CASE STUDIES
Operation Coldpath
$4.7M in suspicious flows flagged · 3 referrals made
Summary
A Luxembourg-based investment fund engaged Capital Path following an internal audit that identified anomalous outflows over an 18-month period. The fund suspected internal fraud or external manipulation of its settlement instructions. Given the cross-border nature of the flows and the involvement of Hong Kong-based counterparties, the fund's legal counsel recommended engaging Capital Path for its partner authority access in the relevant jurisdictions.
Investigation
Capital Path's compliance advisory unit conducted an initial AML/CFT framework review of the fund's internal controls, identifying three material weaknesses: inadequate beneficial ownership verification for counterparty relationships, absence of transaction monitoring thresholds for settlement instructions, and an insufficient segregation of duties in the payment authorization process. These findings were documented and provided to the fund within six weeks.
In parallel, the financial intelligence unit traced the anomalous outflows. Approximately €4.7M had been routed through a Luxembourg intermediary to two Hong Kong shell entities. Capital Path engaged the Luxembourg FIU (Financial Intelligence Unit Luxembourg) and the Hong Kong JFIU (Joint Financial Intelligence Unit) via MOU channels, requesting beneficial ownership disclosure on the shell entities.
Outcome
Beneficial ownership disclosure from Hong Kong identified three individuals with connections to the fund's former third-party administrator. Capital Path submitted a formal criminal referral to Luxembourg authorities supported by the full evidence package. Separately, Capital Path's compliance advisory team delivered a remediation roadmap to the fund covering all identified control weaknesses. The fund implemented the recommended changes within 90 days, subsequently passing a regulatory AML examination.