What is tipping off?  Guernsey’s money laundering regime requires, in simple terms, that when a financial services business (“FSB”) suspects that one of its clients may be involved in money laundering, it must make a suspicious transaction report (otherwise known as an STR) to the Financial intelligence Service.

What is tipping off?

The offence is made out when a person, knowing or suspecting that an STR had been made, disclosed any information to any other person which might prejudice any investigation which might be conducted.

the past

In Guernsey there was not a blanket ban on communicating the fact that an STR had been made. What law did require, though, was for a business placed in that position to consider whether prejudice might occur. If there was not prejudice, then there was no reason why the client could not be informed. In practice, however, FSBs would err on the side of caution.

Frequently an FSB would ask the FIS whether informing a particular third party would be ikely to cause prejudice. In general, the FIS would co-operate where possible to assist any business facing an irate client wanting to know why its instructions were not being complied with.

That remained the position for some years.

changes

During the recent IMF visit to Jersey, they noted that the tipping off offence (similar in substance to that in Guernsey) did not comply fully with FATF’s recommendation 14. The IMF recommended that Jersey remove the limitation referring to prejudice and implement a blanket prohibition on disclosing the fact that an STR had been made.

That recommendation was clearly noted by the Guernsey authorities, who proposed amendments to the Guernsey tipping off offence to bring it into line with recommendation 14.

There were strong objections from those who noted that the UK had not itself saw fit to amend its tipping off offence in this way.

As a form of compromise (it seems), the tipping off offence was amended to add a further alternative, namely, that tipping off could also occur if the information was disclosed in circumstances where it was unreasonable to do so. Not only was that amendment out of step with the UK, it was not what was proposed by the FATF, and left businesses to second guess what was “reasonable”.

That led to further amendments which, with effect from 28 July 2010, substantively re-wrote the tipping off offence in a further unsatisfactory fashion.
 

The new offence

Tipping off is now said to occur when a person, knowing or suspecting that an STR has been or will be made “discloses to any other person information or any other matter about, or relating to, that knowledge or suspicion.” This causes some immediate and obvious problems.

1. First, it removes the requirement for prejudice.
   • Thus, even after the money laundering client has been jailed, and their proceeds confiscated, it would still remain an offence to discuss with them the STR which led to that result.
   • There is simply no discretion.
   • At best, the Law Officers could indicate they would be unlikely to prosecute.
2. Second, it appears to go beyond even what is contemplated by recommendation 14, which required FSBs to be “prohibited by law from disclosing the fact that a suspicious transaction report or related information” has been made.
   • To comply with recommendation 14, all that was required was to prohibit a person disclosing “to any other person information or any other matter about, or relating to, that knowledge or suspicion.”
   • By leaving in place the words struck out, the drafter has broadened the offence, to prohibit discussion not only as to the fact of the knowledge or suspicion (which was what was presumably intended) but to also, potentially, inhibit discussion as to the underlying facts which may relate to that suspicion. That is bound to cause headaches as FSBs grapple with what it means in practice.
3. Third, it places Guernsey out of step with other jurisdictions.
   • Whilst it is admirable to be in the vanguard of the fight against money aundering, it might be wondered whether there is a need to be setting the pace.

What do I do

That is the question many businesses will be asking themselves as they come to terms with the new offence, and what it means they can (and can’t) do. Here are some tips:

1. • Think. Give thought to whether any particular action might give rise to tipping off.
2. • Document. Whatever you decide, make a careful note of what you are doing and the reasons for it.
3. • Ask. If in doubt, seek advice.
4. • Review. Suspicion, and tipping off, is not a static concept. Keep your reaction to it under review.

By having these considerations in mind

• you will ensure your business is asking itself the right questions AND
• Not only will that help your business to make the right decisions, it wil also help, in the event that, notwithstanding, tipping off does occur, to ensure that any prosecution is less likely.

End