Guernsey seminar highlights growing pressure on firms to get suspicion and reporting decisions right

From identifying suspicion to avoiding tipping off, a recent Guernsey regulatory seminar showed that the biggest risks for regulated businesses often lie not in the law itself, but in how firms respond when concerns first emerge.

When suspicion arises, the challenge for regulated businesses is rarely spotting the rule book.

It is knowing how to apply it in the moment, with incomplete facts, commercial pressure, and the risk of making matters worse through a poorly judged next step. That was the clear message from our recent regulatory seminar in Guernsey, titled “Dealing with the proceeds of crime – tips and traps”.

The event focused on one of the most sensitive areas of compliance: how firms identify suspicion, investigate concerns, and respond in a way that is legally sound, proportionate, and defensible.

The discussion was led by Christopher Edwards and Abel Lyall, making clear that strong decision making in this area depends less on abstract legal theory and more on disciplined internal process. Firms with clear escalation routes, robust records, well trained staff, and a calm approach to fact finding are far better equipped to manage risk than those that act too quickly or fail to document why decisions were made.

The seminar offered a practical reminder that in a regulatory environment shaped by scrutiny, uncertainty and cross border complexity, process is not a back-office task. It is a frontline priority.

Suspicion is a low threshold, but it still needs a factual basis

One of the first points explored was the meaning of suspicion. The speakers emphasised that the threshold is deliberately low. A person does not need proof, certainty or even a concluded view that criminal conduct has taken place. Equally, however, suspicion is different from a vague feeling or an instinct unsupported by facts. There must be some concrete basis for concern, even if the picture is incomplete.

This matters because the reporting duty can be triggered by both subjective and objective elements. If an individual genuinely suspects money laundering or criminal property, the obligation to report may arise.

Even where the individual does not say they were suspicious, there may still be risk if a reasonable person in possession of the same information would have formed that view. That dual test places a heavy responsibility on firms to ensure staff understand what warning signs look like and know how to react when they appear.

Most concerns begin with something that does not fit

The seminar highlighted the types of issues that commonly give rise to concern. These include unusual transactions, activity with no obvious commercial rationale, inconsistencies between what a client said at the outset and what is happening in practice, evasive behaviour when information is requested, adverse media, sanctions screening results and contact from enforcement authorities.
None of these automatically proves wrongdoing but each may be enough to justify closer review.

A useful practical point was that firms can only recognise what is unusual if they have taken the time to understand the client relationship properly in the first place. Good onboarding, strong know your client information and effective transaction monitoring are not merely administrative exercises. They are what allow a business to tell the difference between an expected pattern and one that deserves scrutiny.

Investigation should be careful, documented and proportionate

A particularly important element of seminar focused on what should happen after an initial concern arises.

The answer was not to panic and file a report at the first sign of uncertainty.

Instead, firms should investigate sensibly and at an appropriate pace. That may include asking further questions, seeking supporting documents, checking explanations against independent sources, reviewing historic information and, where needed, obtaining legal advice or third-party intelligence.

Chris and Abel stressed the importance of approaching this stage with an open mind. Some matters that first appear troubling do turn out to have a credible explanation. The key is not to sit passively on a concern, nor to rush into a conclusion, but to work through the issue methodically. Thorough documentation is essential. A contemporaneous note of how the concern arose, what steps were taken, who was consulted and why conclusions were reached can become one of the most important protections available to the firm if questions are asked later by a regulator, law enforcement or a court.

Tipping off remains a major risk, but sensible internal communication is possible

Another major theme was tipping off. Once suspicion exists, firms must think very carefully about who can be told and what can be said.

The safest principle is to keep the circle as narrow as possible. Discussions with the money laundering reporting officer and other essential internal decision makers are clearly part of the compliance process, and boards may also need enough information to perform their oversight role. But wider circulation creates the risk of unnecessary disclosure and accidental missteps.

Client communications are often the most sensitive area. The seminar made clear that there is no need to mislead a client, but equally a firm cannot reveal that a report has been made or that a criminal concern is under review.

In practice, this often means using carefully worded, neutral explanations and ensuring that all contact is channelled through a small number of senior individuals. Clear scripts, internal protocols and disciplined handling can make the difference between a controlled situation and a damaging one.

Good reporting is clear, structured and easy to follow

The discussion on suspicious activity reports was especially practical. The speakers observed that too many reports focus heavily on the history of escalation rather than the underlying concern. A better approach is to begin by explaining the relevant structure or relationship in simple terms, identify the parties involved, and then set out plainly what gives rise to suspicion.

Jargon, assumed knowledge and internal shorthand can make reports hard to understand and less useful to the authorities receiving them.

This is important not only for the quality of the report itself but also for any associated consent request. If a firm is asking for permission to continue dealing with funds or assets, the request needs to explain exactly what is proposed, why it matters and why granting consent would be appropriate. Clear storytelling, in the best sense of that phrase, is central to effective reporting.

Cross border and sanctions issues add complexity

The seminar also underlined how quickly these matters can become more complicated when assets, transactions or parties touch more than one jurisdiction.

A decision in Guernsey may not be the end of the analysis if action also needs to be taken in the United Kingdom, Switzerland or elsewhere. Firms may need local advice and may have to consider reporting or consent issues in more than one place.

Sanctions add a further layer. A sanctions report does not automatically mean a suspicious activity report is required, because designation itself is different from criminal conduct. But if there is suspected sanctions evasion or the assets may represent criminal property, the proceeds of crime regime may still be engaged. The important lesson is that firms must keep the separate legal regimes distinct while also understanding where they overlap.

The central lesson: process protects the firm

The broader lesson from the seminar is that firms cannot afford to treat suspicion and reporting questions as isolated compliance events.

They are governance issues, reputational issues and, in many cases, client relationship issues as well. The organisations that respond best are not necessarily those with the most resources, but those with the clearest processes, the best internal communication and the discipline to pause, assess and record their reasoning before acting.

For boards, compliance teams and client facing professionals, the message is straightforward. The legal tests may be familiar but applying them well remains difficult and the cost of getting it wrong can be significant.

In that context, the most effective protection is often not a single legal answer, but a well-run process that stands up to pressure, supports good judgment, and gives firms confidence in the decisions they make.