Jersey Briefing -  some thoughts about SARS and tipping off exceptions in Jersey

Intro thoughts

1. Unless otherwise permitted (x10 permissions discussed below), the Proceeds of Crime Law [Article 35(4)] makes it an offence (punishable by imprisonment of up to 5 years and/or a fine) to disclose to another person:-
   • That an internal or external SAR has been or will be made, or
   • Any information otherwise relating to an internal or external SAR
2. So the Proceeds of Crime and Terrorism (Tipping Off – Exceptions) Regulations 2014 (“the Regulations”)
   • Are a handy tool that enables a firm to share the information which will allow it, its staff and certain associates to strengthen defences against money laundering and the financing of terrorism.

The critical criteria for any disclosures to be protected by the Regulations are that the SAR disclosures

1. Must be made in good faith to prevent and detect money laundering and
2. In one of the following cases 1-5 (Regulation 3-7)
3. And including additional other specified provisions/conditions numbered 6-10 (general condition Regulation 2 plus Article 35(6) of the Proceeds of Crime Law)

CASES 1-7 (including specified provisions/conditions numbered 8-12)

1- Same business (Regulation 3)

1. A disclosure is protected where

• A SAR is shared with a person in the same business in Jersey;
• The disclosure must not disclose the name of the person who made the internal SAR;

2- Same financial group (Regulation 4)

• A disclosure is protected;
• Within the same financial group (as defined in Article 16(2) of the Money Laundering Order) or
  • With whom the reporting person [donor] shares
    1. Common ownership,
    2. Management or
    3. Compliance control
  • It is not protected to share a copy of a SAR;
  • Any further disclosure must not disclose the identity of the person who made the internal SAR;

3- Another relevant person (Regulation 5)

1. A disclosure with another relevant person (as defined in the Money Laundering Order, so a financial services business in Jersey or a Jersey business carrying on financial services business (not trustee) elsewhere in the world) is protected if it relates to
   • A common customer,
   • Common former customer or
   • A transaction involving both parties;
2. It is not protected to share a copy of a SAR;

• Any further disclosure must not disclose the identity of the person who made the internal SAR or the identity of the MLRO;

4- Supervisory bodies (Regulation 6)

1. A disclosure to the Jersey Financial Services Commission or the Joint Financial Crimes Unit is protected,
2. it is not protected to disclose a copy of the SAR;

• Any further disclosure must not disclose the identity of the person who made the internal SAR;

5- MLRO (Regulation 7)

1. The disclosure by the MLRO
   • To his/her colleague or
   • A colleague of the person who made the internal SAR is protected if it is for the purpose of carrying out the MLRO’s functions.

6-8 - Scenario not mentioned –  (Regulation 2)

1. If the tests in Regulations 3 to 7 are not met, REGULATION 2 deals with general Protected disclosures as follows
   • [6]-it is otherwise made to a person who is the person making the disclosure;
   • [7]-if and to the extent that it is required to be made by any enactment or by the law of another jurisdiction;  
   • [8] if and to the extent that the JFCU has given, to the person making the disclosure, permission in writing for the disclosure to be made.

9-10 - Scenario not mentioned –  POCL ARTICLE 35[6]

1. Article 35(6) of the Proceeds of Crime Law permits disclosure to:
   • [9] - Legal advisers, in connection with the provision of legal advice or for actual or contemplated legal proceedings, and the legal adviser can discuss the disclosure with the firm; and
   • [10] - Accountants and to enable the accountant to provide accounting, tax, audit or insolvency services. However, there is no provision to allow the accountant to discuss the disclosure.
2. In both cases, the disclosure must not be to further a criminal purpose.

ABSOLUTE PROHIBITION

1. None of these provisions permits any form of disclosure to the SAR subject, who will often be a regulated business client.

COMMON SCENARIOS

1. Two of the most common such scenarios are triggered by,
   • Firstly, the obligation to apply due diligence measures and,
   • Secondly, the receipt of a “no consent” from the JFCU.

TO TAKE THESE IN TURN:

1. Article 13(1)(c) of the Money Laundering Order
   • Requires applying due diligence measures where there is a suspicion of money laundering. However, seeking this information may inadvertently tip-off the client about the SAR.
2. The Handbook provides some advice about this in section 8.5.1,
   • 8.5.1 advising that the risk of tipping off a client and their advisors may be minimised by
     • Providing employees with adequate support, such as specific training or assistance, and
     • Obtaining advice from the JFCU where a relevant person is concerned that applying identification measures will lead to the customer being tipped off.
   • It explains that ”Reasonable enquiries of a customer conducted tactfully regarding the background to a transaction or activity that is inconsistent with the usual pattern of transactions of activity is prudent practice, forms an integral part of CDD measures, and should not give rise to the tipping-off offence.”
3. Article 14(6) of the Money Laundering Order
   • Allows that a regulated business need not apply due diligence measures where, having made a SAR, With the consent of the JFCU, it does not
     • Complete the transaction,
     • Carry out the transaction,
     • Establish the business relationship or terminates the business relationship, as the case requires.
   • The other common problematic scenario is where following the submission of a SAR,
     • The regulated business does not receive consent to continue the relationship or transact (as appropriate).
     • Under such circumstances, the regulated business has to put a stop to any planned transaction or client activity, and this will, inevitably, trigger questions from the client.
     • As the regulated business cannot disclose that a SAR has or is about to be made or is awaiting consent from the JFCU, there is often no easy way to respond.
     • Thankfully the JFCU are usually very helpful in these circumstances and will do what they can to assist. Still, it is often necessary for the regulated business to seek legal advice and take great care to find a way through a maze of prohibitions and demands.

Regulations - https://www.jerseylaw.je/laws/revised/Pages/08.780.80.aspx