REPORT
Drug Trafficking Offences (Amendment) ( Jersey ) Law, 200-
Introduction
1. In 2008 the Island’s framework to counter money laundering and terrorist financing is to be the subject of a review by the International Monetary Fund. Jersey will be assessed against the international standards set by the Financial Action Task Force on Money Laundering (“FATF”). The amendments this draft Law proposes have been formulated to achieve a number of the criteria set out in the 40 Recommendations and 9 Special Recommendations of the FATF, against which Jersey will be assessed, and also to address inconsistencies in the current operation of the Proceeds of Crime (Jersey) Law, 1999, (“POCL”) the Drug Trafficking Offences (Jersey) Law, 1988 (“DTOL”) and the Terrorism (Jersey) Law, 2002 (“TL”).
Part 2
Failing to disclose a knowledge or suspicion of money laundering
2. Recommendation 13 of the FATF provides that,
“If a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, it should be required, directly by law or regulation, to report promptly its suspicions to the financial intelligence unit (FIU).”
3. The FATF Methodology for Assessing Compliance with the 40 Recommendations and 9 Special Recommendations, which is designed for use by assessors when preparing their reports and expands on the text of the Recommendations, states the following in reference to Recommendation 13:
“13.1* A financial institution should be required by law or regulation to report to the FIU (a suspicious transaction report – STR) when it suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity. At a minimum, the obligation to make a STR should apply to funds that are the proceeds of all offences that are required to be included as predicate offences under Recommendation 1. This requirement should be a direct mandatory obligation, and any indirect or implicit obligation to report suspicious transactions, whether by reason of possible prosecution for a ML offence or otherwise (so called “indirect reporting”), is not acceptable.”
4. Article 40 of the DTOL already requires a person who knows or suspects that another person is engaged in drug money laundering to report to a police officer that knowledge or suspicion, if based on information that comes to the person’s attention in the course of his or her trade, profession, business or employment. A similar provision applicable to a person who comes across information in the course of their trade, profession, business or employment (but not if it comes to him or her in the course of the business of a financial institution) can be found at Article 20 of the TL. Article 23 of the TL sets out a difference offence, in similar terms to the offence being created here under Article 34D, which applies to a person working in a financial institution.
5. Article 3 of the draft Law amends the current offence in Article 40 so that it will no longer apply to a person who receives information in the course of the business of a financial institution. A new offence is created at Article 40 to apply to employees and employers of a financial institution. Article 40 essentially introduces a negligence test in respect of those working in the regulated industry so that the failure to disclose offence is committed where a person has reasonable grounds for knowing or suspecting that another person is engaged in money laundering, even if they did not actually know or suspect that was the case. This reflects the fact that persons who carry out activities in the regulated sector are expected to exercise a higher level of diligence in handling transactions, as opposed to those employed in other businesses. These changes reflect the current position in the TL and amendments being proposed to the POCL.
Restrictions on Disclosure
6. The amendments in the new Articles 40B-D inserted by the draft Law will have the effect of introducing into the principal Law provisions similar to those in Article 29-31 of the Proceeds of Crime (Jersey) Law, 2002 (“POCL”). The same provisions are being introduced into the TL. The new provisions provide an express statutory basis for the disclosure of information by a police officer for particular purposes. Whilst information can be disclosed by the police under established common law principles on police disclosure, it was thought desirable to include express disclosure provisions in both the DTOL and TL, so as to ensure that the position on police disclosure under these Laws is both clear and identifiable, not only to the IMF assessors but also to members of the public for human rights purposes.
Financial Information and Account Monitoring Orders
7. Recommendation 28 of the FATF Recommendations is as follows,
“Recommendation 28
When conducting investigations of money laundering and underlying predicate offences, competent authorities should be able to obtain documents and information for use in those investigations, and in prosecutions and related actions. This should include powers to use compulsory measures for the production of records held by financial institutions and other persons, for the search of persons and premises, and for the seizure and obtaining of evidence.”
8. The FATF Methodology states the following:
“28.1 Competent authorities responsible for conducting investigations of ML, FT and other underlying predicate offences should have the powers to be able to:
a) compel production of,
b) search persons or premises for, and
c) seize and obtain
transaction records, identification data obtained through the CDD process, account files and business correspondence, and other records, documents or information, held or maintained by financial institutions and other businesses or persons. Such powers should be exercised through lawful process (for example, subpoenas, summonses, search and seizure warrants, or court orders) and be available for use in investigations and prosecutions of ML, FT, and other underlying predicate offences, or in related actions e.g. actions to freeze and confiscate the proceeds of crime.”
