JERSEY CORPORATE CRIMINAL LIABILITY FOR FAILURE TO PREVENT MONEY LAUNDERING

On 28 January 2022, the Government of Jersey launched a consultation, which closes on 21 February 2022, regarding proposals to introduce

• A new corporate criminal offence for any financial services business (FSB) that fails to prevent money laundering and terrorist financing.

The new offence

1. Would be introduced by way of amendment to the Proceeds of Crime (Jersey) Law 1999 (POCL) and
2. Is driven by a desire to overcome difficulties with the identification doctrine.

Currently, the criminal act of money laundering

3. Is only be attributed to an FSB where the individual(s) committing the offence represent the directing mind and will of the FSB.
4. However, complex corporate structures make prosecution more difficult; and the practice of layering by criminals has become common.

The new failure-to-prevent offence means:

5. Once the offence of money laundering or financing terrorism is established, to the criminal standard (beyond reasonable doubt),
6. Then it is up to the corporate body to demonstrate to the civil standard (the balance of probabilities) that it took adequate or reasonable steps to prevent the substantive offence.

International driver

7. The Financial Action Task Force (FATF) Methodology requires jurisdictions to demonstrate that money laundering offences and activities are investigated, and
8. Offenders are prosecuted and subject to effective, proportionate, and dissuasive sanctions.

Jersey

9. The Government of Jersey considers that introducing new statutory measures will enhance the jurisdiction’s effectiveness of AML/CFT enforcement to meet the requirements of the FATF Methodology.
10. The consultation paper goes on to clarify that it is not just with regard to satisfying the FATF Methodology that a corporate criminal offence is proposed to be introduced –
11. the ultimate rationale for corporate criminal liability is much broader and based on the social implications of law enforcement.
12. Where corporate bodies commit crimes, it is essential that they are held to account and sanctioned (by fines), similar to natural persons.

How would the law work?

13. The proposed failure-to-prevent offence would be triggered by the substantive offences covered under the POCL and the Terrorism (Jersey) Law 2002 (Terrorism Law) as well as conduct outside Jersey which, if occurring in Jersey, would be an offence under these provisions;
14. whereas a contravention of the Money Laundering (Jersey) Order 2008 (MLO), however, would not trigger the new offence.

A defence?

15. Crucially, FSBs will be relieved to know that the proposed amendment would provide corporate bodies with a “reasonable steps” defence tailored to their business and risk requirements.
16. There will be subjectivity in what exactly constitutes “reasonable” steps or adequate prevention procedures,
17. Depending on the size and risk profile of the business in each case, and the proposed change is intended to be a further incentive for FSBs to ensure they adopt best practice to fight financial crime.

What do the lawyers think

18. We anticipate that there will be considerable overlap between
    • FSBs complying with the MLO and
    • Demonstrating adequate prevention measures are in place by way of defence to an alleged failure-to-prevent offence.
19. That is to say,
20. Where an FSB has robust systems in place to prevent such offences,
21. It could also have a ready-made defence, and
22. The proposed failure-to-prevent offence would also only apply to the sectors which are already regulated for AML purposes.
23. No additional requirements for other sectors would be introduced, so the Consultation briefing argues that
24. An increase in the effectiveness of enforcement can therefore be achieved without introducing any new requirements for the financial services sector.
25. Nonetheless, while there are requirements to prevent money laundering and terrorist financing already,
26. The introduction of a failure to prevent offence will focus the minds of FSBs in considering just how robust their policies and procedures are.
27. This is the latest in a number of proposed changes to the anti-money laundering legal and regulatory framework in Jersey.

Source

1. https://www.applebyglobal.com/publications/corporate-criminal-liability-for-failure-to-prevent-money-laundering/?sid=79f10a72-ce3c-4539-a737-4c6ecd6c500a