Guernsey case shows there are no proceeds of crime – lessons on consent

In BD Limited v Investec Bank (Channel Island) Limited [2022] GRC103,

• A bank account holder [BD LIMITED] brought a private law action against Investec Bank (Channel Island) Limited [the bank] to establish that their monies [property] were not the proceeds of criminal conduct, allowing the bank to deal with the property with the protection of a court order.
• Read the judgement - https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=84237

IN THE ABOVE JUDGEMENT, THE BAILIFF FOUND

• Investec Bank (Channel Island) Limited [Investec] should comply with the customer's instructions to transfer the funds and close the account.

LESSONS ON CONSENT

• This case is about the FIS refusing consent and, without this protection, Investec [the Defendant] did not comply with the transfer instructions.

BACKGROUND ON CONSENT

• Obtaining Guernsey's Financial Intelligence Service (FIS)'s consent to the proposed act provides a statutory defence to the act in question.
• If the FIS does not provide consent, the business cannot deal with the assets without the risk of committing a criminal offence.

WHAT HAPPENED

• BD LIMITED [The Plaintiff] held a bank account with the Defendant, and the monies were contained in three sub-accounts.
  • The ultimate beneficial owner [UBO] of the Plaintiff, Mr Stroll, was connected with an entity convicted of criminal offences relating to
    • services provided to an online gambling business and
    • deceptive telemarketing and direct mail practices.
  • The gambling business remunerated Mr Stroll as a consultant, and funds paid into the accounts were said to be from that source.
• The Defendant had given the Plaintiff notice that its accounts would be closed because it no longer wanted customers involved in the online gambling industry.
• The Defendant then suspected that the funds paid into the accounts were the proceeds of crime, and its MLRO filed a Suspicious Activity Report (SAR) with the FIS.
• After the Plaintiff had difficulty finding alternative banking arrangements, the Defendant obtained FIS consent to re-activate the accounts (which had already been deactivated in anticipation of closure), maintain them, and take its charges/fees.
• When the Plaintiff found an alternative bank, the Defendant sought FIS consent to carry out the Plaintiff's instructions to transfer the monies to the new bank.
• The FIS refused consent and without this protection, the Defendant did not comply with the transfer instructions.

PROCEEDS OF CRIME YES OR NO

• The Plaintiff brought proceedings against the Defendant to establish that the monies in the account were not the proceeds of crime.
• The test applied was set out in Liang v RBC Trustees (Guernsey) Limited2018 GLR 189,   
  • https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=63450

NO PROCEEDS OF CRIME

• The Bailiff considered the evidence as to the provenance of the monies in the accounts and was satisfied, on the balance of probabilities, that none of the amounts standing in the accounts were the proceeds of criminal conduct.
• Accordingly, the Bailiff granted the declarations sought by the Plaintiffs and ordered the Defendant to comply with the Plaintiff's instructions to transfer the monies to the new bank within 14 days.

SOURCES

• https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=84237
• https://www.lexology.com/library/detail.aspx?g=f27beb4a-1125-4339-bef8-d841f5b3bf32
• https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=63450