Vesttoo: Updated statement says appears “procedures were circumvented”
Insurtech Vesttoo has issued an updated statement related to the allegations that some of the letter of credit (LOC) collateral used to underpin its transactions was forged or fraudulent.
The validity of LOCs related to Vesttoo transactions has kicked off investigations industry-wide, as the insurance and reinsurance market try to identify where exposure to any fraudulent collateral may sit.
Vesttoo has now put out an updated statement, in which it says, “Vesttoo is taking this matter very seriously. While there is still much that is unknown at this stage, the company is doing all it can to determine how and where the fraudulent LOCs originated.
“At a minimum, it appears that Vesttoo’s procedures were circumvented.”
A board instigated audit is said to have been underway at Vesttoo since the issues originally surfaced.
While one incident, where a cedent tried to cash in a letter of credit kicked off this investigation, as we reported before, the ongoing audit is said to have found that multiple letters of credit (LOCs) are involved, all of which were issued by the same bank.
That audit remains in progress with no findings yet available, we understand.
Vesttoo continued in its updated statement, “The company is conducting a rigorous internal and external analysis of the events leading up to the first report of a fraudulent LOC. That process includes the engagement of an experienced investigations team. The Company will use the results of that analysis to take appropriate measures.
“In the meantime, Vesttoo is in the process of communicating with impacted parties – including investors, banks and cedents – and actively working with those who have been affected on potential solutions. The company is committed to understanding what happened.”
The latest statement does not give the market much more to go on, but the admission that at a minimum the insurtech’s own procedures were circumvented highlights that the focus is on understanding how parties could have got forged or fraudulent LOCs through the checks and balances that were in place.
It seems that until the audit findings are released, or leaked as has been seen with other information related to this story, we may not learn where any fault really lies, which parties may have been involved and where the evident shortcomings in process and controls have actually occurred.
Also read:
July 25th – AM Best to review fronting collateral in light of Vesttoo news.
July 25th – Fronting company Obsidian says Vesttoo exposure “de minimus”.
July 24th – Clear Blue: No material rating impact from Vesttoo issue. Reinsurance may be required.
July 21st – Vesttoo: Multiple LOCs from one bank in focus. Failure of security controls or KYC?
July 20th – MS Transverse: Any exposure to Vesttoo LOC collateral issues “immaterial”.
July 20th – Vesttoo: Collateral damage.
July 19th – Vesttoo: New report claims significant amount of forged LOCs. The question is how?
July 18th – Vesttoo faces fraudulent collateral claim. Confirms investigation, exit of some leaders.
