aachen received a complaint in early 2005 that Westraven had commenced a money transfer business and registered a branch in the town of Aachen. That complaint was passed on to BaFIN.  The premises in Aachen were searched by the German police in or about the month of September 2005. BaFIN provided a brochure found on the premises.  That brochure stated there were 72 agencies of the Company in Ireland; 127 in the UK and 6 main agencies in Germany.  The brochure expressly claimed that Westraven met the regulatory standards in all of the countries in which it operated.

At the hearing before the Appeals Tribunal, the Financial Regulator put in evidence – with the agreement of Mr Olayinka – a translation of two letters written by Westraven  Ltd from its address in Aachen, one to the German embassy in Nigeria dated the 27th of June, 2005 signed by Mr Bamidele Emmanuel and the other dated the 31st of October, 2005 signed by Mr Olayinka and Mr Emmanuel. What the letters make clear is that it was Westraven itself and not some subsidiary or agency which carried on business in Germany.  Furthermore they reveal that Westraven purported to carry on a range of activities in the courier or transport businesses.  The letter of the 27th of June, 2005 makes it clear that some activities were being carried on as late as that date. 

Again, on the 22nd of March, 2006 Mr Ryder conducted an internet search on Westraven and Mr Wilson Olayinka.    That search revealed an entity by the name of “Westraven Finance (UK) Ltd”.  An official report on that company showed that it was incorporated in the UK on the 25th of May, 2004 and that Mr Wilson Olayinka and Mrs Olakunbi Olayinka were Directors of it.  The report shows the company was struck off the register in the UK on the 28th of February, 2006 for failing to file annual returns.

The disruption in the commercial arrangement between Westraven and Travelex, the formation and striking off in the UK of a company including the name “Westraven” and the trading by Westraven itself in Germany in a money transmission business and other commercial enterprises was not mentioned in the application to the financial regulator for an authorisation.

On the 6th of April, 2006 Mr Deasy wrote to Mr Olayinka asking him to explain why he did not disclose the fact that he and Mrs Olayinka were directors of Westraven Finance UK Ltd., and that that company had been dissolved.  On the 12th of April, 2006 Mr Deasy wrote to Mr Olayinka and repeated the queries about the UK company and stated that the answer given by Mr Olayinka about the German operation was not acceptable. 

On the 16th of May, 2006 a meeting was held at the Westraven premises in Naas Road, Newbridge, Co Kildare which was attended by Mr Neil Kennedy, Mr Conor Ryder and Mr Neil Kelly on behalf of the Financial Regulator and by Mr Olayinka, Mr Akande, Ms McConnell, Solicitor, and Mr Raymond Smith, accountant. (the May meeting).  A disagreement arose as a result of the fact that certain bank accounts were not available on the Company’s premises at the date of the visit. 

Mr Olayinka confirmed that Travelex had at that stage terminated its relationship with Westraven.  Mr Olayinka explained that a liability of some €90,000 of Westraven to Travelex was due to the fact that three agents did not pay moneys owing by them to Westraven.  Again, Mr Olayinka confirmed that the controls and accounting were not good at that time. At that meeting Mr Olayinka gave Mr Ryder a list of 43 agents.  It was Mr Ryder’s evidence that of these 43 agents, Mr Olayinka produced signed agreements in respect of only eight; that some information was available in relation to seventeen more, but that there was no information in relation to the other eighteen.  This evidence was disputed by Mr Olayinka.

Mr Ryder wrote to Westraven once more on the 30th of June, 2006 seeking various documents and information.  The queries raised by the Financial Regulator included the following:

  1.  An explanation as to why the investigation by the Public Prosecutor of Aachen, Germany, of Westraven was not disclosed to the Financial Regulator.
  2. Why Mr Olayinka had failed to disclose his directorship in Westraven (UK) Finance Ltd.
  3. Why Westraven failed to disclose in its application that Travelex had suspended its business relationship with the applicant.

