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Judgments with connection to financial crime

The following are summaries of recent Royal Court cases with some connection to financial crime.

Failing to act on significant cash payments: Abu Dhabi Commercial Bank

Abu Dhabi Commercial Bank PJSC ("the Bank") were fined £475,000 after a SAR revealed their failure to maintain adequate policies and procedures to prevent money laundering.

Between 2013 and 2019 over US$1.2 million was withdrawn from two bank accounts held by two individuals, with no scrutiny as to where the money was going.  The cash was handed over the counter of branches in the UAE, tens of thousands of dollars at a time.  At no stage did the Bank seek evidence as to the legitimacy of the withdrawals.  

The Bank is one of the largest in the Middle East with an income of approximately £2 billion. It does not offer retail banking in Jersey and at the time had fewer than ten employees based here. 

To place matters in context, cash is used much more frequently in the UAE than would be the case in Jersey. At the time there was no limit to the amount of cash that a Jersey customer could withdraw, although there were automated and manual monitoring methods. These failed to engage. When an employee queried a particularly large withdrawal there was an 'unsatisfactory explanation', but this did not lead to any further action and further transactions were allowed.

The Court repeated that there had to be appropriate policies in the light of the degree of risk of money laundering inherent in the business, and these had to be applied consistently. It said: "The only aggravating factor was the fact that the bank's failings took place notwithstanding the extensive guidance on anti-money laundering and counter-terrorism financing legislation provided by the Jersey Financial Services Commissioner. It should have been apparent to any regulated entity in Jersey the importance attached to appropriate policies and procedures to counter money laundering."

AG v Abu Dhabi Commercial Bank PJSC Jersey Branch 14 Apr 2020 on Jersey Law website

Failing to heed red flags LGL Trustees

LGL Trustees Limited (LGL) were fined £550,000 for failing to note the warning signs that an investment scheme may have been a fraud designed to skim funds from Angola's public treasury.

In 2010 LGL was approached by a Jersey law firm to establish and administer a limited partnership to invest up to US$1.6 billion of Angolan state funds in real estate outside Angola.  The limited partnership was managed by a Swiss-based investment business that was 95% owned by a Swiss/Angolan national with strong Angolan political connections. In 2008 he had set up Angola's first private investment bank with the president's son. LGL rated the business as very high risk.  

LGL did gather material as part of their due diligence.  There was no specific public material on the US$1.6 billion real estate investment, but there was reference to a report saying that Angola had asked Quantum Global to set up a sovereign wealth fund with western financiers. It noted that two of the president's children were said to be connected to Quantum Global. LGL had also downloaded a 2010 report from the Financial Action Task Force ("FATF"), noting that as at February 2010 Angola had not committed to the Anti Money-Laundering International standards, and posed a threat to the international financial system  (a law criminalising money laundering was enacted in May 2010). 

LGL were to provide administrative services, including the provision of a registered office and, where applicable, company secretary and directors, save for the board of the General Partner which was provided by Quantum Global. 

While the failings were not systemic, they were ongoing over a period of years, during which time LGL earned £900,000 in fees, and a profit of over £300,000. In the words of the compliance officer, the directors seem determined to continue with the business. When concern was raised over the 'colossal' management fees being earned by Quantum Global, LGL referred to the possibility of corrupt payments as "leakage", which the court said came close to 'an acceptance as to what might occur with these very substantial fees after they were paid'. 

AG v LGL Trustees Limited 26-Feb-2021 on Jersey Law website

Forfeiture and instrumentalities of crime: Ellis

This was a civil forfeiture case initially brought in 2018, and concerned an account opened in Jersey in the 1980s, into which initially legitimate cash was paid, but with the intention of avoiding UK tax.

The defence was, inter alia, that the defendant was under the impression that this was legal, as that is how the product was marketed. The Court found, after a contested hearing with the Respondent and his advocate attending, that the account containing £33,000 was tainted property.  

In a subsequent judgment (AG v Ellis [2019] JRC 219) the Royal Court held that it would be contrary to Article 1 Protocol 1 of the ECHR to forfeit the whole account rather than just the proportion which represented the evaded tax.  It also held that the burden lay on the Attorney General to satisfy the Court that what he was seeking by way of forfeiture was proportionate. 

