Reporting and tipping off Andrew Le Brun Vladimir Jizdny Financial crime policy 1 Overview Reporting knowledge or suspicion Reporting requirement Person carrying on a financial services business Person carrying on business, trade or profession Protection for reporting Tipping off Offence Permitted disclosure under Proceeds of Crime and Terrorism (Tipping Off Exceptions) (Jersey) Regulations ( Tipping Off Regulations ) 2 Reporting 3 1
Reporting requirement (1) Carrying on a financial services business Article 34D of the Proceeds of Crime Law SAR must be made when there is knowledge, suspicion or reasonable grounds for suspecting that: Another person is engaged in ML or FT; or Property constitutes or represents proceeds of criminal conduct Article 21 of the Terrorism Law (formerly Article 23) SAR must be made when there is knowledge, suspicion or reasonable grounds for suspecting that: Another person is engaged in FT; or Property is or may be terrorist property 4 Reporting requirement (2) Carrying on a financial services business Report to be made in good faith to the JFCU as soon as is practicable after information or matters comes to attention Otherwise, criminal offence Imprisonment for term not exceeding 5 years or a fine or both Except where employee has not been given material training and, as a result, did not know or suspect that other person engaged in ML or FT 5 Reporting requirement (3) Carrying on a financial services business Article 21(1) of the Money Laundering Order requires reporting to be in line with procedures Employee to MLRO (or deputy MLRO) Article 21(2) of the Money Laundering Order requires MLRO (or deputy MLRO) to make SAR to JFCU using prescribed form Otherwise, criminal offence Subsequent to SAR, Article 21(4) of the Money Laundering Order requires MLRO to provide JFCU with additional information Otherwise, criminal offence 6 2
Reporting requirement (4) except financial services business Article 34A of the Proceeds of Crime Law SAR must be made when there is knowledge or suspicion that: Another person is engaged in ML or FT Article 19 of the Terrorism Law (formerly Article 20) SAR must be made when there is belief or suspicion that: Another person has committed a FT offence 7 Reporting requirement (5) except financial services business Report to be made in good faith to a police officer as soon as is practicable after the information or matter comes to attention Otherwise, criminal offence Imprisonment for term not exceeding 5 years or to a fine or both 8 Reporting requirement (6) except financial services business Article 21 of the Money Laundering Order does not apply No requirement for reporting to be in line with procedures Employee may report to MLRO (or deputy MLRO) or to a police officer SAR may be delivered in any format No requirement to provide JFCU with additional information 9 3
Protection for reporting (1) Article 32 of the Proceeds of Crime Law When there is suspicion or belief that any property constitutes or represents the proceeds of criminal conduct Article 18 of the Terrorism Law When there is suspicion or belief that: Property is terrorist property Service provided for the purposes of terrorism or for the support of a terrorist entity 10 Protection for reporting (2) SAR to be made to a police officer in good faith Before person does a particular act As soon as reasonably practicable afterwards ML or FT offence is not committed (or defence) where: Act is done with express consent of a police officer SAR is made on person s own initiative and as soon as reasonably practicable afterwards 11 Protection for reporting (3) Timing of protective report SAR should be made after doing act: Where something appears suspicious only with benefit of hindsight; or Following receipt of additional information If report not made Defence that intended to make a report and reasonable excuse for not doing so 12 4
Protection for reporting (4) Carrying on a financial services business Article 21(1) of the Money Laundering Order requires reporting to be in line with procedures Employee to MLRO (or deputy MLRO) Article 21(2) of the Money Laundering Order requires MLRO (or deputy MLRO) to make SAR to JFCU using prescribed form Otherwise, criminal offence Subsequent to SAR, Article 21(4) of the Money Laundering Order requires MLRO to provide JFCU with additional information Otherwise, criminal offence 13 Protection for reporting (5) except financial services business Article 21 of the Money Laundering Order does not apply No requirement for reporting to be in line with procedures Employee may report to MLRO (or deputy MLRO) or to a police officer SAR may be delivered in any format No requirement to provide JFCU with additional information 14 Reporting glossary (1) Knowledge or suspicion See Section 3 of Information Resource (Part 2) Cultural barrier Dismissal of information concerning allegation of criminal activity on grounds that lack of public information to verify veracity of allegations Reasonable grounds for suspicion So called objective test See Section 3 of Information Resource (Part 2) Determined from facts or circumstances from which an honest or reasonable person would have formed suspicion (also guidance in Section 8) 15 5
