 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
SP4 Effective measures must be in place that require firms to have both internal and external reporting requirements whenever money laundering or terrorist financing is known or suspected.
8 Reporting Requirements
! Throughout these Notes, and this Chapter in particular, the term “suspicious transaction report” includes known as well as suspected activity of money laundering or terrorist financing whether these are generated by a member of staff or automated monitoring systems.
As the types of transactions which may be used by a money launderer are almost unlimited, it is difficult to define a suspicious transaction. Suspicion is personal and subjective and falls far short of proof based on firm evidence. It is more than the absence of certainty that someone is innocent. A person would not be expected to know the exact nature of the criminal offence or that the particular funds were definitely those arising from the crime. However, a suspicious transaction will often be one which is inconsistent with a customer's known, legitimate business or personal activities or with the normal business for that type of customer. Therefore, the first key to recognition is knowing enough about the customer's business to recognise that a transaction, or series of transactions, is unusual.
There is a statutory obligation on all staff to report suspicions of money laundering of terrorist financing. Section 18 contains the requirement to report to the "Appropriate Person" (for the purpose of these Notes called the Money Laundering Reporting Officer- see section 5.2) in accordance with internal procedures. In line with accepted practice, some businesses may choose to require that such unusual or suspicious transactions be drawn initially to the attention of supervisory management to ensure that there are no known facts that will negate the suspicion before further reporting on to the Money Laundering Reporting Officer or an appointed deputy.
! Once employees have reported their suspicions to the MLRO they have fully satisfied the statutory obligations.
8.1 Knowledge, belief or suspicion or reasonable grounds (S2A(a))
Both the legislation and Notes refer to the obligation to make a report either internally to the MLRO or by the MLRO to the GFIU if there is knowledge or suspicion or has reasonable grounds to suspect. It should be noted that under the Terrorism Act, the requirement to make a disclosure is if there is a “suspicion or belief”[30]. Before proceeding to explain the requirements of the reporting obligations it is useful to give consideration to the meaning of these two terms.
Having knowledge means actually knowing something to be true. In a criminal court, it must be proved that the individual in fact knew that a person was engaged in money laundering. That said, knowledge can be inferred from the surrounding circumstances; so, for example, a failure to ask obvious questions may be relied upon by a jury to imply knowledge. The knowledge must, however, have come to the firm (or to the member of staff) in the course of business. Information that comes to the firm or staff member in other circumstances does not come within the scope of the firm’s obligation to make a report.
A belief is less onerous than a knowledge but stronger than a suspicion. So the requirement to make a disclosure under the Terrorism Act is much wider in scope than that under the Drug Trafficking Offences Act or the Crime (Money Laundering and Proceeds) Act.
Suspicion is more subjective and falls short of proof based on firm evidence. Suspicion has been defined by the courts as being beyond mere speculation and based on some foundation, for example:
“A degree of satisfaction and not necessarily amounting to belief but at least extending beyond speculation as to whether an event has occurred or not”;
and
“Although the creation of suspicion requires a lesser factual basis than the creation of a belief, it must nonetheless be built upon some foundation.”
In a recent
In providing the judgement LJ Longmore said that the existence of a suspicion was a subjective fact - there was no requirement that there should be reasonable grounds for the suspicion. Whilst it was misleading to use the words "inkling" or "fleeting thought", suspicion in this context meant only that the defendant must "think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice. But the statute does not require the suspicion to be "clear" or "firmly grounded and targeted on specific facts", or based upon "reasonable grounds"". In K Ltd, the court said that this definition of suspicion should also be applied to civil cases.
K Ltd and Da Silva now also provide some degree of clarity
about the meaning of suspicion in the context of the
A transaction which appears unusual is not necessarily suspicious. Even customers with a stable and predictable transactions profile will have periodic transactions that are unusual for them. Many customers will, for perfectly good reasons, have an erratic pattern of transactions or account activity. So the unusual is, in the first instance, only a basis for further enquiry, which may in turn require judgement as to whether it is suspicious. A transaction or activity may not be suspicious at the time, but if suspicions are raised later, an obligation to report then arises.
A member of staff, including the MLRO, who considers a transaction or activity to be suspicious, would not necessarily be expected either to know or to establish the exact nature of any underlying criminal offence, or that the particular funds or property were definitely those arising from a crime or terrorist financing.
8.1.1 Reporting requirements in attempted money laundering scenarios
The CJA[32] requires a firm to make a suspicious transaction report if money laundering is known or suspected. The requirement applies to all firms that conduct a relevant financial business so long as this knowledge or suspicion came about in the course of its trade, business or employment.
R97 Where a potential or existing business relationship attempts to conduct money laundering through a new or established relationship but fails, the obligation to report to GFIU remains as this knowledge or suspicion came about from the firms trade, business or profession.
8.2 Internal Reporting
All members of a firm’s staff are obliged to report a knowledge, belief or suspicion of money laundering or terrorist financing.