Westraven replied to that letter on the 1st of July, 2006 and stated:

1) That Westraven in Ireland had not received any information that the Public Prosecutor of Aachen had investigated the company and went on to say that “…when asked at the meeting on 22 March 2006, we did register the business in Germany but left it in abeyance”.

2)  With relation to the UK Company, it was said that at the meetings with the Financial Regulator it was disclosed that that company was registered but did not start to trade.

3)  In relation to Travelex, the explanation furnished by Mr Olayinka was in the following terms:

All along, both Brinkspeed Services and Messrs Travelex Money Transfer Ltd had an open communication channel relating to continuity of business by both parties, this has lead to the probable reason for  the oversight in timely disclosure to the Financial Regulators”.

On the 25th of August, 2006 Travelex confirmed that the Financial Regulator could disclose the information provided by them to Brinkspeed.

On the 4th of September, 2006 BaFIN confirmed that the information supplied by it could be disclosed to Westraven. 

On the 22nd of February, 2007 Patrick Neary, the Chief Executive of the Financial Regulator appointed Sharon Donnery, Patrick Brady and James O’Brien to be “Designated Decision Makers” in relation to the application by Westraven for an authorisation to carry on a money transmission business pursuant to Section 30 of the Central Bank Act 1997 (as amended).  The acceptance of that appointment by the designated decision makers involved the execution by each of them of a declaration confirming that they had not prejudged any of the matters in relation to the application nor expressed any opinion in advance which might suggest bias by prejudgment.

On the 6th of October, 2006 Mr Deasy wrote to Mr Olayinka pursuant to Section 31(3) of the Central Bank Act 1997 advising him that the Financial Regulator proposed to refuse to grant the application for an authorisation on the grounds specified therein and attached to that letter a scheduled setting out the reasons for the proposed refusal.

Among the reasons set out in that schedule were the following: 

  1.  That Westraven was investigated and searched by the German police and the German Regulator (BaFIN) in relation to an allegation of operating an illegal money transmission business and that Westraven had failed to disclose that information to the Financial Regulator in its application.
  2. That Westraven had traded as a money transmission business in Germany and that the Aachen branch of Westraven Ltd had accepted money transfers for pay abroad from mid year 2004 until May 2005 without having the required licence. 
  3. At the time of the application Mr Olayinka held a directorship in Westraven Finance (UK) Ltd, a company registered in the UK and yet stated in the questionnaire signed by him that he was not a director of another company.
  4. During the course of the application, Westraven Finance (UK) Ltd was struck off the Companies Register in the UK on the 28th February 2006 for failure to file annual returns.  This was not disclosed to the Financial Regulator. 
  5. The position with regard to Travelex Money Transfer Ltd (Travelex) was that Westraven claimed to hold an agency agreement with that company at the date of its application and that Travelex had informed the Financial Regulator that at that date: 
  6. Travelex’s operations with Westraven were suspended.
  7. Since the 9th of January 2005, Westraven was stopped from processing transactions via the Travelex system due to the non payment of funds due to Travelex and it was alleged that Westraven had falsified records evidencing payments.
  8. Travelex obtained a judgment against Westraven for €35,000.

Mr Olayinka responded to these allegations in a letter also dated the 6th of October 2006. The schedule attached to that letter contains a considerable body of information but particular attention was attached by the Appeals Tribunal to the following statements contained therein, namely:

