Jersey courts criticise ‘no consent’ regime….AGAIN!!!

The issue of the ‘no consent’ regime in Jersey has recently been considered in the Jersey courts as part of an application to judicially review and quash the decision of the JFCU to refuse to consent to the normal operation of a bank account.

1. Judgement say

This is an application to judicially review and quash the decision of the Jersey Financial Crimes Unit (“the JFCU”) taken on 8th November, 2018, to maintain its refusal to consent to the normal operation of certain bank accounts.

The application was taken out against the Chief Officer of the States of Jersey Police as required under Article 25 of the States of Jersey Police Force Law 2012.

https://www.jerseylaw.je/judgments/unreported/Pages/%5B2019%5DJRC161.aspx

2. Guernsey

The judgement also refers to

previous criticisms by the Royal Court of the ‘informal freeze’ regime [see below] and

the Guernsey Court of Appeal decision in Chief Officer, Customs & Excise v Garnet Investments Limited, which lies at the centre of this case.

https://www.gov.gg/article/105231/Judicial-Committee-of-the-Privy-Council-refuses-Garnet-Investments-Ltd-application-to-appeal

While this was hotly debated and there were indications that Garnet may not be a wholly satisfactory decision, the application failed, and the informal freeze maintain on the ground that the decision taken at the time was reasonable and proportionate

Royal Court criticism of the Jersey consent regime

The Royal Court has on a number of occasions remarked upon the potential for injustice arising from the application of the Jersey consent regime.

In 2007 in Chief Officer of SOJP v Minwalla [2007] JLR 409, the Court (Sir Michael Birt, then Deputy Bailiff) contrasted the saisie provisions in Article 15, including the provision to discharge the order if proceedings have not been instituted within a reasonable time, with the unrestricted “informal freeze” achieved by the withholding of police consent under Article 32:

However, there is another provision in the 1999 Law which has the effect of achieving an ‘informal’ freezing of assets without the need for a court order.

The problem arises because of the terms of the money laundering offences such as Article 32 of the 1999 Law.

In broad outline, Article 32 provides that a person is guilty of an offence if he is concerned with an arrangement whereby the retention or control by or on behalf of A of A’s proceeds of criminal conduct is facilitated in circumstances where the person knows or suspects that A is or has been engaged in criminal conduct.

There is a defence available where the person concerned has disclosed his suspicions to the police who have consented to his undertaking the transaction in question

Applying this to the ordinary banking relationship, the consequence is that, if a bank forms a suspicion that its customer may be engaged in criminal conduct, it files a Suspicious Transaction Report (STR) with the police.  If the police then consent to the bank thereafter complying with its customer’s instructions to pay out money from the account, all well and good; the bank is protected.  But if the police do not consent, the bank is on the horns of a dilemma.

On the one hand, it has its customer demanding that it make payment in accordance with the mandate.

On the other hand, it has a suspicion that its customer has been engaged in criminal conduct and, if it makes the payment, it will clearly facilitate the retention or control of the money by its customer.

Accordingly, if it were subsequently to transpire that the money in the account was in fact the proceeds of the customer’s criminal conduct, the bank would have committed the criminal offence of money laundering under Article 32.  As the bank does not know at that stage whether the money in the account is in fact the proceeds of criminal conduct, it invariably errs on the side of caution and refuses to make the payment.

The result is that the account is informally frozen for so long as the bank has the relevant suspicion and the police do not consent.

This is clearly capable of causing great hardship and unfairness.

There may never be a prosecution, yet the bank may retain its suspicion.

The result may be that a person, against whom no criminal charges have been brought and where there lies only a suspicion, finds his assets informally frozen without there even having been any court order to achieve this.  Furthermore, the freezing of the account may continue for an indefinite period.

It is hard to reconcile this situation with the carefully structured protections provided in respect of a saisie, which are clearly intended to ensure that funds are not frozen indefinitely or for an unreasonably long period in the absence of criminal charges.

The potential injustice of the situation was recognised in the United Kingdom where the relevant legislation was amended in 2002 so as to provide that the police have seven days from the STR in which to respond.

If no response is given they are deemed to have consented to the bank dealing with funds in question.

If they respond within the seven days and refuse consent, they have a further thirty one days in which to apply for a restraint order (the equivalent of a saisie).

If they have taken no such action at the expiry of thirty one days after their refusal of consent, the bank may safely proceed.

In the recent case of K limited v National Westminster Bank Plc [2006] 4 All ER 907, the English Court of Appeal concluded that this struck a fair balance between the competing interests and that accordingly there was no need for the court to intervene to prevent an informal freeze, given that it could only last for a maximum of thirty eight days.

We would refer also to the recent decision of the English Court of Appeal in R ex p. UMBS Online Ltd v Serious Organised Crime Agency [2007] EWCA Civ 406 concerning the need to strike a fair balance between undue interference with personal liberties and the need to fight crime.

However, no such amendment to the 1999 Law has been made and we must therefore wrestle with the resulting difficulties.”

In paragraph 75 the Court concluded its judgment by commenting that the amended UK legislation, with its moratorium period and deemed consent provisions, struck a fair balance between the competing interests and then said “

… we would urge that immediate consideration be given to introducing amendments similar to those which have been introduced in the UK”.

These concerns were repeated in Gichuru v Walbrook [2008] JRC 068 at paragraphs 36-38 in which the Court repeated its preference for the balance struck in the UK legislation and its recommendation that the statutory scheme be amended:-

“such amendments could include the introduction of time limits coupled with the ability to obtain a saisie at an earlier stage than at present i.e. once a criminal investigation has begun.” (paragraph 38)

The amendment to permit a saisie at the start of a Jersey criminal investigation (Article 15(1A)), was introduced in 2014 (as set out above).  However, no corresponding amendment was made to limit the time during which consent may be withheld, and thus funds, using the words of Advocate Redgrave, were “informally frozen without a saisie.”

Whether anyone soon acts of the court’s criticisms is an open-ended question but I doubt this is going to be the last we hear on Jersey’s ‘no consent’ regime.