Reporting glossary (2) Good faith (dictionary definition) Encompasses a sincere belief or motive without any malice or the desire to defraud others Criminal conduct (defined) An offence specified in Schedule 1 of the Proceeds of Crime Law; or If it occurs or has occurred outside Jersey, would have constituted such an offence if occurring in Jersey Terrorist property (defined) Defined in Article 3 of the Terrorism Law 16 How many SARs? One, two, or three SARs? In practice: Report made in accordance with reporting requirement also provides protection Report made under requirement in Proceeds of Crime Law covers Terrorism Law But specify provisions under which report is made 17 Procedures for reporting (1) Article 21 Communicate identity of MLRO (and/or deputy MLROs) Provide for internal SAR to be considered in light of all relevant information MLRO to have access to that relevant information (also Article 8) External SAR to be disclosed as soon as practicable 18 6
Procedures for reporting (2) AML/CFT Code Highlight that reporting requirement applies to declined business MLRO (or deputy) to record all internal and external SARs in register to support timely retrieval of information MLRO to document all enquiries MLRO to document decisions MLRO to inform JFCU where relevant information subsequently discovered 19 Effectiveness of reporting (1)? MLRO to consider Period of time between matter coming to employee s attention and date of SAR Reasonable? Disciplinary measures Number and content of internal SARs consistent with business risk assessment? 20 Effectiveness of reporting (2)? Board to consider Typical period of time taken by MLRO to consider internal SAR Number of SARs not processed within this typical period 21 7
Tipping off 22 Tipping off (1) Article 35(4) of the Proceeds of Crime Law and Terrorism Law Offence to disclose: That SAR (internal or external) has been made or will be made or information otherwise relating to such a SAR If person knows or suspects that a SAR (internal or external) has been or will be made» Except in accordance with Tipping Off Regulations (protected disclosure) Imprisonment for term not exceeding 5 years or a fine or both Defence if reasonable excuse for disclosure 23 Tipping off (2) Article 35(4) of the Proceeds of Crime Law and Terrorism Law Tipping off provisions do not apply to disclosure to: Lawyer in connection with provision of legal advice or purpose of proceedings» And vice versa Accountant to enable provision of accounting services In both cases, so long as not with view to furthering criminal purpose 24 8
Tipping off (3) Protected disclosures Made in good faith for purpose of preventing ML or FT and falls under five cases Required to be made by statute in Jersey or law elsewhere E.g. under Article 30 of Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 Person disclosing may transmit copy of SAR form Made with permission of JFCU 25 Tipping off (4) Protected disclosures Case 1: internal disclosure Individual (D) to individual (R) in same person Person disclosing may transmit copy of SAR form so long as recipient in Jersey Case 2: disclosure within financial group or network D to R in same financial group or network» Financial group defined in Money Laundering Order Must not reveal name of person who made internal SAR Person disclosing may nottransmit copy of SAR form 26 Tipping off (5) Protected disclosures Case 3: other relevant persons D to R in another relevant person» Where customer (or former customer) common to both Must not reveal name of person who made internal SAR Person disclosing may nottransmit copy of SAR form Case 4: domestic agencies D to R in Commission or JFCU Person disclosing may nottransmit copy of SAR form to Commission 27 9
Tipping off (6) Protected disclosures Case 5: external MLRO R (MLRO) to any fellow employee of D R (MLRO) to any fellow employee of R (in its capacity as MLRO)» MLRO may nottransmit copy of SAR form 28 Back to SARs 29 New Section 4 (1) AML PP 2014 outline New Structure of the AML/CFT Handbook Part 4, Sections 2 4 Section 2 Typologies Section 3 Red flags for SARs Section 4 Guidance on products and services 30 10
New Section 4 (2) Section 2 ML/TF Typologies What is a typology? Where can I find it? What is in it for me? How can I benefit from typologies? Microsoft Word Document 31 New Section 4 (3) Section 3 Red flags for SARs What is a red flag? Where can I find it? What do I need red flags for? What happens if I am oblivious to red flags? 32 New Section 4 (4) Section 4 Guidance on products and services Which products and services? Where can I find the guidance? What is in the guidance for me to look at? 33 11
Key learning points Reporting obligations have changed: Property constitutes or represents proceeds of criminal conduct Property is or may be terrorist property MLRO and Board to consider effectiveness of reporting Prescribed circumstances when tipping off permitted Cannot transmit copy of SAR form in all cases 34 Reporting and tipping off Andrew Le Brun Vladimir Jizdny Financial crime policy 35 12