Mik Underdown, MLRO of The Blenheim Group in Guernsey, provides a brief overview of one of the key proposals in the new Disclosure Law that will shortly be enacted in Guernsey.
Financial service providers in Guernsey will need to take careful note of the new disclosure law that will come into force later this year.
The draft legislation for the new law – The Disclosure (Bailiwick of Guernsey) Law, 2007 – is currently under review and, when enacted, will introduce some new rules that will affect the obligations of reporting suspicious transactions.
The reason for updating the rules regarding disclosure is because currently there is no positive obligation to report suspicious transactions in certain circumstances. Consequently, this has been identified by the Financial Action Task Force (‘FATF’) as an area where Guernsey’s anti-money laundering legislation does not meet international standards.
The key difference that will appear in the new legislation is the introduction of a ‘reasonable man’ test of knowledge or suspicion of money laundering activity.
Current Guernsey legislation does not hold a positive obligation to report knowledge or suspicion of money laundering, unless there is knowledge or suspicion that the laundering involves the proceeds of drug trafficking.
What Guernsey legislation does contain however, is an indirect obligation that can be found in the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999. This indirect obligation refers to non-drug related money laundering by making it an offence to assist another person to retain the proceeds of criminal conduct. (The person can, of course, defend themselves by disclosing their actual knowledge or suspicion to, for example, their firms Money Laundering Reporting Officer).
This highlights the key difference that will be introduced by the new Disclosure Law because a person potentially becomes guilty of an offence not only if they fail to report that knowledge or suspicion, but also if they fail to report where they have reasonable grounds for knowing or suspecting that another person is engaged in money laundering.
This will mean that just an awareness of facts that would lead a reasonable man to know or suspect money laundering may be taking place, will be enough for a person to be guilty of an offence if they do not report it.
The new legislation will mirror that in other jurisdictions (including the UK) and will clearly need the MLROs within businesses to inform and educate their staff.
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.