Cayman Islands: Reporting Obligations & Tipping Off: Has The Pendulum Swung Too Far?

Last Updated: 13 December 2002
Article by Anthony Akiwumi
Reporting Obligations & Tipping Off: Has The Pendulum Swung Too Far?

The reporting obligation underpinning the regulatory rampart raised in the global battle against money laundering and cross border fraud has come under recent scrutiny in the United Kingdom and in Canada. Contrasting approaches and decisions from these jurisdictions, should give practitioners in these Islands plenty of food for thought. In the rush to legislate against what is properly perceived as a destabilising threat to the proper functioning of governments and their economies, long protected and essential democratic principles namely, the necessity of an independent legal profession and of the sanctity of legal professional privilege, appear to have been sacrificed on the altar of expediency. Perhaps, in the wake of developments, particularly in Canada, the time has come for a reappraisal by the legal profession of the legislative straightjacket imposed by the Proceeds of Criminal Conduct Law (2001 Revision) and the Money Laundering Regulations imposed thereunder.

The fate of the English solicitor named John Duff is a salutary tale of the attendant dangers to legal practitioners in this legislative minefield. The case brings into to stark relief the conflict of interest between one’s duty to one’s client under the orthodox conception of the lawyer client relationship, and the duty foisted upon legal practitioners under proceeds of crime/anti money laundering legislation. Are lawyers, erstwhile independent and fearless defenders of their clients’ interests now no more than toothless poodles subject to the beck, call and sanction of a faceless State?

If it be thought that this question is of purely academic interest to be debated at the various in vogue compliance / anti money laundering seminars, couched in glib exhortations to lawyers to "know the client," then spare a thought for poor old Mr Duff as he serves his six months term of imprisonment at one of Her Majesty’s institutions with the certain prospect of being removed from the Rolls. Consideration of his case should raise the alarm bells for all in the legal profession and should send a shiver down our collective spines. The case was reported in the Legal Section of The Times of 23rd July 2002, which gave the following brief account:

"For failing to report his suspicion in relation to money paid to his firm by a commercial client who was then convicted of drug trafficking, Duff was sentenced at Manchester Crown Court on 1st July 2002, the English equivalent of the Grand Court, to six months' imprisonment. It must be likely that he will in turn also face severe professional sanctions. In essence Duff's involvement arose during the mid- 1990s, when he was paid £70,000 by an established client on account of fees. A little later the client asked for his money back and Duff duly obliged, having deducted a portion for his fees. About a year later this client was arrested in possession of large quantity of cocaine and prosecuted for trafficking. The client pleaded ignorance and instructed Duff to defend him on this basis. Acting for the client enabled access by Duff to the prosecution evidence, from which he ascertained that the client has spent the returned £70,000 on purchases of various items connected with his ostensible business.

However, presumably as a precaution, Duff consulted the statute concerned with reporting suspicion and also took independent advice on the matter. As the relevant statute (S52 Drug Trafficking Act 1994) refers only to suspicion of a person who is engaged in drug money-laundering, Duff decided that he had no such suspicion. At most this related to a past-completed transaction and as his client was currently a prison inmate awaiting trial he could not possibly be so engaged.

So, fatefully, he decided to do nothing. Unfortunately, but understandably, Duff misunderstood his duty under Section 52. The cause of his professional ruin was not an intention to flout the law but a misunderstanding of it based upon ambiguous wording. Nonetheless despite accepting that this was a genuine mistake of law, the judge sent Duff to prison. In sentencing, the judge spoke of the need to send out a clear message to solicitors."

Notwithstanding the deterrent nature of the sentence imposed by the trial judge, there are important issues of principle here that should not lightly be abrogated nor ignored. Are lawyers really expected to act as policemen as well as being defenders their clients’ interests and protectors of the clients’ constitutionally guaranteed democratic rights? Of course, in the United Kingdom and for that matter the Cayman Islands, steeped in the tradition of parliamentary supremacy, Human Rights Acts and Conventions notwithstanding, it is apparently easier for Parliament or the Legislative Assembly to extinguish these constitutional safeguards without much effective protest. The position in Canada, with its Charter of Rights acting as the bedrock of its democracy, is mercifully different and may provide some hope of a reversal of these constitutional erosions. The gauntlet has been well and truly thrown down by the Law Society of Canada, which recently challenged the constitutionality of the reporting obligations imposed by the Canadian proceeds of crime legislation, to all intents and purposes a mirror the English and Caymanian models.

Foreshadowing this challenge was a remarkably robust communiqué issued on behalf of the Law Federations of Canada by Richard C. Gibbs Q.C. in his capacity as chairman of the Special Litigation Committee:

The Government's vision of the role of lawyers as State conscripts to secretly inform on their clients is completely repugnant to centuries of legal tradition and modern views of democracy: the legal profession is founded upon independence of the lawyer from the State, loyalty of the lawyer to the client, avoidance of conflicts of interest between the lawyer and the client, and the keeping of client confidences. Asking lawyers to report to the State on their clients is unacceptable to the Law Societies. All of these core values, along with the solicitor and client communication privilege, are recognized as pillars to our democracy. To protect the solicitor and client communication privilege while riding roughshod over the other core values of the legal profession is a completely unacceptable political response to increase State surveillance of transactions conducted for clients by lawyers. The Government has drawn the line as it sees fit and "consultation" with it has proved fruitless.

By unanimous resolution of all the Societies regulating the legal professions in Canada, the Special Litigation Committee of the Federation of Law Societies has been charged with asserting before the Court the traditional constitutional position of an independent legal profession in Canada unfettered in delivering loyal and confidential legal service to its clients. The FLSC Special Litigation Committee gratefully accepts the challenge of seeing that the Judiciary draws an appropriate line between lawyer State cooption and lawyer independence."

