Stephen Baker. Barrister at Law. Senior Legal Adviser

Transcription

1 Stephen Baker Barrister at Law Senior Legal Adviser

2 Money Laundering Local Risks Internal Threats Reputational Damage How to Protect Your Business.

3 Major Local Risk Handling the proceeds of serious financial crime Nature of the Island s business means that there is almost invariably an international dimension The major local risk is the handling of the proceeds of serious crime committed abroad.

4 How is serious financial crime investigated? Investigated by the Attorney General Expert barristers Forensic accountants Police Investigation of Fraud (Jersey) Law 1991.

5 Local / Internal Risks Deliberate criminality A rogue employee Systemic failures / incompetence Not realising that you are handling the proceeds of crime when you should have done.

6 Deliberate Criminality A bad apple in the barrel A rogue employee Trusted colleague Respectable person Nobody can believe it.

7 Case studies Timothy John Nelson Late 30s Respectable Director Trusted colleague Nobody could believe it Manipulating company accounts for eight years Lied to colleagues Bankrupted company.

8 But it couldn t happen in a major financial institution Nick Leeson Barings Bank Trusted Successful Respected Manipulated bank records Bankrupted bank Nobody could believe it But it won t happen again Allied Irish Bank.

9 Christine Donnelly Trust member of staff Working in finance industry Respected Stole hundreds of thousands of pounds from employer Financing heroin habit.

10 Maria Culkin Employed as trust administrator in local trust company Trusted Honest Outside work environment: - living with drugs trafficker - pleads guilty to money laundering offences (not connected to her employment).

11 Risks of bad apple Employer is the victim of dishonesty or other criminal conduct Employer may be victim in one of two ways: (i) direct financial loser (ii) the employer s bank accounts are misused to launder the proceeds of crime.

12 Is that as bad as it can get? No! Worst case: because the employee is the controlling mind of the company, the employer is prosecuted.

13 Consequences of risk Damage to reputation Loss of customers Legal costs Regulatory action Risk of becoming the subject of the investigation Risk of prosecution.

14 Case Study Bank Cantrade Robert Young Academic Doctor of econometrics Respectable Dishonest.

15 Consequences to bank Criminal conviction because of behaviour of senior manager 3 million fine Costs Reputational damage Civil Liability.

16 Risk Systems failures / Incompetence Weak systems / incompetence leads to the laundering of the proceeds of serious crime.

17 Consequences Damage to reputation Loss of customers Legal costs Regulatory action Civil liability Risk of becoming the subject of the investigation Risk of prosecution Dragged into a vast time-consuming costly litigation.

18 Protection against internal Two limbs : threats Deliberate wrongdoing Systems failure / Incompetence

19 Deliberate Wrongdoing Controls Structure Segregation of duties Clear definition of roles and responsibilities Dual signatories A genuine control or a rubber stamp? No one employee should have too much power Proper supervision.

20 Case Study A Jersey financial institution employed a man. They had a copy of his curriculum vitae. It was an impressive document. He had a degree in Law from the University of Salford. He had many other qualifications. The CV had never been checked. When the Registrar of Salford University was contacted by those conducting a criminal investigation, it turned out that Salford did not offer a Law Degree. A simple check would have prevented this man being employed.

21 Systems Failures / i) Know the Law Incompetence ii) Fulfil, at the very least, the minimum requirements of the money laundering order and guidance notes. Ideally meet best practice.

22 Knowing the Law What are the proceeds of crime? Proceeds of Crime (Jersey) Law, 1999, Article 1 Proceeds of criminal conduct, in relation to any person who has benefited from criminal conduct, means that benefit;

23 Criminal conduct means conduct, whether occurring before or after Article 3 comes into force, that - (a)..., or (b) if it occurs or has occurred outside the Island, would have constituted such an offence if occurring in the Island;

24 It does not matter that the conduct may not have constituted a crime in the country where the conduct occurred What matters is whether the conduct would have constituted a crime in Jersey The relevant conduct is transposed to Jersey.

25 Fulfil the requirements of the Money Laundering Order Article 37 of the Proceeds of Crime (Jersey) Law 1999 makes it a crime to act in breach of the Money Laundering Order The sentence for a body corporate is an unlimited fine For an individual, the sentence is two years imprisonment.

26 Article 37 : (5) Where an offence under paragraph (4) by a body corporate is proved - (a) to have been committed with the consent or connivance of; or (b) to be attributable to any neglect on the part of, a director, manager, secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity he, as well as the body corporate, shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

27 The Risks The risks are high. Institutions are at risk of prosecution for breach of the Money Laundering Order The potential consequences for an individual are loss of liberty and loss of livelihood.

28 Protecting the Business Invest in time training staff in Money Laundering Procedures Monitor the criminal and civil litigation which takes place in Jersey. What can be learned? Monitor World Events Assess the risks Aim for best practice not minimum standards.

29 Case Study - Bank Cantrade A junior member of staff knew there was a fraud being committed. He told his senior managers. His warnings were ignored. Consider a similar situation relating to money laundering A junior member of staff tells a senior member I think these funds are the proceeds of crime. Can that warning be ignored? Look at the consequences. All staff must be trained in how to respond to such warnings.

30 Stephen Baker Barrister at Law Senior Legal Adviser