REPORT
Proceeds of Crime (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 to this draft Law 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. Jersey was last assessed by the IMF in 2003. In the Report that followed that assessment the following was stated:
“The POCL should be amended to provide financial institutions with an affirmative obligation to report suspicious transactions rather than the act of reporting being used as a defense against the money laundering offense.”
5. It is apparent from the 2003 Report that the IMF did not consider that the existing POCL provisions went far enough to meet Recommendation 13 because the Law did not create a direct mandatory obligation on financial institutions to report a knowledge or suspicion, or reasonable grounds for a knowledge or suspicion, of money laundering. Instead under the current provisions the reporting of such a knowledge or suspicion is a defence to the offences set out under Articles 32 and 33 of the POCL.
6. Given that this point was commented on by the IMF in 2003, it is thought that Jersey would be likely to receive adverse comment from the IMF during next year’s assessment if this matter has not been addressed. The deficiency in the POCL is particularly highlighted by the fact that both the DTOL and TL include offences for failing to disclose a knowledge or suspicion of money laundering. Article 40 of the DTOL requires a person who knows or suspects that another person is 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.
7. The offence created at Article 34A of the draft Law applies to a person who, in the course of his or her trade, profession business or employment, comes to know or suspect someone is engaged in money laundering and who fails to disclose that knowledge or suspicion to a police officer. This offence is the equivalent offence to the offence in Article 40 of the DTOL and Article 20 of the TL.
8. The offence created at Article 34D applies to a person who comes into information in the course of carrying on a financial services business. If, based on that information, the person knows or suspects or has reasonable grounds for knowing for suspecting that another person is engaged in money laundering and fails to disclose that information to a police officer or nominated officer then they commit the offence. Article 34D 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. This offence is the equivalent to the offence in Article 23 of the TL. A new offence in the same terms is to be introduced into the DTOL.
Financial Information and Account Monitoring Orders
9. 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.”
10. 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.”
11. 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.
12. Under Article 33 of Schedule 7 of the Terrorism (Jersey) Law, 2002, 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.
13. Neither of these powers exist under the POCL or DTOL. It is considered that that this could receive adverse comment from the IMF, who may query why such powers are available in relation to terrorist offences but not offences committed under the other two Laws. The amendments are therefore sought to bring the POCL, DTOL 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
Enforcement of External Confiscation Orders
14. 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.
15. Currently the provision of assistance to another jurisdiction to enable the enforcement of an external confiscation order under the Proceeds of Crime (Jersey) Law, 1999 is conditional on that jurisdiction being listed, currently in the Proceeds of Crime (Designated Countries and Territories) (Jersey) Regulations 1999, 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 DTOL, 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”).
16. Under the draft Law, the enforcement in Jersey of external confiscation orders 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 POCL 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.
17. Draft Regulations replacing 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 DTOL, TL and CJICL.
18. 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.
Part 4 – Miscellaneous and closing
Asset sharing arrangement
19. Article 13 amends the term “asset sharing arrangement” in Article 24 of the POCL 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 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.
20. Article 13 also provides for the designation of the Criminal Offences Confiscation Fund as a special fund. This amendment is aimed at clarifying the funds status further to its omission from the list of special funds in the Public Finances (Transitional Provisions) (No.1) (Jersey) Regulations 2005.
Article 37 Amendments
21. Recommendations 4-12 of the FATF Recommendations provide for certain measures to be taken by financial services businesses to prevent and detect money laundering and terrorist financing. These measures cover customer due diligence, record-keeping and compliance.
22. In Jersey, measures to be taken by financial services businesses have been established by the Money Laundering (Jersey) Order 1999, which is issued under Article 37 of the POCL. At present Article 37 only provides that the Minister may prescribe procedures, under the Order, to be maintained by persons who carry on financial services business for the purposes of forestalling and preventing money laundering. This remit is no longer wide enough to address all of the measures that the FATF Recommendations require financial services businesses to take, in particular in relation to the detection of money laundering.
23. The amendment widens the scope of Article 37 by giving the Minister a general power to prescribe measures to be taken (and measures not to be taken) by financial services businesses in line with the FATF Recommendations through the vehicle of the Order.
24. Draft Article 37 also provides a basis for the Order to permit information to be disclosed by a financial services business to other businesses – where those businesses are part of the same group of companies, or part of a network of businesses that includes the financial services business. This amendment is in line with the European Union’s Third Money Laundering Directive.
Financial/Manpower Implications - for Treasury and Resources
Human Rights – for Treasury and Resources
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