Strikingly Similar: Disclosure Regulations Powers & Financial Orders

On 2 November criticism was made of the speed by which production orders and the like could be obtained.  Proposals put to the States of Guernsey to amend the Disclosure Law appear to offer a solution.  But is it the right one?

We wrote recently about The Inspection of Bailiwick Law Enforcement Report (see here), noting criticism of the ability to make effective use of production orders, account monitoring orders and customer information orders (Financial Orders).  Financial Orders cannot be sought without H M Procureur's approval.  The problem was:

"Very lengthy delays were commonplace. This frustrated investigators, seriously limited the rate at which investigations could progress, and had an adverse effect on asset recovery performance. We also found that delays with international mutual legal assistance cases were commonplace."

On 7 November 2018 a solution was proposed (see here), which has since been approved at the States meeting of 12 December 2018.

The Court has the power to grant Financial Orders to compel the disclosure of information under The Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999.  There are parallel provisions under certain other criminal legislation.  The States have now approved amendments to The Disclosure (Bailiwick of Guernsey) Law, 2007 (Disclosure Law) to provide law enforcement with the direct ability to exercise similar tools without the need for a court order.    

The Disclosure Law and Regulations

The Disclosure Law is principally concerned with suspicious activity reports (SARs).  The obligation to raise a SAR is triggered by knowledge or suspicion of money laundering – they are a money-laundering specific tool.

s.11 of the Disclosure Law permits the introduction of regulations covering:

"such other matters as are reasonably necessary to enable any person to whom a disclosure is made under this Law, or any other enactment, to obtain additional information from any person"

The regulations introduced under this section are The Disclosure (Bailiwick of Guernsey) Regulations, 2007 (as amended) (Disclosure Regs). 

The Disclosure Regs, provide that where a SAR has been raised, a prescribed police officer can serve notice in writing to compel the production of specified information about that SAR:

• From the person who made the SAR, under regulation 2; and/ or
• From a third party, under regulation 2A.

Failure to respond to a regulation 2 or 2A notice is a criminal offence, attracting penalties of up to 5 years imprisonment and/ or an unlimited fine.

The New Powers

The States have now approved the amendment of the Disclosure Law to permit the introduction of regulations empowering prescribed officers to compel the production of information from any person where:

• A report has been made regarding knowledge or suspicion of crime, or the proceeds of crime, irrespective of whether the crime took place within or outside of the Bailiwick of Guernsey.  Such reports are not limited to SARs and cover reports of any crime; and/ or
• A report has been made for any purpose, including seeking information, where the report is made by an authority or agency specified in the ordinance.  These include specified Guernsey authorities, but also include non- Guernsey agencies with functions akin to those of Guernsey Police's Financial Intelligence Unit (FIU).

Implications

Subject to the content of the subsequent regulations, this may be a significant change.  Assuming that the new regulations are similar to the Disclosure Regs, it is anticipated that they will empower prescribed police officers to compel the production of information.  In order to be effective we would expect that power to be accompanied by criminal consequences for non-compliance.  While this power to compel production of information is not labelled a "Financial Order", the distinction is limited.  It would nevertheless provide the ability to compel the production of documents and information in a like manner to a production order or an account monitoring order.

A key difference between this power and a Financial Order is that no court order is required to make the power effective.  The change confers quite extensive powers to the police directly, without the scrutiny of the Court and without requiring H M Procureur's approval.

The powers under the Disclosure Law were originally designed to enable the investigation of SARs made in Guernsey.  The change anticipates that these powers will be exercisable where no SAR has been made, in Guernsey or otherwise, and potentially where there may be no grounds for a SAR to be raised at all.  It will be interesting to see how the tension which this might create will be managed in practice.

If there are barriers to the effective deployment of Financial Orders then certainly change is needed.  But the significance of taking these powers beyond the scrutiny of the Court and without requiring H M Procureur's approval should not be under estimated.  We would therefore expect any subsequent regulations to include safeguards regarding the use of these powers in order to protect those who may be subject to them and also to enable the police to exercise them with confidence in the appropriate circumstances.