The impact on a trustee of potential holding of criminal proceeds

This article looks at the implications for a trustee in Jersey faced with the difficult situation where it is suspected that trust assets may be, or indeed have been confirmed as being, the proceeds of crime and/or a civil fraud. Trustees will undoubtedly maintain rigorous systems to comply with their money laundering and other regulatory obligations but that does not necessarily prevent the worst from happening where, for example, they are themselves deceived by the person settling assets on the trust. Trustees therefore need to understand their responsibilities in such circumstances and the range of possible outcomes, in terms of personal liability and in terms of the consequences for the trust as a whole and for the relevant ‘tainted’ assets.

Leaving aside the consequences for the relevant trust and trust property, the regulatory dimension will be of particular concern to any trustee who discovers that they hold property that is or is suspected to be the proceeds of crime. Trustees are under strict legal obligations pursuant to the Proceeds of Crime (Jersey) Law 1999, the Money Laundering (Jersey) Order 2008 and the Drug Trafficking Offences (Jersey) Law 1988 to establish and maintain appropriate systems of customer due diligence, ongoing monitoring of transactions and reporting procedures to guard against the risk of accepting property that represents the proceeds of crime. Trustees will also need to ensure they co-operate fully with investigations, including notices issued by the attorney-general to answer questions, furnish information or produce documents pursuant to article 2 of the Investigation of Fraud (Jersey) Law 1991…

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