  1. That Mr Olayinka expressly accepted that the list of 14 agents given to the Financial Regulator were then the only agents of Westraven and that the other agents whose names had been provided on a list  furnished to the Financial Regulator had been suspended “because they have not or fully satisfied the required  KYC of the firm”.
  2. In relation to the trading by Westraven in Germany, Mr Olayinka explained that the German police had not contacted Westraven in Ireland about the investigation.  He explained that Westraven had discontinued the money transmission business in Germany when Mr Ronald Donders of Travelex had alerted them to the fact that authorisation for carrying on that business in Germany was required.  Mr Olayinka also explained that the failure to disclose the activities carried on by Westraven in Germany was that it was not trading at the time the question was posed to him.
  3. With regard to Travelex, Mr Olayinka recognised that since the 9th of January 2005, Westraven was stopped from processing transactions via Travelex as a result of “defaults from a couple of agents” of Westraven.  Mr Olayinka contended nonetheless that the contractual agency agreement still subsisted and was not terminated. 
  4. In the schedule, Mr Olayinka expressly recognised that there were errors in judgment in the past in not disclosing the branch in Germany and that there were “lax controls in the conduct of the business of Westraven”.  It was asserted that these defects had been remedied.

At a meeting of the designated decision makers, held on the 26th of March 2007, it was decided that the application should be refused on each of the grounds listed in Mr Deasy’s letter to Westraven dated 6 October 2006 for the reason stated in the schedule to that letter subject to one minor amendment.

On the 29th of March, 2007 Fiona McMahon, Deputy Head of FIFA, informed Mr Olayinka that under Section 31 (3) (6) of the Central Bank Act 1997 (as amended) the application of Westraven for authorisation had been refused for the reason set out in the schedule to that letter.

In a lengthy schedule attached to a letter of dated the 6th of October, 2006 the Financial Regulator informed Mr Olayinka in detail of the findings of fact made by the Regulator; his understanding of the applicable law and the reasoning process that led the Financial Regulator to the conclusion reached by him.

In a document entitled “Understanding of Our Application” enclosed with a letter to the Appeals Tribunal dated the 19th of July 2007 Mr. Olayinka set out in detail his response to the concerns expressed on behalf of the Financial Regulator. 

THE JUDGMENT:

The power to grant an authorisation to carry on a money transmission business is vested exclusively in the Financial Regulator. Neither the Appeals Tribunal nor any superior court of law can grant such an authorisation.

Under Part VIIA Section 57Z of the Central Bank Act 1942 (as inserted by Section 28 of the Act of 2003 as amended in turn by Section 14 of the Act of 2004) the power of the Appeals Tribunal on the present appeal is either:

  1. To affirm the decision of the Financial Regulator, or;
  2. To remit the matter concerned for reconsideration by the Regulatory Authority, together with any recommendation or direction of the Appeals Tribunal as to what aspect of the matter should be reconsidered.

The assessment and investigation of the application for authorisation made by Westraven gave rise to a multiplicity of issues and events raised by both parties and described by each of them as “concerns”. The Tribunal is satisfied that the most satisfactory method of exploring these concerns in the present case is to examine, first, the grounds relied upon by Westraven in support of its appeal and, secondly, the reasons provided by the Financial Regulator for his refusal of the authorisation.

It may be helpful to consider the Westraven grounds of appeal under three headings, namely:

  1. Alleged want of fairness which may be subdivided into :-
    • Bias on the part of the Financial Regulator or his officers.
    • Unfair procedures adopted by the Financial Regulator.
  2. Alleged errors made by the Financial Regulator in his findings or assessment in relation to the business of the Appellant and the documents maintained in relation to it.
  3. The failure of the Financial Regulator to recognise that the errors which did occur related to past events which had been or could be rectified.

The very careful manner in which the Financial Regulator selected the Decision Making Team, and the declarations which they were required to provide, effectively eliminated any possibility of sustaining a case of bias in the decision making process.

The suggestion that the decision making process was tainted by the provision of misleading information by Mr Ryder or other members of the investigating team – an argument summarised by Mr Olayinka in the words “garbage in, garbage out” is not supported by the evidence. The material submitted to the Decision Making Committee was wholly unobjectionable.

There was no objective support for the proposition that any member of the FIFA was biased. The fact that Mr Ryder and his colleagues made enquires from appropriate sources in relation to Westraven and its activities in Ireland and elsewhere and placed the resulting information before Mr Olayinka for his observations in no sense constituted prejudgment as alleged. It was an entirely appropriate manner in which to conduct the investigation. There was no evidence to suggest that any member of the designated decision making team or FIFA was tainted by bias or possessed any extraneous factor which might have adversely affected the decision making process or the investigation on which it was based.