The Court of Appeal (AG v Ellis [2020] JRC 098) disagreed and held that the balance of the account represented tainted property, because that account was an instrumentality of crime - it was opened for the purpose of committing tax evasion and was used for that purpose. The position in Jersey could be distinguished from England (Ahmed v HMRC [2013] EWHC 2241 (Admin)), and while the Court of Appeal stated that each case would turn on its own facts, in this matter the whole sum was forfeit.

AG v Ellis 24-Nov-2020 on Jersey Law website

Compromise agreement: Allied Trust

An application was made to the Court concerning bank accounts holding US$17 million which, the Attorney General asserted, were tainted property. As such forfeiture was sought under the Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018.

The settlor of the trust argued that the monies were not tainted, and should be distributed to the charitable beneficiaries of the trust, initially being the Swiss Red Cross and UNICEF. Later the Durrell Wildlife Conservation Trust was added as a beneficiary.

The Court said that in such cases, counsel would almost certainly be better placed to make an assessment of litigation risk than the Court, and assessment of litigation risk is clearly a material part of the negotiations which lead to a compromise.  

"Here, if the Attorney failed in his application, the Criminal Offences Confiscation Fund would receive no additional monies and there would be the nagging concern that criminal monies had not been forfeited.  Similarly, as far as Advocate Nicholls' client is concerned, the assessment of litigation risk there would be that the charities, which he says were always intended to benefit from this Trust, would not in fact benefit at all because if the proceedings were lost, then the whole of the monies in the bank accounts would accrue to the Criminal Offences Confiscation Fund.  An agreement which compromises the claims is in those circumstances a perfectly natural and proper step to take.  It is equally clearly not contrary to the public interest or to public policy not only because the statute provides for a mechanism by which such agreements can be put before the Court for approval, but also because an agreement of the kind put before us is consistent with the purpose of the legislation." 

The Court remarked that as a result of this compromise, there was no admission that the funds in question were tainted property, and added that there was 'a pleasing irony' some of the monies, derived from the sale of a safari club, would be applied to the benefit of animals through the work of Durrell.

AG v Allied Trust Company Limited and B 30-Jan-2020 on Jersey Law website

Sentencing guidelines for money laundering: Pearce 2021

While this case predominately involved the laundering of domestic drug proceeds, it does offer guidance on the sentencing policies of the Court.

The case of AG v Goodwin [2016] JRC 165 was relied on, which summarises the principles to be considered when sentencing money laundering offences:

  • There is not necessarily a direct relationship between the sentence for the laundering offence and predicate offence, but where that offence can be identified, some regard will be had to the appropriate sentence for that offence.
  • The criminality in laundering is the assistance, support and encouragement it provides to criminal conduct.
  • The extent of the launderer's knowledge of the predicate offence is relevant, although a lack of knowledge is not a mitigating.
  • The amount of money laundered is relevant.
  • No distinction is to be drawn between the laundering of one's own proceeds of crime and the proceeds of crime committed by third parties.
  • The duration, sophistication and scale of money laundering are all relevant considerations.
  • While this offence was not directly connected to the finance industry, the interest of Jersey as a finance centre justifies a deterrent element.

Relevant case law has moved on, and both AG v Michel  [2007] JRC 120 and AG v Bojwani [2010] JRC 116 were no longer considered relevant. Pearce, having conducted his own defence, was sentenced to 7 and half years' imprisonment.

AG v Pearce 4-Aug-2021 on Jersey Law website

Laundering cash in St Helier: Umurzokov and others 2022

This was an unusual case where there were two visits to the Island by representatives of an organised crime group. The aim was to launder Jersey banknotes either by exchanging them for other currencies, or by purchasing high value goods. The initial visit by one individual successfully converted £7,000 into US dollars as well as paying £2,000 into a bank account.

The second trip involved three people attempting to launder £53,000. They managing to make 13 conversions by purchasing consumer devices, making exchanges and deposits at counters or automatic machines, effectively laundering £20,000. However they were unsuccessful at the Post Office and a bank, as well as being unsuccessful in purchasing other high value items, and were arrested while trying to leave the Island. They received sentences of three or four years and their deportation was ordered.

AG v Umurzokov and Ors 24-Apr-2022 on Jersey Law website

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