R98 Firms must establish clear processes for the reporting, processing, reporting and subsequent co-operation with law enforcement agencies arising out of an internal report. These processes must ensure that;
a. The reporting lines between the member of staff and the MLRO are as short as possible and that all members of staff have direct access to the MLRO;
b. the firm’s MLRO must consider each such report and be considered in the light of all other relevant information held on the customer[33], and determine whether it gives grounds for knowledge or suspicion;
c. until the MLRO advises the member of staff making an internal report that no report to GFIU is to be made, further transactions or activity in respect of that customer, whether of the same nature or different from that giving rise to the previous suspicion, should be referred to the MLRO as they arise;
d. if the MLRO determines that a report does give rise to grounds for knowledge or suspicion, he must report the matter to GFIU in accordance with the requirements of 8.3 below as soon as is reasonably practicable after the information comes to him[34];
e. all reports to the MLRO are properly documented even if initially the reporting procedures permit a verbal report to be made, these must be appropriately documented at the earliest possible opportunity;
f. the MLRO should formally acknowledge receipt of the report which includes a reminder to the person who submitted the report of the “tipping off” provisions of the legislation;
g. the records of suspicions and their associated investigations and documentation, including those not made externally be kept for at least five years.
8.3 External Reporting
The CJA and TO[35] both refer to the Gibraltar Financial Intelligence Unit (GFIU) as the person to whom reports of suspected or known money laundering or terrorist financing should be reported.
R99
For the purposes of these Notes it is the
The central reception point for disclosure of suspicions is:
The
Europort
Tel 70211
Fax 70233
E-Mail gibintel@gibraltar.gi
GFIU is
integrated into the Government of Gibraltar Co-ordinating Centre for Criminal
Intelligence and Drugs. It is staffed by
officers seconded from HM Customs
8.3.1 Format of report
The use of a standard format in the reporting of disclosures is important and all firms are encouraged to use the form as illustrated at Appendix 6 – GFIU Reporting form.
Disclosures should be typed whenever possible or, if the standard layout is followed, generated on word-processing software. Firms using popular commercial software packages may be able to take advantage of form-based document and template features. Further information and advice can be obtained from GFIU.
Sufficient information should be disclosed on the suspicious transaction, including the reason for the suspicion, to enable the investigating officer to conduct appropriate enquiries. If a particular offence is suspected, this should be stated so that the report may be passed to the appropriate investigation team with the minimum of delay. However, it is not necessary to complete all sections of the disclosure form and its submission should not be delayed if particular details are not available.
Where additional relevant evidence is held which could be made available to the investigating officer, this should be noted on the form.
The receipt of all disclosures will be acknowledged by GFIU. In the majority of cases, written consent will also be given to continue processing the transaction. However, in exceptional circumstances such as the imminent arrest of a customer and restraint of assets, consent may not be given. The reporting institution concerned will be made aware of the situation and should follow the directions of the Police or Customs officer in charge of the investigation.
R100 Where a firm has submitted a suspicious transaction report to GFIU or where it knows that a client or transaction is under investigation, it should not destroy any relevant records without the agreement of the authorities even though the five year limit may have been reached.
8.3.2 After a report has been submitted
Following receipt of a disclosure and initial research
within GFIU, the information contained in the disclosure (not the disclosure
itself) is allocated to a designated, trained financial investigator in either
the Royal Gibraltar Police or HM Customs
The customer is not approached in the initial stages of the investigation and will not be approached unless criminal activity is identified. Courts generally recognise the need to protect sources of sensitive intelligence, and it is the duty of investigators to seek in such circumstances to obtain the relevant evidence by independent means.
The money laundering and terrorism legislation is drafted in
such a way that reports submitted to GFIU may be allocated only to Police or
Customs Officers for investigation. There is no mechanism for passing the
information to tax authorities either in
Access to the information contained in disclosures is
restricted to designated officers within the Royal Gibraltar Police and HM
Customs
It is therefore important that all disclosures are made to GFIU in accordance with these procedures. It is recognised however that there may be occasions when an urgent operational response is required which can only be effected by direct contact with RGP or Customs. In such circumstances, GFIU must be advised as soon as practicable and a written disclosure submitted as usual.
Whilst the legislation permits disclosure to any Police or Customs Officer only GFIU will issue letters of acknowledgement and consent.
Following the submission of a disclosure report, a firm is not precluded from subsequently terminating its relationship with a customer, provided it does so for normal commercial reasons. It must not alert the customer to the fact of the disclosure as to do so would constitute a “tipping-off” offence. Close liaison with GFIU and the investigating officer is encouraged in such circumstances so that the interests of all parties may be fully considered.