In the Notice of Appeal and in the argument before the Appeals Tribunal, Mr Olayinka complained forcefully about certain aspects of the investigative process.

He complained that the documentation relating to the application process was not immediately available to him. He asserted that the Financial Regulator never indicated with sufficient particularity the requirements for obtaining an authorisation. As Mr Olayinka put it, “there were no black and white clear cut procedures that the firm was meant to comply with”. In the same context, concern was expressed that the Financial Regulator did not point out the conditions in the process and procedures of Westraven with which he was dissatisfied.

The complaints made by Mr Olayinka included problems which arose in relation to the meetings between the members of FIFA and Westraven which it was planned to hold or were held at the premises of the company in Newbridge.

Unquestionably a discussion took place with regard to the possibility of a meeting in January 2006. Discussion did take place with regard to having a meeting on the 24th of February 2006. There is no doubt that Mr Ryder and his colleagues believed that this date had been agreed upon. Mr Olayinka’s recollection is to the contrary. It can be said that Mr Ryder encountered surprising problems in endeavouring to make contact with Mr Olayinka in relation to the meeting. Again, a difference of opinion emerged as to the external appearance of the company’s premises on the 24th of February 2006. Having regard to what he saw and the information he received from an adjoining tenant, Mr Ryder inferred that the premises had not been in use for some period of time. This inference was wholly rejected by Mr Olayinka. Whilst he was not in Ireland at the time, Mr Olayinka was satisfied that the premises were open for business on the 24th of February 2006 and that a member of the staff had temporarily absented himself / herself at the time of the visit. The misunderstanding about arrangements in relation to the visit might not have been significant in itself but Mr Ryder, having reported what he saw and heard to his superiors, a decision was taken to write to Westraven calling upon it to cease the money transmission business forthwith. This letter was written on the 27th of February 2006 (the February letter).

The February letter did have very serious consequences for Westraven. It forthwith ceased to carry on business and has not resumed it since. On the other hand, it must be recognised that in its terms, the letter was essentially restating the law as enacted by the Act of 2004, namely, a person could not carry on a money transmission business after the 1st of July 2005 without the statutory authorisation. What is true – and what concerned Mr Olayinka deeply – was that he was called upon to cease illegal trading where a comparable demand was not made of other companies in what appeared to be a similar position. Mr Olayinka presented the novel argument that he had obtained an “implied authorisation” by the Financial Regulator acquiescing in practice to Westraven carrying on the money transmission business after the 1st of July 2005 and up to the 27th of February 2006. Mr Olayinka’s belief that the Financial Regulator tolerated the apparent contravention of the law is supported by the facts that emerged at the hearing. A decision was made at a high level in the office of the Financial Regulator not to seek the closure or termination of a money transmission business which had been in operation before January 2005 after the lapse of the six month period of grace provided that an application was being examined unless the Financial Regulator was “concerned about some matter that arose”.

The relevant legislation makes no provision for an “implied authorisation”. An authorisation is either given or it is not given. At no time was an authorisation granted by the Financial Regulator to Westraven to carry on the business of money transmission. Indeed it is clear that at all material times the Regulator was processing the application of Westraven and had very serious concerns arising from the information he had obtained in relation to that application. It might have been possible for Mr Olayinka to make an argument based on the doctrine of legitimate expectations. However, that argument, even if successful, would only relate to the decision of the Financial Regulator made in February 2006 to alter, or appear to alter, his practice or policy in permitting a person to continue a money transmission business after the 2nd of July 2005 without obtaining the requisite authorisation. The doctrine could not be applied to raise a right or expectation in Westraven that they had or would receive the necessary permission which was at all times under consideration to the clear knowledge of the applicant.

