In what the headline writers are calling a “landmark case”, an MLRO and the firm she worked for in Jersey have been acquitted of failing to make suspicious activity reports when they should have done. (“Landmark” because it was the first prosecution – rather than civil action – and not because of the acquittal.) You can read something of the case here, although I have yet to find the court transcript – please do share if you have the link.
However, I was more interested to read that, a week after her acquittal, MLRO Michelle Jardine had been banned from working in the regulated sector by the Jersey Financial Services Commission. In that cold-blooded way I have, I leapt on this information because it all helps to define the expectations (or at least the JFSC’s expectations) of the role of the MLRO. For those of you unfamiliar with this particular Channel Island, let me explain that under Jersey legislation there are two separate roles: Money Laundering Compliance Officer (responsible for monitoring compliance with AML legislation) and Money Laundering Reporting Officer (responsible for receiving and considering SARs – suspicious activity reports). Both roles can be held by the same person, as indeed they were by Mrs Jardine when she worked for wealth management firm STM Fiduciare Limited. So what went wrong?
Looking at the JFSC’s Public Statement, we find that in her role as MLRO, Mrs Jardine failed to process fifteen SARs – some of them nearly two years old. And in her role as MLCO, she failed to pass on to the Board full information about the status of internal and external reporting of suspicions (perhaps unsurprising in the circumstances). So she failed at the very core of the job: listening to what your staff tell you of their concerns about money laundering, and passing on information to the authorities for investigation. Quite what she thought she was signing up to when she agreed to be MLRO and MLCO, I cannot imagine, but this case (both the criminal acquittal and the regulatory withdrawal of approval) underlines the importance of making sure that MLROs are fully aware of the duties for which they are legally responsible.
I hate money laundering 
Just to be clear – this was the first criminal prosecution IN JERSEY for a failure to report a suspicion. In the UK there have been criminal prosecutions for failure to report a suspicion.
Thank you, David, yes – a landmark case in Jersey. And a shot across the bows for several jurisdictions.
Best wishes from Susan
BACKGROUND TO THE CASE
The case arose from an application for a
St Kitts and Nevis passport. St Kitts runs
a citizenship by investment programme.
It outsources the administration of that
programme, including handling applicant
funds, to an immigration consultant, Henley
& Partners.
In turn, Henley outsourced much of its office
function to a Jersey trustco, STM Fiduciaire,
which received and handled applicant funds.
It also provided Mrs Jardine, STM’s MLRO,
as a director of Henley.
Problems began when Henley received an
application from a Ukrainian local politician.
STM carried out its usual KYC/CDD checks.
It also received money in respect of the
fee. However, this did not come from the
applicant directly, but from a company
in Belize via a Cypriot trustco. The Belize
company was not obviously linked to the
applicant, and so there was no evident
link between the applicant and the funds
remitted. Although the Cypriot trustco
provided some explanation (the applicant was
a lawyer, and had procured a client to pay on
his behalf), this did not conclusively tie the
applicant to the funds. As a result, Mrs Jardine
and STM returned the funds to sender and
the application was not proceeded with.
THE PROSECUTION CASE
Three years later, Mrs Jardine and STM
were indicted for failing to report money
laundering. The prosecution argued that
application was made and funds paid on
behalf of a PEP, which were automatically
grounds for suspicion. Furthermore, it
argued the Ukraine and former Soviet Bloc
are notoriously corrupt. Next, it viewed
acquiring a second passport by investment as
a “passport for sale”, again arguing this was
automatically suspicious. Finally, it argued the
lack of explanation for the origin and route
of the funds, paid by a third party in Belize
through Cyprus, was also suspicious.
This is extremely helpful, Nick – thank you. It all serves to show how vigilant MLROs must be in documenting their discussions and decisions when deciding whether or not to make disclosures.
Best wishes from Susan