Vesttoo: KYC was conducted on all parties internally, as well as by external orgs

In a new statement, a spokesperson from under-fire insurtech Vesttoo has said that know your customer (KYC) was conducted on all parties internally, as well as by external organisations that were involved in the collateralized reinsurance deals it facilitated.

As we reported last week, it’s increasingly clear that any letter of credit (LOC) collateral fraud that occurred was particularly sophisticated, as numerous parties had not spotted any issues with the LOC collateral in question.

The insurance and reinsurance industry has checks and balances in place to validate collateral and counterparty security, and we understand, in at least some of the cases where LOC validity is now in question, security checks had been undertaken by more parties than just Vesttoo.

Vesttoo’s statement today reads that the “rigorous external investigation into the circumstances surrounding the suspected fraud of Letters of Credit (LOCs) used as collateral in its transactions,” continues.

Saying that, “The company is fully cooperating with all parties investigating the matter.”

Before adding that, “The company can confirm that standard KYC (“Know Your Customer”) was conducted on all parties internally as well as by external organizations.”

KYC and customer identification is seen as a critical financial market process for fighting fraud, and a mandatory process for participation in most marketplaces.

The statement continues, “Vesttoo is committed to working with alternative investors and brokers to ascertain alternative collateral for our clients. We are in active discussions with potential investors for this purpose.”

The spokesperson then explains that, while there have been significant staff losses at Vesttoo, the company “retains a very experienced and committed core team of more than 50 people who are focused on working with the markets to resolve these issues and is actively corresponding with the various regulatory bodies worldwide regarding the situation, as well as harnessing our technological suite and platform to find potential solutions.”

Finally the statement says, “Vesttoo and its board of directors confirm once again that the company will meet all of its commitments to suppliers and consultants.”

As we reported today, just prior to this statement being released, we’d learned that carriers are receiving requests for replacement capacity to support billions in risk that is linked to deals involving Vesttoo facilitated reinsurance.

The market is still lacking clarity into how and where processes failed to enable this fraud to occur.

Vesttoo had itself previously stated that, “At a minimum, it appears that Vesttoo’s procedures were circumvented.”

If those procedures included its KYC processes, while other parties had also sought to validate counterparty collateral, it continues to suggest a sophisticated fraud has occurred, indicating a failure, or circumventing, of KYC and collateral security controls.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.