THE JUDGMENT

The Appeals Tribunal could not accept Mr Olayinka’s contention that the Financial Regulator had an obligation to identify all of the shortcomings in the procedures adopted by Westraven and afforded an opportunity of rectifying them. A particular deficiency might be rectified to the satisfaction of both the Applicant and the Regulator but it is not the function of the Regulator to identify the detailed procedures which every business, or any particular business, must adopt to achieve the principles and objectives required by the legislation. If a particular defect could be rectified and the authorisation refused because of it, this might well be a ground for requiring the Financial Regulator to reconsider his decision. Where widespread departure from prudent procedures is the basis for believing that the Applicant for an authorisation does not possess or exercise appropriate control, that undoubtedly would be justification for refusing the application.

The Appeals Tribunal can understand that Mr Olayinka’s complaint that he did not receive adequate notice of the documents and information which would be required at the May meeting. It might have been more helpful if the Financial Regulator had indicated in advance the documents which he wished to inspect.

However, the reality remains – and both parties agree – that at the May meeting Westraven produced a list of 43 agents. This was a very considerable reduction on the number originally identified and certainly much less than the 300 – 500 to which Westraven aspired. Even then, of the 43, Mr Ryder questioned the adequacy of the documentation relating to 25 and whilst Mr Olayinka disputed that objection. He himself, in the letter dated the 6th of October 2006 accepted that only 14 agents had signed appropriate agreements and complied with the “Know Your Customer” (KYC) requirements.

The argument that errors of judgment had occurred in the past and would not be repeated in the future, provided no answer to the very serious complaints made by the Financial Regulator about false misleading statements in, or omissions from the original application.

We will turn then to the response of the Financial Regulator and the reasons provided for the rejection by him of the application for authorisation.

The Financial Regulator rejected the application for authorisation on the grounds provided by paragraphs (a), (b) and (c) of Section 31(2) of the Central Bank Act 1997 (as amended). The reasons for refusal under each of those paragraphs were set out in the schedule to that letter. A full statement of reasons and the findings of material fact and the evidence in support of it were set out in a statement furnished by the Financial Regulator at the request of Westraven pursuant Section 57N of the Central Bank Act 1942 (as amended).

The most helpful approach to the Appeal in the present case is to consider in the first instance the material which was omitted from, or inadequately dealt with, in the application for an authorisation. That material consists of the following:

  1. The omission in the application of any reference to the formation (and subsequent striking off) of Westraven Finance (UK) Ltd.
  2. The trade (including a money transmission business) carried on by Westraven in Germany.
  3. The suspension of the commercial relationship between Westraven and Travelex.

The failure to refer in the application to the existence of a company promoted in the UK by Mr and Mrs Olayinka was properly a matter for concern on the part of the Financial Regulator but of itself will hardly have justified refusal of the application for authorisation.

The failure to mention the trading history of Westraven itself in Germany was alarming and the explanation by Mr Olayinka of his failure to refer to that activity was unconvincing. It was not simply a case of the company having carried on and then discontinued a routine commercial business. The enquiries properly undertaken by the Financial Regulator unearthed facts which made disclosure of the activities of the company in Germany of immediate and direct relevance to the application for authorisation in this jurisdiction. First it must be recognised that the business was carried on by Westraven itself and not - as might have been thought – by some subsidiary or authorised agent. Secondly the business which had been carried on was the money transmission business. Thirdly, the carrying on of the money transmission business in Germany without authorisation in that jurisdiction was illegal and Westraven had no such authorisation. Fourthly, the illegal activities of Westraven resulted in the police in Germany searching the premises from which Westraven carried on business in Aachen. The Tribunal accepts the evidence of Mr Olayinka that he learnt of the search made of the company’s premises as a result of a phone call which he made to Westraven’s manager in Aachen, Mr Bamidele Emmanuel. Likewise the Tribunal accepts that Mr Bamidele Emmanuel attempted to contact Mr Olayinka in the weeks following the police raid but was unable to make contact with him. Furthermore the correspondence put in evidence at the hearing of the appeal shows that Westraven itself engaged in a variety of business transactions in Aachen, apart from the money transmission business.

