Her Majesty’s Procureur (Attorney General) in Guernsey has taken the very unusual step of issuing public guidance regarding tipping-off offences under the Terrorism Law 1 and Disclosure Law.2
This step is unprecedented and reflects significant problems in the legislation which was amended prior to the visit of the IMF in 2010, and which put Guernsey significantly out of step with similar provisions in other jurisdictions. It has also been disclosed that the provisions of the relevant legislation are being reconsidered for amendment.
Prior to the amended legislation, it was possible to seek formal consent from the authorities to tip-off other persons that a suspicious transaction report had been made. This was often required in order to facilitate the flow of information between financial services businesses to prevent criminal activities.
The amended legislation unfortunately created uncertainty regarding tipping-off, leaving all financial services businesses with considerable problems as to how to control the flow of information within an organisation, a cross-border group or between associated businesses handling client activities.
This was based on wording which created an offence if a person "discloses to any other person information or any other matter about, or relating to, that knowledge or suspicion". The restrictive provisions of the new tipping-off provisions went some way beyond the position in the UK and Jersey and any breach could constitute a serious criminal offence.
The legislation placed businesses in a position where they may have made a report but were not able to disclose this to staff of their own business or to other offices which might become involved in the same transaction or perhaps providing services for the same client.
The New Guidance
HM Procureur’s guidance, which is non-binding, indicates that:
“it is not the intention of the Bailiwick authorities that the tipping-off offences should forestall legitimate attempts to prevent money laundering and terrorist financing”
“no prosecutions will be brought against persons who disclose that a [suspicious transaction report] has been or will be made by one member of an organisation to another for the purpose of discharging AML/CFT responsibilities and functions”
“this will also be the case in respect of a disclosure made to linked organisations such as head offices or branches of the same institution, again providing that it is made to discharge AML/CFT responsibilities and functions”
“This will not apply if the disclosure is made in circumstances where there are grounds to believe that it may prejudice an investigation”
What Action Should You Take?
The guidance deals only with your organisation or a head office or subsidiary so it is assumed for the time being that you cannot tip off third parties such as intermediaries or companies or other organisations outside of your own business group, although it remains a defence that the disclosure is intended to assist in the prevention of crime. If you find yourself in this position, you are urged to take legal advice.
You should ensure that the MLRO and board activities related to suspicious transaction reporting are maintained strictly confidential at all times, and ensure that staff are aware of the need to maintain such matters in this way, particularly in terms of access to files and correspondence. The guidance clearly indicates that information should only be shared in order to discharge responsibilities under the Guernsey legislation, for example to assist members of staff in managing the situation correctly, and not widely or for general information purposes.
If you intend to report outside your own Guernsey organisation to a group or subsidiary overseas then you must also ensure that such reporting is dealt with in the most confidential manner and develop procedures which are adopted and adhered to by both parties. If you cannot ensure that such information will be maintained on an absolutely restricted and confidential basis, then you will be taking a risk that it may be further disseminated. Such tipping-off would fall outside of the protections afforded by this guidance.
Whilst the prosecution authorities retain the power to decide whether or not a prosecution is in the public interest, they still have no formal power under current legislation to sanction or absolve any person from criminal liability. This means that internally reporting the existence of a suspicious transaction report will remain an offence, but would not be pursued. It is hoped that any amendment would allow express permission to be granted.
Given the difficulties associated with balancing the benefits of sharing information against the criminal liability which arises from it, and the fact that the prosecution stance is a voluntary election rather than a statutory defence, very great care should be taken before deciding what information should be disclosed, who it should be disclosed to and what security is in place to prevent further dissemination of any information relating to knowledge of suspicion of any money laundering activity.