31/01/22

JERSEY: Jurisdiction proposes to add corporate 'failure to prevent' offence to AML regime.

As published on step.org/industry-news, Monday 31 January, 2022.

Jersey's government plans to introduce a new corporate criminal offence of failing to prevent money laundering.

The government proposes that the new offence will appear as an amendment to the Proceeds of Crime (Jersey) Law 1999 (the POCL), following a brief public consultation ending on 21 February 2022. It says that Jersey's recognised exposure to the so-called 'layering' stage of money laundering, based both on its own national risk assessment in 2020 and on reports by independent experts, means it has to improve its anti-money laundering (AML) enforcement regime. This will enable prosecutions consistent with the jurisdiction's threats and risk profile, in line with Financial Action Task Force (FATF) recommendations. Layering refers to the technique by which proceeds of crime are first placed in one bank and then moved through several others to conceal their origin.

Legal obligations to prevent money laundering and terrorist financing already exist for the AML-regulated sector, so the new offence can be introduced into law without extending existing or introducing any new requirements for the sector, says the government. This will avoid increasing compliance costs and protect the jurisdiction's international competitiveness, it says.

The amendment states that a financial services business commits an offence and is liable to a fine if a person is engaged in money laundering when acting in the capacity of a person associated with that business. Any 'relevant person' to the offence is also guilty and liable in the same manner as the financial services business. The remainder of the legislation deals with definitions and with defences available to businesses.

The effect will be that the 'identification doctrine' will be removed from AML offences. Currently, a criminal act can only be attributed to a legal person where a natural person committing the offence can be said to represent the 'directing mind and will' of the legal person, which makes prosecutions difficult. Removing this for AML offences would enable the attribution of criminal liability across the entire spectrum of different companies, bringing more complex corporate structures into scope. This would act as a deterrent against criminal actors while ultimately increasing the overall social acceptance of legal sanctions, says the consultation paper.

Though broadly similar to the corporate failure-to-prevent (FTP) offences introduced in the UK through the Bribery Act 2010 and Criminal Finances Act 2017 for tax evasion, the new offence proposed by Jersey will be more targeted, focussing on money laundering and terrorist financing only for financial services businesses. The substantive offences are those in articles 30 and 31 of the POCL and articles 15 and 16 of the Terrorism (Jersey) Law 2002 and will cover conduct outside Jersey that would be an offence if it occurred within the jurisdiction. Only money laundering and terrorist financing as defined under the aforementioned articles would trigger the new offence, whereas, for example, a contravention of the Money Laundering (Jersey) Order 2008 would not. The amendment provides a definition of 'associated persons', listing the most relevant categories from a financial services and AML perspective. It also provides the corporate body with a 'reasonable steps' defence tailored to its business and risk requirements.

'FTP offences provide for a defence where reasonable or adequate prevention measures are in place', says the government. 'They create an incentive for corporate bodies to ensure they comply with best practices and that they identify and support the removal of any areas of uncertainty in statutory and regulatory guidance, whereas at present, there is no positive incentive to do so. This represents another attractive feature from a policy perspective which looks to minimise AML vulnerabilities on a jurisdictional level.'