Money laundering tip-offs carry heavy penalities
THE term money laundering often brings to mind a vivid picture of making dirty money clean. This term, while descriptive, can lead to individuals having difficulty in recognising money laundering in all its sophisticated forms.
For regulated financial institutions, the obligation to prevent money laundering and the need to disclose any suspicion of same is the focus of the Proceeds of Crime Act (POCA).
The POCA defines a suspicious transaction as complex, unusual or large business transaction carried out by the customer and unusual patterns of transactions, whether completed or not, which appear to be inconsistent with the normal transactions carried out by that customer with the business. The Courts have defined "suspicious" as going beyond sheer speculation, but nevertheless based on some foundation.
In an effort to stem the proliferation of money laundering disguised as harmless transactions, financial institutions are required to make suspicious transaction reports. Financial institutions must make these reports in circumstances where:
* there is knowledge or belief or reasonable grounds for knowledge or belief that another person has engaged in a transaction that could constitute or be related to money laundering; and
* the information or matter on which the knowledge or belief is based, or which gave reasonable grounds for such knowledge or belief, was obtained in the course of a business in the regulated sector.
The BOJ's 2004 (revised 2009) Guidance Notes on the Detection and Prevention of Money Laundering and Terrorist Financing Activities (the "Guidance Notes") are instructive and outline, inter alia, the responsibilities of financial institutions under POCA. The Guidance Notes indicate that there is now a minimum 30-day period for financial institutions to file a suspicious transaction report with the chief technical director of the Financial Investigations Division of the Ministry of Finance and Planning.
The test for whether a financial institution should make a suspicious transaction report is essentially an objective one, where the question posed is whether an honest reasonable person would have known or suspected the transaction.
In addition, as a rule of thumb, the Guidance Notes suggest that financial institutions should seek to employ procedures with customers that allow them to terminate the transaction in the event that the institution believes that money laundering could be involved. However, a financial institution may well ask what should be done when faced with a suspicious transaction in circumstances where declining to proceed may arguably alert the customer of the institution's suspicions, while proceeding may cause the institution to inadvertently run afoul of POCA.
The financial institution can make the disclosure to an authorised officer or nominated officer that the property is criminal property before doing the prohibited act. On the other hand, if the financial institution is placed in a position where it believes it must proceed with the transaction, it must ensure the disclosure is made and the appropriate consent is obtained from both the designated authority and the nominated officer. In the event that the financial institution must proceed with the transaction, and the appropriate consent is not obtained, then the disclosure must be made at the financial institution's own initiative and as soon as it reasonably practicable.
The POCA goes further to make it an offence when a person:
* knowing or having reasonable grounds to believe that a disclosure to an authorised or nominated officer has been made he makes a disclosure which is likely to prejudice any investigation that might be conducted following the first disclosure; or
* knowing or having reasonable grounds to believe that the enforcing authority is acting or proposing to act in connection with a money laundering investigation he discloses information related to the investigation to any other person.
This is known as the offence of "tipping off" and such disclosures can significantly prejudice the outcome of an investigation and may give rise to criminal charges. In particular, the person could be liable on conviction before a resident magistrate to a fine not exceeding $1 million or to imprisonment for a term not exceeding 12 months or both or on conviction on indictment before a Circuit Court to a fine or imprisonment for a term not exceeding 10 years or both.
It would appear that the offence of "tipping-off" can occur in circumstances of intentional disclosure and inadvertent disclosure. For example, if a financial institution refuses to proceed with a transaction, and in so doing it prejudices the investigation of a previous disclosure, this inadvertent disclosure could be deemed "tipping-off". This means that inept client care could result in the offence of "tipping-off" and give rise to criminal liability. Therefore, effective management of client relationships and training of employees in relation to the requirements of the POCA are of paramount importance.
However, anti-money laundering measures are not confined to financial institutions, as Jamaica is also evaluated based on its ability to introduce and implement international standards in relation to anti-money laundering measures. The Caribbean Financial Action Task Force, in its 6th Follow Up Report dated April 20, 2012, rated Jamaica as receiving partially compliant ratings on seven out of 16 core and key recommendations. These core and key recommendations include for financial institutions, the requirement for detailed customer due diligence and recording of unusual transactions. Evidently, individually and collectively we must continue to strive to combat money laundering.
Stephanie Sterling is an Associate at Myers, Fletcher & Gordon and is a member of the firm's Commercial Department. Stephanie may be contacted via firstname.lastname@example.org or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.