Prosecutors and law enforcement agencies in the Cayman Islands have significant powers to restrain and, in certain circumstances, confiscate assets representing the proceeds of criminal activity (Proceeds of Crime Act (2020 Revision) ("POCA"), Part III.
This short guide, which forms part of McGrath Tonner's financial crime and anti-money laundering series, focusses on restraint orders.
Restraint orders
A restraint order is an order prohibiting a person from dealing with realisable property subject to certain conditions and exceptions (section 451). It bears considerable similarities with the civil Mareva injunction and it is a frequently used weapon in the arsenal of the various Cayman Islands investigatory authorities.
A restraint order may state that it applies -
- to some or all realisable property held by the specified person; and/or
- to realisable property transferred to the specified person after the order is made.
Restraint orders are available to law enforcement agencies at the investigatory stage (prior to criminal charges being laid) and are designed to prevent assets, that may ultimately be made the subject of a confiscation order, from being dissipated.
The application process
A restraint order may only be made on an application by the Director of Public Prosecutions ("DPP"). It may be made ex parte to a judge in chambers and any application will almost invariably be advanced without notice to the subject of the order. The application will be in writing and must be supported by affidavit evidence.
The DPP should ensure that a record of the hearing is kept and that the usual requirements of full and frank disclosure are observed. Failure to do so may result in the order being set aside at a later inter partes hearing (see below).
Statutory requirements
The Grand Court of the Cayman Islands may grant a restraint order if any one of the following five conditions is satisfied (section 41):
- a criminal investigation has been started in the Islands with regard to an offence and there is reasonable cause to believe that the alleged offender has benefited from their criminal conduct;
- proceedings for an offence have been started in the Islands (and not concluded) and there is reasonable cause to believe that the defendant has benefited from their criminal conduct;
- either-
- an application by the DPP has been made under sections 28 - 29 ("reconsideration" cases) or 36 - 37 ("absconding" cases) and not concluded; or
- the court believes that such an application is to be made,
- either-
- an application by the DPP has been made under section 30 ("reconsideration of benefit") and not concluded, or
- the court believes that such an application is to be made,
- either-
- an application by the DPP has been made under section 31 ("reconsideration of available amount") and not concluded; or
- the court believes that such an application is to be made,
The Court may grant a restraint order if one of the above conditions is fulfilled but it is not mandated to do so. The Court may refuse an application where there is insufficient risk of dissipation (although this will be rare at the ex parte stage). It may also require the suspect to disclose his assets.
Living and Legal Expenses
A restraint order will have immediate repercussions for the suspect and their family since access to money will be restricted.
For this reason, a restraint order may make provision for -
- reasonable living expenses of the suspect; and/or
- reasonable legal expenses of the suspect; and/or
- for the suspect to have sufficient access to money so that they may carry on a trade, business, profession or occupation.
The judge hearing the application should make such allowances not least because the suspect is yet to be convicted and it is by no means inevitable that a confiscation order will follow. As such, the Court should provide for such matters without the suspect having to make an application (however this is not always the case).
It is significant that the "reasonable legal expenses" allowance does not permit expenditure on the suspect's defence to the criminal prosecution in respect of which the restraint order is made. This has been a cause of controversy and can make a suspect's life very difficult. Experienced Cayman counsel should be consulted if and when this issue arises.
Discharge and variation
An application for the discharge or variation of a restraint order may be made by any person affected by it (section 46).
The grounds for discharge may include failure of the applicant to give full and frank disclosure at the ex parte hearing, failure of the law enforcement authority to commence proceedings within a reasonable time and/or the absence of reasonable grounds to believe the suspect has benefitted from criminal conduct.
Variation applications are common, often on the basis that the restraint order goes beyond that which is required to preserve assets for a confiscation order.
Appeal
Any person affected by the grant, refusal, discharge or variation of a restraint order may appeal to the Court of Appeal. The Court of Appeal may either confirm the decision or make such order as it believes to be appropriate.
Enforcement of the order
Third parties (such as financial institutions or government registries) may be given notice of, and be bound by, the terms of the restraint order.
Law enforcement agencies may seize any realisable property to which the restraint order applies to prevent its removal from the Islands.
Failure to comply with a restraint order will be treated as contempt of court.
This is a complex area of law. The subject(s) of any such order, or third parties affected by such an order, would be well advised to seek legal advice promptly.
Footnote
1. All section numbers are references to POCA unless otherwise stated.
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.