The Tribunal is satisfied that the failure of the Westraven to disclose activities in which it engaged in Germany was misleading and the failure to provide information which did become available to Mr Olayinka arising from those activities subsequent to the application was a serious breach of his undertaking to the Financial Regulator.

The Appeals Tribunal is satisfied that the inclusion of the agreement with Travelex in the documents submitted by it in connection with its application for authorisation was intended to establish that the Applicant / Appellant had an ongoing commercial relationship with a long established and well regarded company engaged in the money transmission business. The production of that agreement without reference to the fact that the relationship was suspended four months before the application was misleading. That fact alone might have justified the Financial Regulator rejecting the application for authorisation but the position was much more serious.

The investigation by the Officers of the Financial Regulator ascertained that the agreement was suspended – though not finally terminated – because Westraven had underpaid Travelex a sum of €72,000. The management of Travelex so informed the Financial Regulator and Westraven accepted that this was so. Travelex went on to say that the underpayment was due to the fact that records had been falsified by Westraven. Whilst that allegation was strenuously denied by Mr Olayinka he did accept that there was the deficiency alleged by Travelex but explained that it was caused by the “default” of agents of Westraven.

Mr Olayinka illustrated the defaults of the agents involved with an example of an agent operating the transmission system for a sum of €8,000 and paying to Westraven only the sum of €1,000. Apparently the system operated by Westraven did not pick up this fraudulent abuse. It was Travelex that ascertained that the sum of nearly €80,000 was in arrears. Not only does this suggest lack of control of the company, as Mr Olayinka acknowledged it casts serious doubt upon the manner in which agents were recruited and trained.

The essence of the system designed to prevent money laundering or the transmission of funds to finance terrorism was that those engaged in the money transmission business should know their customers. This fundamental duty is more complex where agents are engaged. The principal must ensure that the agents are properly instructed, diligent and reliable. The fact that at least three agents retained by Westraven could and did operate the Westraven system to deprive it of very substantial funds was a financial blow to Westraven and a disastrous failure to maintain a secure system of reliable agents to operate the necessary protective system. This serious defect in the agency system was underscored by Mr Olayinka’s own statement on the 6th of October 2006 that there were at that stage only fourteen agents who had signed agreements and maintained KYC documentation to the satisfaction of Westraven. That figure of fourteen contrasts immediately with the forty-three agents whose names were furnished in a list provided to Mr Ryder on the 16th day of May, 2006 and the one hundred agents who were originally mentioned. The aspiration to recruit – and train or instruct – three hundred agents by the year 2006 can only be seen as wholly unrealistic in the light of the established or admitted facts.

If the facts which emerged during the course of the investigation in relation to Travelex and the operation of Westraven in Germany had been placed before the Financial Regulator in the original application the Appeals Tribunal has no doubt that the Regulator would properly have refused the application. The fact that this information was obtained largely as a result of diligent enquiries made by the Financial Regulator’s officers exacerbates the concerns which the objective facts properly raised.

The foregoing conclusions are sufficient to determine the issues which arise on this appeal. The Appeals Tribunal does not believe that it is necessary or would be appropriate to make any finding on fact or law in relation to the other issues or concerns raised by either party.

In the opinion of the Appeals Tribunal the application was properly rejected by the Financial Regulator and the Appeals Tribunal accordingly affirms his decision in that behalf.

Note.    The Appeals Tribunal ordered the Applicant to make a contribution of €20,000 in respect of the Respondent’s costs. The Appeals Tribunal directed that the Order was not to be enforced unless the Applicant instituted proceedings to review the decision whether by way of appeal or otherwise. No review proceedings have been instituted.
               

Last updated on 1 July 2008 - TK

 

 

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