Stirring stuff indeed and lest it be thought that the judiciary, in the face of this hyperbole, would shirk its duty and adopt "a purposive construction" of the Canadian statute, the Law Societies in the various Canadian Provinces have been able to obtain injunctions preventing the extension of the reporting and tipping off aspects of the proceeds of crime legislation to the legal profession. At first blush, it might be tempting to conclude that the injunctions were premised exclusively on the explicit safeguards guaranteed by the Canadian Charter of Rights. However, it is significant to note, that in all the judgments granting interlocutory relief, the judiciary recognized the principle of an independent bar as an essential unwritten rule of the constitution and a core democratic principle.

In the LAW SOCIETY OF BRITISH COLUMBIA, CANADIAN BAR ASSOCIATION (as INTERVENOR) v ATTORNEY GENRAL OF CANADA 20th November 2001, the question before the Court was whether the impugned legislation had the effect of placing all lawyers in a profound conflict of interest between their duty of solicitor-client confidentiality owed to a client and their duty to report that client to the government. In considering the principles at stake, Allan J concluded that issues of (a) whether the independence of the bar is a constitutionally protected right and, if so, (b) whether the impugned legislation violates that right, raise serious constitutional questions to be tried. In the course of her judgment, ALLAN J agreed with the following propositions:

    1. An independent bar is a cornerstone of a democratic society and that the bar must be free from government regulation;
    2. An independent bar performs a critical role in the proper administration of justice;
    3. Solicitor – client confidentiality is a principle of fundamental justice;
    4. The protection of the independence of the judiciary is an unwritten principle of the Constitution.
    5. There is an interdependent relationship between an independent bar and an independent judiciary which requires that the former as well as the latter should be considered unwritten constitutional norms;
    6. An independent bar is essential to the maintenance of an independent judiciary. Just as the independence of the courts is beyond question so the independence of the bar must be beyond question. The lawyers of the independent bar have been the constant source of the judges who comprise the independent judiciary in English common law history. The "habit" of independence is nurtured by the bar. An independent judiciary without an independent bar would be akin to having a frame without a picture.
    7. In the performance of what may be called his private function, that is, in advising on legal matters and in representing clients before the courts and other tribunals, the lawyer is accorded great powers not permitted to other professionals.... By any standard, these powers and duties are vital to the maintenance of order in our society and the due administration of the law in the interest of the whole community.

Interestingly, in granting the injunction, the Learned Judge was unpersuaded by the Attorney General’s submissions on the necessity of the impugned legislation to as a means to give effect to Canada’s international commitments given to the FATF to co-operate in efforts to eliminate money laundering from the proceeds of crime. Furthermore, the Learned Judge was unimpressed with the argument that because other countries had enacted comparable legislation requiring lawyers to report "suspicious transactions", that the same should be extended to Canada. Indeed, on an examination of the legislation in the United States, she found no counterpart to the provision in its law and, on the basis of expert evidence doubted whether the US courts would regard such a provision as constitutional.

The Learned Judge also made reference to the European Parliament’s approval of a Directive in November 2001 amending an earlier 1991 Directive "on the prevention of the use of the financial system for the purpose of money laundering." The Directive, to be adopted shortly will be binding on all member states of the European Union. It is significant that an explanatory memorandum to the draft Directive notes that lawyers would be exempted from any suspicious transaction identification or reporting requirements connected with the representation or defence of a client in legal proceedings, and "again to make full allowance for the professional duty of discretion, as called for by the European Parliament," member states would have the option of allowing lawyers to communicate their suspicions of money laundering to their bar association or equivalent professional body. Thus, legal advice remains subject to the obligation of professional secrecy unless the lawyer is taking part in money laundering activities, the legal advice is provided for money laundering purposes, or the lawyer knows that the client is seeking legal advice for money laundering purposes. It is worth noting that in the ensuing debate on these issues, the presidents of the bars of Germany, Switzerland, Austrian and the Netherlands in a joint statement declared:

"Not even totalitarian dictators have asked law firms to do this. A citizen’s right to absolute confidentiality from his or her law firm is a basic fundamental legal right."

As previously stated, the Courts of all the other Canadian Provinces following a co-coordinated attack by the Law Societies and the Canadian Bar Association adopted this decision. In the wake of this judicial unity, the Attorney General of Canada was compelled in May of 2002 to reach an agreement with the Federation of Law Societies of Canada the effect of which is to exempt legal practitioners from the reporting obligations as previously described until the issue has been determined by the British Columbia Supreme Court and beyond. The impugned provisions were brought into effect on 12th June 2002 and until the determination of the appeal have no effect on the legal profession, including notaries.

From the Cayman perspective it is instructive to note how the judicious use of fundamental basic principles can be used as an effective safeguard against the threatened over-enthusiastic foreign inspired interferences of the Legislative and the Executive branches of Government. Brought to its most basic level, is the difference in duty owed to the alleged confessed criminal and the money launderer justified in principle? Is the money launderer entitled to expect less confidentiality in his dealings with his attorney than a person accused of a serious offence against property or person? On any analysis, there can be no justification for this inequality of treatment and it is this that undermines the basic premise of the reporting obligations imposed by our anti money laundering legislation. In any event, if the Canadian and European experience is any guide, the time has perhaps come for a reversal in the swing of the pendulum. Perhaps a "back to basic principles" approach will have to be adopted by the legal profession as a whole. These principles, often ignored in the cut and thrust of arcane negotiations between the Executive and the legal profession, are the keys to the tried and tested mechanisms that prevent the preemptory abrogation of long established constitutional common law rights. Society as a whole will be better served by this re-affirmation to the basic canons of our democracy. For Cayman though, and we hope not, it may well be that an invocation of these principles may be too little too late.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.