[2005]JRC165
ROYAL COURT
(Samedi Division)
25th November 2005
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Before:
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F.C. Hamon, Esq., O.B.E., Commissioner and
Jurats de Veulle and Le Cornu.
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The Attorney General
-v-
Caversham Fiduciary Services Ltd
And
Caversham Trustees Ltd.
And
Nicholas Bell.
Sentencing by the
Inferior Number of the Royal Court,
to which the accused was remanded by the Inferior Number on 25th November, 2005
following a guilty plea to the following charges:
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2 counts of:
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Failing to comply with the requirements of Article
2(1)(a) of the Money Laundering (Jersey)
Order 1999 contrary to Article 37(4) of the Proceeds of Crime (Jersey) Law 1999. (Count 1: Caversham Fiduciary
Services Ltd and Nicholas Bell; Count 2: Caversham Trustees Limited and
Nicholas Bell.)
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Plea: Guilty
Details of Offence:
The Defendant Companies, members of
the Caversham Group of companies, are regulated by the Jersey Financial
Services Commission (“JFSC”) in the provision of trust company
business. Mr Bell was a chartered
accountant, director and at all material times an approved principal person of
the Caversham Group of companies.
In 2004 a JFSC inspection visit identified the facts giving rise to this
prosecution, namely:-
In December 2002 an English
solicitor and sole practitioner contacted Mr Bell with a view to establishing a
discretionary trust, explaining that Mr Gary Stevens as Attorney for Mr Lee had
recently received monies from the sale proceeds of a sauna in London and they now wish to re-invest those
monies. He explained that Mr Lee is
a non-resident who wished the monies to be kept offshore in the first
instance. The solicitor sent
through certain documentation on Mr Stevens. The identity of Mr Lee was not verified
at all. On 10th December
2002 £850,000 was remitted from the solicitors’ account to the
First Defendant’s account and then paid to the client account of the
Second Defendant (this forms the basis of count 1). Two days later (12th
December) a request was received by Mr Bell from the solicitor to pay away a
total of £825,000 to four unknown entities with no connection with the
requested discretionary trust. The
following day (13th December) the trust was established, with Mr
Stevens named as the sole beneficiary. The next working day (16th
December) the payments away were made by Mr Bell as requested without the
identity of Mr Lee being verified and without any systems of control or
communication operating which would have ensured that evidence of
identification of Mr Lee was obtained (this forms the basis of Count 2). The Caversham group of companies was
paid £2,600 for its services in December 2002.
It is not known if Mr Lee exists or
not.
The Money Laundering (Jersey)
Order 1999 and the Anti-Money Laundering Guidance
Notes for the Finance Sector make it plain that assets are not to be paid away
unless and until verification of identity as required by law has been carried
out.
When the above facts were identified
by the JFSC, the Defendant Companies’ Compliance Officer, on request,
delivered a copy of the Companies’ files to the States of Jersey Joint
Financial Crimes Unit and subsequently gave a statement to the Police, putting
the Defendants’ files into evidence.
Mr Bell was interviewed by the
Police and gave “no comment” responses.
Not guilty pleas were entered and
the trial took place on 13th
October 2005. Following
the close of the Prosecution case, the Defendant’s Advocate made a
submission of no case to answer based on a point of law. After hearing argument, that submission
was rejected by the Court. The
Defendants then entered guilty pleas.
The Crown accepted that the
Defendant Companies’ commission of offences was attributed to Mr
Bell’s negligence as opposed to consent or connivance.
Aggravating features of the case
were put by the Crown as:-
a) the amount of money (£850,000)
potentially layered without knowing who Mr Lee was;
b) the very short period of time (four working
days) over which substantial funds were received by the First Defendant, paid
to the Second Defendant and then paid away without knowing who Mr Lee was;
c) the provision of effectively total anonymity to
Mr Lee (if he exists) through the discretionary trust structure;
d) payments away totalling £825,000 were
made with no internal control or communication operating, despite the payments
being to unknown entities and on their face without commercial purpose or
apparent justification under the trust, failing to ensure that before doing so
the identity of Mr Lee was known.
Details of Mitigation:
(1) The Caversham group of
companies have offices in Jersey, London and Geneva and have been
providing professional advice and financial services since 1977. Licensed since April 2002. It was argued substantial reputational
damage and financial losses suffered by reason of the prosecution. Companies largely co-operative with the
JFSC and the States of Jersey Police.
(2) Mr Bell: Aged 49 years,
chartered accountant and director of many years standing and approved principal
person. Owns 25.5% of the issued
share capital in the Defendant Companies.
The prosecution has caused him to leave the business and related
accountancy partnership and take up a new, more junior position with another
regulated institution in the Island at much
reduced salary. Recently
re-married, with seven children from his first marriage to whom he has substantial
financial commitments. Unclear
whether he would be able to realise the capital value of his shares in
Cavendish Group and what value those shares would carry. He too had sustained substantial
reputational damage with his professional body and with industry. These were regulatory offences caused by
negligence and no more.
Previous Convictions:
None.
Conclusions:
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Count 1:
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Bell: £25,000 fine
(or 6 months’ imprisonment in default of payment).
Caversham Fiduciary: £25,000 fine.
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Count 2:
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Bell: £40,000 fine
(or 6 months’ imprisonment in default of payment).
Caversham Trustees: £40,000 fine.
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This is the first case of its kind
in Jersey or elsewhere and the level of fines reflects
this. Jersey
must preserve its reputation as a premier offshore finance centre. Should there be further prosecution for
such offences within the finance industry, substantially higher sentences will
be sought. Had actual money laundering
been involved, a term of imprisonment would have been sought.
