New Civil Forfeiture Law
A new civil forfeiture law is proposed by the Chief Minister’s Department in response to the recommendations made by MONEYVAL in the recent assessment of Jersey’s AML and CFT regime. The aim of the proposed law is to provide a complete framework for the confiscation of monies that are tainted with suspicions of criminal conduct.
The regime would reverse the burden of proof thus making it easier for the authorities to seize tainted funds. This addresses the issue that it can be difficult for law enforcement to prove that an offence has been committed.
Currently there is no satisfactory way forwards for banks regarding the use or paying away of funds following the submission of a SAR where a “no-consent” decision to paying away is given by the authorities. The concept of the proposals will be welcomed by industry where it is believed that significant funds are sitting frozen under the "no-consent" regime.
The regime would add a further category of assets that are subject to forfeiture and being used by the States of Jersey following the bringing into force of the Dormant Accounts (Jersey) Law 2017. Comments are invited in a reduced consultation period by 1 November 2017.
Quick Summary of the Civil Forfeiture Law
The Draft Forfeiture of Assets Civil Proceedings (Jersey) Law 201- (the “Civil Forfeiture Law”) would repeal and replacing the existing Proceeds of Crime (Cash Seizure) (Jersey) Law 2008 (the “Cash Seizure Law”) with a single enactment providing for civil forfeiture of cash and bank accounts.
The Civil Forfeiture Law would expand the circumstances where funds could be confiscated from those set out in the existing Cash Seizure Law. The existing procedure for tainted cash is retained, and new procedures developed to enable:
i) the forfeiture of bank accounts where the Joint Financial Crime Unit (the “JFCU”) has issued a “No Consent” response; and
ii) the forfeiture of bank accounts which are suspected to be the proceeds of unlawful conduct or where they have been used or are intended to be used in unlawful conduct.
When would bank accounts be forfeited following a “No Consent” decision by the JFCU?
It is proposed that the procedure would apply if a “no consent” decision has been given by the JFCU in response to a SAR being submitted by a financial institution and more than 12 months has passed.
The grounds include that the Attorney-General has reasonable grounds to believe that the bank account is tainted property, namely property that is reasonably suspected to be connected with unlawful conduct.
Forfeiture of property which is suspected of being the proceeds of crime
The second new procedure is for the restraint and forfeiture of bank accounts which is suspected to be the proceeds of unlawful conduct or has been used or is intended to be used in unlawful conduct. The consultation paper suggests that the procedure will be followed when domestic authorities are tipped off by foreign authorities, but no SAR has been submitted by the financial institution locally.
What is tainted property?
Tainted property is property connected with conduct that is an offence when the act in question takes place in Jersey or conduct that would be an offence if the act was committed in Jersey, but the act was committed abroad.
Procedures for monies to be paid to the government following a SAR that is over 12 months old
For monies to be forfeited and paid to the Criminal Offences Confiscations Fund, the procedure (following a SAR being made) commences with the Attorney General serving notice on the holder of the account and on the bank requiring the holder to attend court to show cause why the property specified in the notice should not be forfeited. If the respondent to the notice fails to attend the hearing, the Attorney General may apply for an order for forfeiture of the property. This order may be made without further notice under Article 11(1).
When the holder of the account is represented at Court, unless they satisfy the Court that the property is not tainted property (either at that hearing or at a later hearing), the Attorney General may apply to the Court for an order for forfeiture of the property or any part of it.
Procedures for monies to be paid to the government following a suspicion that funds are tainted property
Where property is reasonably suspected of being tainted, the Civil Forfeiture Law gives the Court the power to grant a restraint order. The concept is to prevent the property from being paid away while investigations take place as to the origin of the property without informing the holder of the account. However, at this stage the legislation envisages that the Court would order that the monies vest in the possession of the Viscount. There are no safeguards ensuring that the holder of the account is notified. And the subsequent ability to apply for a forfeiture order may be made by the Attorney General with the requirement of only notifying the same parties who the Court ordered should be notified when the restraint order was initially made. This does not necessarily include the affected party.
A bank’s security interest over property may be set aside
The legislation proposes that legitimate security interests granted over the property may be set aside if the Bailiff is satisfied that it is appropriate in the interests of justice on making a restraint order further to which property is passed to the Viscount.
Secondly security interests may be set aside when the Court decides whether to order that the funds are forfeited. The test includes that such security interest was not given in good faith by the party whose conduct is unlawful. There is no limitation placed on the Court such as a requirement that such is according to the interests of justice. This means that a valid security interest given to a bank over property may be set aside.
How broad should the scope of the law be?
The consultation paper asks whether the Civil Forfeiture Law should extend to immovable as well as movable property? It may be considered that it would be prudent for the jurisdiction to start with a new system and test the water before moving to a broader base.
Account Monitoring Orders
The Civil Forfeiture Law would create the ability for the Attorney General to apply to the Bailiff for an account monitoring order requiring banks to state information that is likely to be of substantial value to the civil forfeiture investigation. Banks and their employees would be subject to criminal penalties if they fail to comply. Exceptions are where they did not have the information in the person’s possession or it was not reasonably practicable for the person to comply. The burden of proof is on the balance of probabilities.
Risks to Customers?
Under the Civil Forfeiture Law, no compensation can be claimed by any customer unless it can be shown that the Viscount or the Attorney General acted in bad faith or there was a breach of their human rights. There are no provisions for compensation to be payable other than by applying for a Court Order which is expensive. There are no provisions enabling a party who did not receive notice for a legitimate reason and so had no opportunity to prove that their property was untainted to claim compensation providing the Attorney General did not act in bad faith. The limited scope for redress suggests that there are substantial risks to customers as the Civil Forfeiture Law is framed and careful thought should be given to extending the remedies for consumers affected by draconian provisions which interfere with property rights.
The Civil Forfeiture Law contains clauses enabling a bank or other party to be guilty of tipping off offences. However, they do not assist a bank in the circumstances that an account held by a bank were to be the subject of a restraint order and no notice is given to the account holder affected.
The extent of the tipping off clauses need to be carefully considered against the requirements as a whole of the Civil Forfeiture Law.
The Civil Forfeiture Law is far reaching and impacts considerably on the rights of banks and their customers. From a civil rights perspective it represents another example of the erosion of the rights of the individual in the face of the need to fight international crime.
The new law will be welcomed by banks in respect of certain circumstances when the jurisdiction operates a blunt “no-consent” regime. However, the Civil Forfeiture Law does not create the ability for banks to appeal against a “no-consent” ruling and/or deal with client money when law enforcement fail to investigate within a reasonable period of time. The fact that only the Attorney General can apply for a forfeiture order means that funds can remain held in suspense when there are suspicions that property is tainted but no further actions are taken by the authorities. Greater consideration needs to be given to reviewing practical examples together with industry and considering the repercussions of the provisions of the law.
Respondees should consider whether it would be fair for such a law to be enacted and are encouraged to respond to the consultation.