Guernsey Press

The ‘Martini law’ keeping out money launderers

A WHILE AGO, a smartly dressed chap pitched off a cruise liner here and strolled into one of our better jewellers looking for a surprise 40th birthday present for his wife. With help from the young assistant, he selected a rather classy – but very expensive – pendant.

Published
Unsung heroes are helping to keep this jurisdiction free from money launderers and those financing terrorism, but aren’t getting sufficient credit for what they do. Richard Digard looks at the hidden realm of suspicious activity reports.

To help keep the gift secret he asked if he could pay half in cash and the balance by cheque, which was fine. As the assistant chatted to him while sorting out the sale, she was mildly surprised how little he knew about the other places he and his wife had visited while cruising, but thought no more about it.

Later, however, while she was at lunch, she saw the same customer with a woman who was significantly younger than 40 – and they were surrounded by bags from other Guernsey jewellers.

She told her boss, who lodged a suspicious activity report with the local authorities, and it turned out that the couple ran an advertising agency but with a lucrative sideline in drug trafficking. The cruise was simply a convenient way of laundering the cash.

This is a true story by the way. As is this.

Another Guernsey jeweller, let’s call them Expensive Baubles Ltd, was attracting some very affluent customers and arranged the auction in London of an exclusive, limited edition necklace, which went for more than £1m.

The buyer was represented by an agent and it was agreed that when funds had cleared, the item would be handed over. Well, the money did arrive in the auctioneer’s account – but in separate transfers from various companies via three different banks in different jurisdictions.

You’ve got it. An SAR was made and investigations revealed that the agent and his client had drug trafficking convictions and were suspected of fraud and money laundering. As a result, when the auctioneer met the agent to hand over the necklace, police went along too…

I mention this as most of us don’t know the quite extraordinary stuff that goes on to keep this island crime-free – and free from the proceeds of crime.

Across the island there are highly trained and attentive individuals looking for the generally quite subtle signs of attempted or possible money laundering, which also includes terrorist financing. They’re good, too.

The latest figures (2016) show there was a 40% increase in SARs received by the Financial Intelligence Unit, with a total of 1,368 investigated.

That’s 26 a week – and the number is doubtless higher today.

Most reports came from trust and company service providers, banks and e-casinos. The criminality most commonly reported during 2016 was tax evasion (we’ll come back to that in a moment), followed by fraud, false accounting or forgery.

There was also a marked increase in SARs related to charities and non-profit organisations, although a quarter of those related to the charities being a victim, predominantly of fraud.

Anyway, the point is that Guernsey takes this stuff very seriously and is excellent at weeding it out.

Not least, it has to be said, because there are strict laws regulating this area and individuals and organisations that fail to disclose knowledge or suspicion of money laundering are exposed to severe penalties.

These are personal offences so islanders take the rap, not a faceless parent company in London or elsewhere. And they’re exposed to what’s effectively Martini legislation.

If you remember the ads, that’s any time, any place, anywhere. So any crime, whoever committed it, whenever they did it and wherever it occurred, as long as it would have been a crime had it happened here.

The long arm of the law indeed. Yet here we are, targeted by Andrew Mitchell, a Conservative MP and former minister, and Margaret Hodge, a Labour MP and also a former minister, to open up our register of who owns what companies to the random inspection of any Tom, Dick or Harry (proper authorities already have access, of course).

As the Financial Times reported last month, ‘The MPs regard this move as a critical tool in the fight against tax evasion and money laundering’.

Wait a minute, we’re already fighting tax evasion and money laundering pretty well, aren’t we?

Yes, says Susan Grossey, and the island isn’t getting nearly enough credit for what it is doing.

‘When money laundering does happen in Guernsey, it is almost exclusively of the proceeds from crimes committed overseas, with Guernsey simply one of the layers in the scheme,’ she says.

Ms Grossey, I should add, runs Thinking about Crime Ltd, a one-person anti-money laundering consultancy that works with institutions in the regulated sector to help them comply with the anti-money laundering legislation in their jurisdiction.

She is an expert with a stellar cast list of clients, from the Gibraltar Association of Compliance Officers to Rothschild Bank International Ltd and the Institute of Chartered Accountants in England and Wales, where she provides specialist training for those at the sharp end and with significant responsibilities.

In her view, this jurisdiction, where she spends about 60% of her time, is an unsung hero when it comes to fighting this type of crime because the local sector is good at picking up on – and reporting – relevant suspicions. The FIU is good at sharing that information with their more directly concerned counterparts in overseas units – who in turn are good at taking on responsibility for investigating and convicting.

‘All of this means that the conviction eventually ends up on someone else’s scorecard, with the result that Guernsey’s money laundering conviction rates look low compared to their level of financial activity.

‘It does not mean that there is lots of laundering that they are missing/permitting,’ she says.

So when MPs target these islands it’s not because there’s a problem here, but because doing so plays quite cynically to their own audience and agenda.