Knowledge

The first Deferred Prosecution Agreement ("DPA") between Jersey's Attorney General (the "AG") and a regulated financial services provider has been approved by the Island's Royal Court (the "Court").

DPAs are an alternative to criminal or regulatory action through which a prosecutor and a corporate can agree to settle allegations of criminality without a prosecution, which is then subject to a review by the Court.

While the case of AG v Afex Offshore (Jersey) Limited is an unusual one, there are some points from the Court's judgment that will be of interest to individuals working in regulated financial services providers in the Jersey.

Key points

• The financial penalties set out in DPAs submitted to the Court will be scrutinised – in this case, the Court was particularly interested in:
  • an additional "discount" that had been applied beyond the usual 1/3rd discount for a guilty plea in a criminal matter;
  • whether penalties for separate counts should be treated individually or cumulatively; and
  • the impact of a financial penalty on a defendant's solvency.

The Court has made clear that this is not a rubber-stamping exercise.

• The Court (and the AG) are mindful of the impact of a DPA on those named in it – in this case the AG sought to redact names of certain individuals because of ongoing criminal investigations, the names of certain trust companies whose policies and procedures the defendant had failed to review and the names of employees of the defendant who were not at fault and who were working in non-public roles under the instructions of others.
  • The case was unusual – the defendant was already being investigated when the Criminal Justice (Deferred Prosecution Agreements) (Jersey) Law 2023 (the "DPA Law") came into force in March 2023, at which point the defendant proposed discussion about a potential DPA. The Court made it clear that "ordinarily, an entity already under investigation is not able to avoid the effect of a prosecution simply by filing a self-report".

About DPAs

DPAs take the form of agreements between the AG and a corporate that must be approved by the Court. The DPA Law sets out that a DPA may include a fine, a compensation plan, a commitment to implement or amend a compliance programme, a contribution to the AG's costs, and the remuneration of an independent monitor to report on compliance with the DPA while it is in force.

Once the AG and the corporate agree on the terms of the DPA, the AG will apply to the Court for it to be approved – the Court may approve it, refuse to approve it or indicate that it would approve it under different terms.

The judgment in AG v Afex quotes from the AG's DPA Guidance, which states that a DPA:

"is a discretionary tool which enables a corporate to make full and carefully structured reparation for its criminal conduct and avoid the damaging consequences of a conviction. In a small jurisdiction, the harm caused to the reputation of a corporate as a result of a conviction is likely to be significant. In addition, a corporate that enters into a DPA with the Attorney General may avoid a complex, lengthy and costly trial".

The facts

Afex Offshore (Jersey) Limited ("Afex") arranges foreign exchange and cross-border payments on behalf of its clients. It is owned by a US company.

Since 2022 Afex had been under criminal investigation and a production order had been granted in July 2022 in respect of services it had supplied to a client who opened an account with them, received payment of just over 3m Euros and paid it out to various people and entities.

Very soon after the DPA Law came into force, Afex contacted the AG about the possibility of a DPA. Afex filed a self-report about the conduct that led to charges 1-5 on the indictment, covering the services described above, relating to failures to verify identification measures and failures to properly scrutinise related money laundering risks.

The Court described the omissions as "serious failings".

In response to certain queries from the AG in relation to the first self-report, a follow-up self-report was issued which became the basis of charges 6-11 on the indictment, which cover Afex's reliance on clients' own AML identification measures and Afex's failure to test and scrutinise those AML processes.

The decision

The Court approved the DPA, noting that the conduct that gave rise to it was "a serious failure in corporate governance driven by individuals within the Defendant acting recklessly", but significantly it also found that "had the Defendant’s procedures been applied properly, the transaction at the heart of the events would not have occurred and the relationship terminated".

The financial penalty of £408,240 was approved (along with a £60,000 contribution to the AG's costs), despite some consideration by the Court on the level of "discount" that should be applied to the starting point of £850,000 for engaging in the DPA process.

Conclusion

The fact that it has taken more than 18 months since the introduction of the DPA Law for the first application to come before the Court shows that it is not a fast-track process for avoiding prosecution. The scrutiny that the Court applied to the financial penalty also demonstrates that it will not rubber stamp applications without consideration.

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