9. Article 32 and Schedule 6 of the TL provide that the Bailiff may, on an application made to him or her by an officer of the Force of at least the rank of chief inspector, order a financial institution to which the order applies to provide customer information to an officer of the force named in the order for the purposes of a terrorist investigation.
10. Under Article 33 and Schedule 7 of the TL, the Bailiff may, on an application made to him or her by an officer of the Force of at least the rank of chief inspector, make an account monitoring order for the purposes of a terrorist investigation.
11. Neither of these powers exist under the DTOL or POCL. It is considered that that this could receive adverse comment from the IMF, who may query why such powers are not available in relation to money laundering and drug money laundering. The amendments are therefore sought to bring the DTOL, POCL and TL in line so that account monitoring orders and customer information orders can be obtained under all three pieces of legislation. This amendment also reflects the position under the 2002 UK Proceeds of Crime Act which allows for customer information and account monitoring orders to be obtained in relation to money laundering investigations.
Part 3 – Miscellaneous and closing
Asset sharing arrangement
12. Article 9 amends the term “assets-sharing agreement” in Article 24 of the Law and replaces it with the term “asset sharing agreement”. This amendment is considered necessary to provide for the consistent use of same terms across the DTOL and POCL. The DTOL refers to “assets-sharing agreement” at present, whilst the POCL refers to “asset sharing arrangement”. These two terms carry different definitions in each of those Laws. Amendments to provide for asset sharing under the TL have been taken forward in preparation for the IMF assessment. As those amendments were already being made, it was thought appropriate for a comprehensive and consistent meaning to be applied across the three Laws.
Enforcement of External Confiscation Orders
13. Recommendation 38 of the Financial Action Task requires countries to have appropriate laws and procedures in place to provide an effective and timely response to mutual legal assistance.
14. Currently the provision of assistance to another jurisdiction to enable the enforcement of an external confiscation order under the DTOL is dependant on that jurisdiction being listed, currently in the Drug Trafficking Offences (Designated Countries and Territories) (Jersey) Regulations 1997, as a designated country or territory to whom assistance can be given. The same is true in relation to the enforcement of an external confiscation order under the POCL, the enforcement of an external restraint or forfeiture order under the TL and the enforcement of an overseas forfeiture order under the Criminal Justice (International Co-operation) (Jersey) Law, 2001 (“CJICL”).
15. Under the amendments made by the draft Law, the enforcement in Jersey of external confiscation orders under the DTOL will no longer be conditional on countries or territories being designated. The amendments enable external confiscation orders from any jurisdiction to be capable of being registered by the Royal Court. Article 39(1) of the DTOL provides that the Royal Court may register an external confiscation order if -
(a) the Court is satisfied that at the time of registration the order is in force and is not subject to appeal;
(b) it is satisfied, where the person against whom the order is made did not appear in the proceedings, that the person received notice of the proceedings in sufficient time to enable the person to defend them; and
(c) it is of the opinion that enforcing the order in Jersey would not be contrary to the interests of justice.
16. Draft Regulations to replace those which already exist will soon be debated. The provisions contained in the Regulations will remain substantively the same. It is intended that the only changes to the Regulations which will be pursued are those necessary in order to remove any references currently made to designated countries or territories. Similar amendments are being made to the POCL, TL and CJICL.
17. Whilst the notion of providing assistance to only designated countries or territories is thought unlikely to receive adverse comment by the International Monetary Fund, the list of designated countries has not been kept up to date in recent years and it is thought highly likely that Jersey will be criticised for not giving “effective” mutual legal assistance because of this. Whilst compliance with FATF Recommendation 38 in this regard could possibly be achieved by updating the list of designated countries or territories, it is considered that the better solution would be to abandon the list of countries and offer assistance to jurisdictions on a case by case basis. Indeed this is the approach that has been adopted in regards to the UK legislation, on which the relevant Jersey legislation was originally based.
Financial/Manpower Implications - for Treasury and Resources
Human Rights - for Treasury and Resources
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