ASK MAT – What is the one MLRO Case that has become a Masterclass in MLRO Risk Management?

ASK MAT – What is the one MLRO Case that has become a Masterclass in MLRO Risk Management?

MAY SYS:-

• One of the worst cases of MLRO risk crystallising I have seen was the failed prosecution of Michael Jardine in Jersey.
• I sat in the court for the day trial, and it makes for a fascinating case study and is instrumental in all MLRO-AML training.

I can summarise as follows:

Case Summary: The Failed Prosecution of Michelle Jardine (STM Fiduciaire)

Background:

• Michelle Jardine was the Money Laundering Reporting Officer (MLRO) and Money Laundering Compliance Officer (MLCO) at STM Fiduciaire (STM) between May 2010 and March 2012.
• The case centred around a 2011 transaction involving a Politically Exposed Person (PEP) from a high-risk jurisdiction, linked to the St Kitts and Nevis citizenship-by-investment programme.
• Funds were received from a Belize company via a Cypriot trust company, with no clear link to the applicant, raising red flags.

Legal Charges:

• Jardine and STM were charged under Articles 34A and 34D of the Proceeds of Crime (Jersey) Law 1999 (POCJL) for:
• Failing to disclose knowledge or suspicion of money laundering.
• Not filing a Suspicious Activity Report (SAR) to the Jersey Financial Crimes Unit (JFCU).

Defence & Outcome:

• The defence argued that a risk-based approach was used, as recommended by the JFSC.
• STM returned the funds and declined the business, concluding there was no money laundering, only unresolved questions about the source of funds.
• The Royal Court acquitted both Jardine and STM, rejecting the prosecution’s claim that PEP status alone triggered a legal duty to report.
• Despite the acquittal, Jardine was banned indefinitely from working in regulated financial services in Jersey without prior JFSC approval

Key Lessons for MLROs and Compliance Officers:

1. Suspicion Thresholds Are Ambiguous:
• The case highlighted how low the threshold for suspicion can be interpreted, especially when dealing with PEPs and complex fund flows.
2. Documentation Is Critical:
• MLROs must document their reasoning and decisions thoroughly. This can be vital in defending against both criminal and regulatory scrutiny.
3. Regulatory vs. Criminal Standards:
• Even if criminal charges fail, regulatory sanctions (like employment bans) can still be imposed, often with lower standards of proof.
4. Risk-Based Approach Validated:
• The court’s acceptance of a risk-based assessment offers some reassurance, but only if it is well-executed and evidenced.
5. Regulatory Vigilance Remains High:
• Jersey’s authorities are committed to enforcement, and future prosecutions may be more aggressive, especially under newer financial penalty regimes.

References

• Comsure SARS and failing to report - where Jersey leads, others should follow. https://www.comsuregroup.com/news/sars-and-failing-to-report-where-jersey-leads-others-follow/
• Lessons from the prosecution of an MLRO - Carey Olsen https://www.careyolsen.com/sites/default/files/CO_GSY_JSY_REG_Lessons-from-the-prosecution-of-an-MLRO_11-15.pdf
• Collas Crill wins first prosecution of its kind in Jersey https://www.collascrill.com/articles/collas-crill-wins-first-prosecution-of-its-kind-in-jersey/