Guernsey trial to determine whether funds help in three bank accounts were proceeds of crime [freeze or unfreeze].

The Royal Court of Guernsey held, on 29 December 2022, that a Guernsey bank that had filed a Suspicious Activity Report (SAR) with Guernsey’s Financial Intelligence Service (FIS) in respect of a customer should comply with the customer’s instruction to transfer the funds away and close the account.

In BD Ltd v Investec Bank (Channel Island) Ltd [2022] GRC103, the plaintiff BD Ltd held a bank account with the defendant bank and the monies were contained in three sub-accounts. The ultimate beneficial owner of BD Ltd was Jack Stroll, a Canadian citizen believed to be resident in Antigua although no address had been provided.

• https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=84237

Stroll was connected to an online gaming business called Golden Palace (GP) and another entity known as ‘National Clearing House’.

Stroll and National Clearing House had been convicted of criminal offences in Canada in connection with services provided to GP and deceptive telemarketing and direct mail practices.

Stroll was remunerated by GP, as a consultant, via a subsidiary company or companies, and the funds paid into the account were understood to be from GP. Funds had also been received into the account from entities that were not Stroll’s employer.

In September 2013, Investec had requested that BD Ltd and Stroll make alternative banking arrangements because it no longer wanted customers involved in the online gambling industry, but BD Ltd had been unable to do so.

BD Ltd’s directors resigned in 2014 and were replaced by James Turian, who failed to provide identification and verification documentation when requested.

In February 2015, a money laundering reporting officer (MRLO) at Investec filed a SAR to the FIS.

As a result, Investec obtained FIS consent to re-activate the accounts (which had been deactivated in anticipation of closure) and to maintain them and take fees for doing so.

When BD Ltd finally found an alternative bank in 2018, Investec sought FIS consent to carry out BD Ltd’s instructions to transfer the monies to the new bank. The FIS refused consent, and, without this protection, Investec declined to comply with the transfer instructions because it risked committing a criminal offence.

To break the impasse, in 20019 BD Ltd brought proceedings against the bank in the Royal Court seeking to establish that the monies in the account were not the proceeds of crime. At that time, the balances held in the three sub-accounts were circa £1.3 million, USD10 million and €293,000 respectively.

In the Royal Court, Bailiff Richard McMahon considered the evidence as to the provenance of the monies in the accounts and was satisfied that, on the balance of probabilities, none of the amounts standing in the accounts were the proceeds of criminal conduct. He therefore granted the declarations sought and ordered the bank to comply with BD Ltd’s instructions to transfer the monies to the new bank within 14 days.

The Court also ordered BD Ltd to pay Investec’s costs in respect of the provenance issue on the indemnity basis, which was in accordance with the terms of an agreement recorded in the consent order.