8.3.3 Feedback from the Investigating Authorities
The provision of feedback by the investigating agency to the disclosing firm is recognised as an important element of the system. Case officers in charge of investigations are encouraged to provide feedback, in general terms, as to the progress of investigations. GFIU may also provide feedback on such cases, and will provide to the institutions on a regular basis, feedback as to the volume and quality of disclosures and on the levels of successful investigations arising from them. Such information, whether provided verbally or in written form should not be used as the basis of subsequent commercial decisions.
Firms should ensure that all contact between particular sections of their organisation and law enforcement agencies is reported back to the Money Laundering Reporting Officer, so that an informed overview of the situation may be obtained. The MLRO should ensure that there is an established close co-operation and liaison with GFIU. In addition, Police or Customs will continue to provide information on request to a disclosing firm in order to establish the current status of a specific investigation.
Disclosing firms should not be disheartened by a perceived lack of an immediate result following a disclosure, and should guard against dismissing further suspicions based on similar circumstances. Criminal investigations can, by their very nature, take weeks, months or even years to result in arrest and conviction.
A disclosure may be the very first piece in a complex puzzle, or it may be the final piece which completes the picture.
8.4 Suspected Terrorists or Terrorist Financing Activities - additional requirements
The Terrorism Act provides for four different types of terrorist financing offences:
o Raising funds for terrorism (s5).
o Use of and possession of money and other property for terrorism (s6).
o Arranging funds for terrorism (s7).
o Arrangements for retention or control of terrorist property (s8).
Under the legislation the only time a person is allowed to take part in any of the above is with the express consent of a Police officer (s9(1)) so it would therefore follow that having a suspicion or belief that any of the above is taking place imposes an obligation on a person to stop the transaction or activity.
R101 Where a firm has a suspicion or belief that terrorist financing is taking place it must ensure that the transaction or activity does not proceed any further until a disclosure to GFIU has been made and consent for the transaction or activity to proceed has been given.
R102 A disclosure made under the Terrorism Act must be accompanied with the information on which the suspicion or belief is based and must be made as soon as is practicable after the suspicion or belief was raised.
Two other items of legislation which are applicable in
Gibraltar are the Terrorism (United Nations Measures)(Overseas Measures) Order
2001[36]
and The Al-Qa’ida and Taliban (United Nations Measures)(
R103 Firms are required, in order to comply with the provisions of the Terrorism Orders to search their customer base to ascertain whether any individuals named in them are positively matched. If a positive match is discovered, firms are required to freeze these business relationships and report this to the Governor.
8.5 Data subjects, access rights, suspicious transaction reports and the Data Protection Act
Occasionally, a request for access to personal data held by a data controller (a firm) under Section 14[38] the Data Protection Act will include within its scope one or more money laundering/terrorist financing suspicious transaction reports which have been submitted in relation to that customer to GFIU. Although it might be instinctively assumed that to avoid tipping off there can be no question of ever including this information when responding to the customer, an automatic assumption to that effect must not be made, even though in practice it will only rarely be decided that it is appropriate to include it.
On making a request in writing to a data controller an individual is normally entitled to have made available to him in an intelligible form all the information that constitutes his personal data and any information available to the data controller as to the source of that data.
Section 19[39] of the Data Protection Act provides that personal data is exempt from disclosure under Section 14 of the Act in any case where the application of that provision would be likely to prejudice the prevention or detection of crime or the apprehension or prosecution of offenders. However, even when relying on an exemption, data controllers (i.e. firms) should provide as much information as they can in response to a request.
Where a firm withholds a piece of information in reliance on the section 19 exemption, it is not obliged to tell the individual that any information has been withheld. The information in question can simply be omitted and no reference made to it when responding to the individual who has made the request.
In the absence of evidence to the contrary the disclosure of a suspicion report is likely to prejudice an investigation and, consequently, constitute a tipping-off offence. In determining whether the Section 19 exemption applies, it is legitimate to take account of the fact that although the disclosure does not, in itself, provide clear evidence of criminal conduct when viewed in isolation, it might ultimately form part of a larger jigsaw of evidence in relation to a particular crime. It is also legitimate to take account generally of the confidential nature of suspicious transaction reports when considering whether or not the exemption under Section 19 might apply.
In cases where the fact that a disclosure had been made had previously been reported in legal proceedings, or in a previous investigation, and the full contents of such a disclosure had been revealed, then it is less likely that the exemption under Section 19 would apply. However, caution should be exercised when considering disclosures that have been made in legal proceedings for the purposes of the Section 19 exemption, as often the disclosure will have been limited strictly to matters relevant to those proceedings, and other information contained in the original report may not have been revealed.
To guard against a tipping-off offence, MLROs should ensure that no information relating to suspicious transaction reports is released to any person without the MLRO’s authorisation. Further consideration may need to be given to suspicion reports received internally that have not been submitted to GFIU.
R104 A record should be kept of the steps that have been taken in determining whether disclosure of a report would involve tipping off and/or the availability of the Data Protection Act’s Section 19 exemption from access to personal data.