The heavy fines were meted out by the Royal Court yesterday as a clear warning to others that Jersey’s standing as a world-class finance centre could not be jeopardised by slack trading practices.
However, Advocate Stephen Baker, defending, warned that it wouldn’t be possible to find a finance company in the Island not guilty of the offence admitted by his clients, adding there was a real risk companies would leave if the penalty was too severe.
It is believed to be the first prosecution of its kind in the British Isles or any offshore centre.
Caversham Fiduciary Services Ltd, Caversham Trustees Ltd and Nicholas Bell (51) admitted failing to check the identities of individuals behind £850,000 paid into a Jersey trust, and on whose behalf £825,000 was paid out four working days later.
They were charged with two counts of failing to comply with requirements of the Money Laundering (Jersey) Order 1999 contrary to provisions of the Proceeds of Crime (Jersey) Law between 3 December 2002 and 9 March 2004.
The offences carry maximum sentences of an unlimited fine and/or a prison sentence of up to two years.
The Attorney General, William Bailhache, said: ‘Most of the Island’s regulated businesses understand and respect the need to have anti-money laundering procedures in place and maintained.
There is a cost to that which those businesses meet.
When one comes across a business which takes profit it would not have made had it met the expenses it should have had to meet, it is important, pour encourager les autres, that there is a significant element of punishment in the penalty imposed.
One can punish afterwards, but the truth is that unless one has as many regulators as there are businesses, the industry must keep its own house in order.’ The companies were fined a total of £65,000 and Bell, a chartered accountant for more than 20 years and who now works for another financial services company, was fined £35,000.
Mr Bailhache had asked the Court to fine Bell £65,000 but that figure was reduced after Advocate Baker said it would bankrupt his client.
Advocate Baker said that Bell was handing over £150,000 annually to his ex-wife to pay for the school fees or university education of his six children and one step-child, even though he only earned £70,000 a year and had £192,000 left in life savings in the bank.
It has yet to be decided how much of the £60,000 costs asked for by the Crown will be recouped, but the court limited Bell’s liability to £10,000.
The case centred on the defendants’ dealings with Timothy Clarke, an English solicitor, who wrote to Bell to set up the Advent Trust on behalf of a Gary Stevens, who he claimed was the Attorney for a Mr Lee.
Bell was told by Mr Clarke that the £850,000 were the proceeds of the sale of a sauna in London, but no efforts were made to check that Mr Lee even existed.
Mr Bailhache said that such a failure persisted even after the date of birth and address given for Mr Stevens in Mr Clarke’s letter of introduction did not match the information in the certified copy of a passport and the client questionnaire completed by Mr Stevens.
The £850,000 was transferred to the trust on 10 December 2002 and £825,000 was paid out to into three Nat West and one Co-op Bank accounts on 16 December.
The transaction earned the defendants £2,653.
Mr Bailhache said that Bell’s failure to check the identity of his client was complemented by the companies’ failure to have compliance mechanisms in place to detect and rectify the failings.
‘There was, in short, no evidence at all of identification procedures or internal control and communication having been maintained within either of the Caversham businesses designed to ensure that Mr Lee’s identity was verified and so to forestall and prevent any money laundering,’ the Attorney General said.
He added: ‘The Crown does not say that money laundering was taking place, but on its face, this had all the hallmarks of a classic layering-type transaction that might be designed to hide the true, possibly criminal, source of the assets.’ Advocate Baker said the fines asked for by the prosecution were wholly ‘disproportionate’ and ‘off the scale’, adding that the defendants were entitled to have four pieces of mitigation considered, ‘Each pleaded guilty,’ he said.
‘Each of them has lost their good character, each of them suffered substantial reputational damage and each of them appear to be sentenced for a crime involving one occasion of a breach of identification procedures in relation to one client relationship.’ He added that Bell had an ‘exemplary’ record and stressed it was a regulatory infraction and not a money laundering offence.
The Caversham group, which has offices in London, Jersey and Geneva, was given 28 days to pay the fine.
Bell was allowed two years to pay.
The defendants have appealed against the guilty verdict on a point of law and this will be heard by the Court of Appeal in January.
The case was presided over by Commissioner Francis Hamon, who was sitting with Jurats De Veulle and Le Cornu.
