GUERNSEY dealing with 'no consent' to unfreeze an account.

L AND M AND N AND MRS B V CREDIT SUISSE AG, (GUERNSEY BRANCH) [2023] GRC 026

1. This is a case concerning the filing of a suspicious activity report (SAR), tipping off, FIU obligations to issue consent to process reported transactions and evidence adduced by a customer to prove their funds/assets did not originate from the proceeds of crime.

THE CASE INVOLVES

1. The widow and children of a wealthy man who headed a global corporation (Company X) and died in 2015.
2. Company X was multi-national, with some subsidiaries located in Country Z.
3. The bank froze £90m family members had inherited.
4. The bank claimed the transactions were blocked because of “legal and regulatory requirements” (i.e., we’ve filed a SAR and don't have consent from the FIU).

THE SAR

1. The SAR was made after the bank found information about

• A civil action started by Country Z’s Prosecutor,
• Concerning alleged corruption by some of Company X’s subsidiaries.

1. It involved payments made to receive insider information about government contract tenders.
2. The Prosecutor’s office had later made a request for assistance to obtain information from the bank for information about Company X, which gave the bank some basis for confirming its original SAR filing.
3. However, since filing the SAR, the Prosecutor’s request for a $200m freezing order related to Company X was rejected by Country Z’s courts, who reduced it to $5m, well below the £90M that had been frozen in Guernsey.
4. No legal action was ever taken against the deceased or any of his family members.

HER HONOUR HAZEL MARSHALL, SETS OUT

1. How she sees the respective obligations between a financial institution when relying on adverse media and other sources to make a SAR,
2. Whether the SAR trigger information warrants freezing of ALL the customer’s funds in an account,
3. Whether there should be evidence to show a clear and explainable nexus shown between the alleged illicit conduct and the proceeds frozen and
4. Ultimately who (i.e. the financial institution or the customer) who should bear this burden.

ALSO, AN INTERESTING IS THE POST-SCRIPT starting at page 29 (para 137).

1. The Court highlights to challenges faced by plaintiffs in such cases, the cost and evidence needed to be borne or adduced by them to try and get access to their funds and some criticism of circumstances where innocent customers are penalised by financial institutions “playing it safe”.
2. A final comment from Her Honour is that Guernsey should revisit its indefinite freezing regime and impose a set time period by which authorities must decide whether to act, before a transaction can then be processed.

Source

• In L and M and N and Mrs B v Credit Suisse AG, (Guernsey Branch) [2023] GRC026, https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=84507