Application made for Prosecution
costs to be paid by the Defendants.
Sentence and Observations of Court:
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Count 1:
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Caversham Fiduciary: £25,000.
Bell: £15,000 fine. (6
months’ imprisonment in default of payment).
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Count 2:
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Caversham Trustees £40,000.
Bell: £20,000 fine. (6 months’ imprisonment in
default of payment, concurrent to Count 1).
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Prosecution Costs to
be paid by the Defendants, assessed if not agreed, with Mr Bell to pay a
maximum of £10,000.
Caversham
Companies’ fines to be paid within twenty eight days.
Fines by Mr Bell
payable at £1,500 per month.
These were very
serious breaches of the Proceeds of Crime (Jersey)
Law 1999. There was a very
serious breakdown in internal controls.
The Guidance Notes make plain institutions’ statutory obligations. It is clear that Mr Lee’s identity
was never verified. Mr Bell was
responsible for the breaches by reason of his autonomy which led to procedures
being totally ignored. The failures
were not identified by Caversham but by the JFSC. The Defendants have been co-operative
but the guilty pleas were of little value as the Crown had much preparation to
do for trial. Defence counsel
outlined the serious financial problem and even bankruptcy that would face Mr
Bell, were the Crown’s conclusions to be followed. However, that is not applicable to the
Caversham companies.
Jersey’s financial reputation is capable of being destroyed in an
instant. If actual money laundering
had taken place here, the sentence of this Court may well have been higher. This case must serve as a warning to all
financial institutions. The
seriousness has been explained by the Attorney General. In particular, the Court endorsed the
Guidance issued by the Financial Services Authority in England in
Chapter 13 of the Enforcement Manual, which forms part of the FSA Handbook.
Her Majesty’s Attorney General.
Advocate S.M Baker for the Defendants.
JUDGMENT
THE COMMISSIONER:
1.
The point
of law raised by Advocate Baker, when the Defendants were convicted on the two
counts on the 30th
October, 2005 was not successful. At that point Advocate Baker withdrew
his not guilty plea and entered pleas of guilty. On the decision in law Advocate Baker
has appealed and the Court of Appeal will hear his argument during the January
sitting of next year. If his appeal
is successful, then in our view, and the view of the learned Attorney General,
it is not likely that a re-trial will be ordered. For that reason Advocate Baker has
withdrawn his objection to sentencing today.
2.
It is, as
the Attorney General has said, a very serious breach of the law, which,
although complex, is comprehensively explained in the guidance notes for the
Finance Committee. It is quite
clear that in the present case the identity of Mr Lee, if he ever existed, was
never followed up in any way. This
is, in our view, a very serious breakdown of internal controls on a company
which has hitherto had an impeccable record.
3.
Mr Bell,
as director and the principle person, was responsible for the defects which the
law has striven to make abundantly clear. Mr Bell had an autonomy in the firm which
the learned Attorney General has strongly criticised. The procedures were in this case, in our
view, totally ignored.
4.
It is perhaps ominous that no failures
were identified within the Caversham business. They were discovered by a routine
inspection conducted by the Jersey Financial Services Commission. But it is obvious that they clearly
found no other defects as a result of their search. Of course there has been co-operation,
although I would say that the guilty plea is of little value and the Crown had
much preparation to do to cover the not guilty plea that had been entered.
5.
Advocate Baker has outlined in very great
detail the real financial problems that Mr Bell faces. We have of course looked at the
reference provided and the reputational damage that Mr Bell has suffered as a
result of this offence. He is now
with another firm. If it had not
been for the very worrying personal financial problems that he faces, we would
have followed without any hesitation, the conclusions of the learned Attorney
General. But, Advocate Baker has
put it quite clearly, he would face bankruptcy at this level of fines and
we’re not prepared to allow that to happen. We cannot however make the same
concession for the Caversham companies.
6.
Jersey is a finance centre
whose reputation can be destroyed on the instant. If money laundering had been an issue
the fines might well have been substantially higher. This is not alone pour encourager les autres; the decision of the Court must serve as
a warning to all the finance centres in Jersey. The Attorney General has itemised very
clearly and in great detail the nature and seriousness of the offence, the
circumstances surrounding the offence, the co-operation of the Companies once
the Commission and the Police became involved. But he has drawn our attention to the
relevant guidance on sanction of the Financial Services Authority and we would
adopt the wording of that Authority:
“The principal purpose of
the imposition of a financial penalty is to promote high standards of
regulatory conduct by deterring firms and approved persons who have breached
regulatory requirements from committing further contraventions, helping to
deter other firms and approved persons from committing contraventions and
demonstrating generally to firms and approved persons the benefits of compliant
behaviour.”
7.
Taking
into account all that we have said we’re going to sentence as follows:
Count 1, Caversham will pay a £25,000 fine, Mr Bell will pay
£15,000 or 6 months’ imprisonment in default of payment. Count 2, Caversham will pay a
£40,000 fine, Mr Bell will pay a £20,000 fine or 6 months’ imprisonment
in default of payment and those fines will be concurrent.
8.
We have
given some thought to the contribution of the cost to the Prosecution. We are prepared to allow those costs,
unless they are agreed, and if they're not agreed, then of course they must be
taxed in the usual way. We would
say however that Mr Bell must not face more than a maximum fine in those
circumstances of £10,000. The
Caversham companies to pay within twenty eight days. Mr Bell to pay £1,500 per month,
but if there are any problems that arise, obviously Mr Bell, through Advocate
Baker, will go to the Viscount and come back to us.
Authorities
Proceeds of Crime (Jersey)
Law 1999.
Money Laundering (Jersey)
Order 1999.