JERSEY FIU [JFIU] PUBLISH TERRORIST FINANCING [TF] SCENARIO FOR THE LEGAL SECTOR

The following scenario cases have been published in the JFIU suspicious Activity Reports - Q4 2023 Industry Feedback for the legal sector.

The JFIU scenario [Comsure has made some minor alterations] can be read below, or the JFIU web link is at the end of this posting.

Situation:

• An offshore regulated Financial Services Business provides administration services for a Jersey-registered fund.
• The fund owns an investment holding company, the sole lender to the UK-registered privately-owned property group, Client X, which holds multimillion-pound investments in properties in the UK. This multimillion-pound loan is secured against a real estate asset – a London property.
• Client X receives a non-binding offer to purchase this London property through a London-based independent (FCA-regulated) investment firm from a recently registered UK company, Company W.
• The offer would be sufficient to settle the outstanding capital and interest on the loan, which was reported to be slightly less than the asking price.
• The offer prompted a due diligence check by a UK Law firm acting on behalf of Client X, which revealed.
• Adverse media relating to the UBO of Company W, who was identified as Client P, a Middle Eastern national resident in a D2/Red list country, where he held business interests.
• The adverse media checks indicated that:-
• Client P is linked to a Middle East-based terrorist organisation proscribed by the UK, EU and USA.

SUSPICION FORMED

• A suspicion was formed that the London property may have been purchased with the proceeds of money laundering/ terrorist financing.

Indicators:

• UK Company registry checks via Companies House reveal that Client P’s name and date of birth were recorded differently from the facts, and a suspicion was formed that this was done intentionally.
• JFIU OBSERVATIONS - The accuracy of data on Companies House is known to be exploited by threat actors.
• Checks on the registered UK address for Company W revealed a generic residential street address associated with numerous unconnected company entities.
• Company W had only recently been incorporated and had no financial trading history.
• Client P’s UAE-based company had links to an associated company in the Middle East, whose open-source checks alleged that it owned an oil tanker that was subject to OFSI Sanctions violations.
• Multiple adverse media alleged that Client P was circumventing sanction measures and involved in providing terrorist financing to sanctioned terrorist organisations.

Suspicious Activity:

• The Jersey entity is directly linked to a fund that, through a loan, ultimately holds a significant London property.
• The loan company has received an offer from a newly formed UK company to buy and repay the property.
• The adverse media alleged that the London company's owner had links to Terrorist organisations, ostensibly to finance their activities. [the UK Law firm identified this through due diligence checks]
• Imagery research indicated that the UK company appeared to be registered at a residential address and had no trading history or anything to justify the purchase of a multimillion-pound property, suggesting it was a shell company.

CONSENT OR NOT?

• The Jersey-regulated institution sought consent to proceed with the sale because of the dual reporting to the UK FIU. However, this was not provided.
• It is noted that the UK has provided consent to transact under the DAML request sent by UK lawyers acting on behalf of the seller. However, that is a different regime from the Jersey consent regime.

Outcomes:

• The sale has not proceeded as consent to transact was not provided by JFIU.

OTHER FIU Actions:

• This SAR was dual-reported to the UK FIU.

• The FIU reviews all submissions and grades and prioritises them as appropriate.
• While all members of the JFIU have training in TF matters, the JFIU have several with more enhanced knowledge who maintain additional connections and a deeper understanding of potential TF typologies.
• A wide range of sources will be reviewed and checked to ascertain the facts of the submission and seek to expand our understanding.
• The JFIU engages both domestically and internationally with specialist counter-terrorism units and other FIUs to share our initial findings and seek further information from relevant stakeholders.

FIU Comment:

• TF cases may also include ML red flags, business behaviour, or unsound facts.
• The adverse media gave cause for concern about the legitimacy of the activity. This has identified a likely typology of using funds to invest or layer in a London property.
• The funds acquired to purchase the London property may have been derived from the proceeds of money laundering or terrorist financing, and if the London property were to be purchased by Client P, the income derived from that property may, in turn, be used criminality or for terrorist financing purposes.
• If the Fund were to receive the proceeds from the sale of the property to settle the loan, then there is a likelihood that the proceeds could taint the remaining fund. Consequently, these funds could be subject to freezing orders, affecting the underlying investor's investment in the fund.

Sourced from the FIU Q4 report here:

• https://jersey.police.uk/media/682689/FIU-SAR-Q4-Reporting-2023.pdf

READ MORE:- The Jersey FIU has published its Q4 2024 Suspicious Activity Statistics [SAR] Report.

The Jersey FIU have published our Q4 2024 Suspicious Activity Statistics Report (#SAR Quarterly #Report), which aims to provide submitters with insight, trends, feedback, and scenarios based on #SARs received by the #FIUJersey.

The report includes a breakdown of

1. Predicate #criminality,
2. The number of SARs by reporting sector,
3. Consent request and grounds for disclosure

Lawyers case study

1. Also included is a new #TF #typology based on the LEGAL SECTOR – this follows earlier reports that included TCSB and banking scenario case studies.

The Q4 results are as follows.

1. Overall, we received 449 SAR reports in Q4 of 2023, a 28% increase from the same period in 2022.
2. The #Banking sector remains the most significant reporting group, with 52.3% of all SARs submitted in Q4 2023.
3. This was followed by the #Trust and #CorporateService Provider (#TCSP) sector, with 26.5% of all submissions.

Access the latest report here:

• https://jersey.police.uk/media/682689/FIU-SAR-Q4-Reporting-2023.pdf

SOURCE

• https://linkscan.io/scan/ux/aHR0cHM6Ly93d3cubGlua2VkaW4uY29tL3Bvc3RzL2ZpdWplcnNleV9zdXNwaWNpb3VzLWFjdGl2aXR5LXJlcG9ydC1xNC0yMDIzLWluZHVzdHJ5LWFjdGl2aXR5LTcxNTkxNzg0MTEwNTQxNTc4MjUtS1FqeT91dG1fc291cmNlPXNoYXJlJnV0bV9tZWRpdW09bWVtYmVyX2lvcw==/1FA31C6C6C44D6062EB62A92DB2C7E75BDA5B566A56B0B15BCFD96476A79E041?c=1&i=1&docs=1