Jersey: The Cost of Failing to Know Your Client

Last Updated: 30 May 2007
Article by Appleby  

With increasing regulation and tougher penalties, KYC (Know Your Client) has been central to financial services industry compliance standards for many years. However, with several recent high profile cases in the media, once again, this is a hot topic of conversation.

The introduction in Jersey of the Proceeds of Crime (Jersey) Law 1999 was designed to provide a comprehensive code to protect and enhance Jersey’s reputation as a transparent and well-regulated offshore centre. The legislation deals with confiscation orders, money laundering, handling the proceeds of crime, tipping off as well as setting up procedures to ‘forestall and prevent money laundering’. These latter procedures apply to those carrying on a financial services business.

A financial services business is defined to include banks, trustees, bureaux de change and those involved in company formation and administration as well as credit references. Notwithstanding the detailed legislative provisions and the regular checks carried out on financial services businesses by the Jersey Financial Services Commission ("JFSC"), there have been few prosecutions brought.

In the case of Attorney General v Caversham Fiduciary Services Limited, Caversham Trustees Limited and Bell [2005] JRC 165, the Royal Court sat to consider the sentence to be imposed following guilty pleas to charges of failing to comply with the requirements of Article 2(1)(a) of the Money Laundering (Jersey) Order 1999 ("the Money Laundering Order") contrary to Article 37(4) of the Proceeds of Crime (Jersey) Law 1999.

Article 2(1)(a) of the Money Laundering Order provides that:

(2) No person shall in the course of any financial services business carried on by him form a business relationship, or carry out a one-off transaction, with or for another person unless, (a) the person carrying on the financial services business maintains the following procedures:

  • Identification procedures

  • Record keeping procedures

  • Internal reporting procedures

  • Such other procedures of internal control and communications as may be appropriate for the purposes of forestalling and preventing money laundering.

The charges arose out of an incident in 2002 when one of the trust company’s directors was approached to set up a discretionary trust by a solicitor in England. He said that a Mr. Stevens had been appointed as attorney for a Mr. Lee. The latter, who was a non-UK resident, and who had recently received funds from the sale of a sauna business, wished to hold them through an offshore trust. The solicitor sent through documents to identify the attorney, but not the ultimate client.

No Connection with the Trust

A few days later, £850,000 was sent from the solicitor’s account to the trust company. Two days later, the solicitor requested the trustee to pay £825,000 to four entities, none of which had any connection to the trust. The trust was established, with the attorney as the sole beneficiary, and the next working day, the payments out were made. This failure to adhere to ‘know your client’ procedures came to light during a routine inspection by the JFSC nearly two years later.

At trial, the defendants originally submitted that there was no case to answer. They argued that the purpose of the particular provisions of the Money Laundering Order was to prevent a systematic failure in the maintenance of procedures. It was not meant to apply to a one-off failure as this appeared to be. However, the Court found that maintenance was an absolute duty and one breach alone was sufficient for the purposes of a criminal trial. The defendants then entered guilty pleas and were sentenced. They appealed on a point of law, and although the detailed judgment is not yet available, it is known that the appeal did not succeed and it is confirmed that even a single breach may constitute an offence.

At the sentencing it was accepted that the director had been negligent rather than conniving in any way. By way of mitigation, it was pleaded that the reputation of the defendants had suffered considerably (both individual and the entities) because of the prosecution. The director had left the trust company and had taken up a much lower paid position. All the defendants had been co-operative with both the police and the JFSC.

No Laundering

The Crown stressed the substantial amount of money involved, the short period in which the whole transaction occurred and the lack of internal control or communication. There was no laundering of any proceeds of crime in this case, but the Crown said that if there had been, it would have been calling for a term of imprisonment.


Taking these factors into account, the Court found as follows:

"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 Court fined the trust company and its associated company £65,000, the director £35,000 and ordered the defendants to pay the prosecution costs.

Shortly after the Court of Appeal judgment (6 February 2006) the JFSC wrote to all regulated entities reminding them of the necessity of maintaining adequate procedures at all times, and the possibility of a one-off breach leading to criminal liability. Although it was stressed that a decision to prosecute would ultimately be for the Attorney General, the JFSC wished to explain that not every breach would be so referred. Factors in assessing the gravity of the breach would include whether there was a threat to the client or the reputation of the island, whether it was deliberate or accidental, whether those involved co-operated, and whether there was a poor compliance history.

This case and the JFSC correspondence shows that it is not just those actually involved in money laundering who may be prosecuted, but also those who have failed to get to know their client.

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.

In association with
Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions