Trust firm facing £650k fine for missing Angola corruption ‘red flags’

Tuesday 16 February 2021

A Jersey trust company is facing a fine of up to £650,000 for failing to recognise the “obvious risk” that a structure it set up could have been used to embezzle funds from Angola's public purse, for the benefit of its corrupt rulers.

The Solicitor General, Matthew Jowitt, is also seeking a £50,000 contribution towards costs from LGL Trustees, which previously admitted two counts of failing to comply with anti-money laundering rules.

The Jersey-owned company was represented by Group CEO and Managing Director John Pirouet when it appeared before Royal Court for its sentencing yesterday.

Summing up the facts, the Solicitor General said the case concerned breaches of the 2008 Money Laundering Order in respect of business which LGL took on and maintained from April 2010 until 2016, which involved using a limited partnership structure to invest hundreds of millions of dollars’ worth of public funds from Angola into real estate around the world.

Pictured: The case was presented to the Court by the Solicitor General, Matthew Jowitt.

The Court heard that while LGL identified “a very high risk of money laundering” from the outset due to the involvement of Angola - described as “a very high-risk jurisdiction” for money laundering - it failed to “identify the real risks that were apparent, and to respond appropriately to those risks."

It also failed to collect customer due diligence information that it was required to, by law.

The Solicitor General said that there were “numerous ‘red flags’” that the investment scheme might a fraudulent one to “skim funds from Angola’s public treasury and re-route them to the notoriously corrupt Angolan president, and/or to his relatives, and associates of theirs."

There was, however, no suggestion that any of the money provided was of suspicious origin as it was public funds, or that the investments into which the money was placed were in themselves suspicious - in fact they were described as “high-quality property investments."

“The money laundering risk related to the possibility of corrupt misuse of funds diverted from the Jersey investment structure that LGL was administering,” the Solicitor General said.

Pictured: The company was represented in Royal Court by Group CEO and Managing Director John Pirouet.

He went on to say that, if LGL had “appropriate and consistent policies” in place to prevent money laundering, they would not have taken the business on in 2010, or at least, would have terminated shortly after further 'red flags' came to light. 

The Court heard that LGL had received £900,000 in fees over the period, which represented 4% of its turnover.

The Solicitor General said LGL would have been facing a £1.2m fine if they had not pleaded guilty. Taking into account their admission and cooperation, he moved for a £650,000 fine and asked for £50,000 to be paid towards the prosecution's costs.   

Advocate William Grace, defending, assured the Court that LGL had policies and preventative measures in place in relation to money laundering, but that they had fallen short of the required standard.

He then went on to describe the breaches as “policy and procedure offences”, noting that this characterisation was not an attempt to trivialise them.  

Pictured: Carey Olsen's Partner, William Grace was representing LGL.

He rejected the view that the offences were a “very serious breach of the anti-money laundering order”, which he said would equate to a systemic, repeated breach, with intentional disregard of the requirements and the defendant having failed to take any preventative steps.

He added a “very serious breach” would have also intentionally enabled money laundering by the customer or a third party. 

He said that, in the case of LGL, the company had not been effective in managing the risk of money laundering.

He described the offence as having stemmed from a mistake made in 2010, which was then carried forward. “It was not six years of consistent offending,” he said.

Advocate Grace said LGL understood why it was before the Court and accepted the importance of the rationale behind the prosecution.

“LGL stands shoulder to shoulder with the court and the industry,” he said. “It’s got something wrong in this case but otherwise it seeks to uphold the high standards that are expected of it.”

The lawyer said LGL was not an “industry outlier” and subscribed to “all the standards Jersey has set as well as the best practice expected of the industry”.

“It has made mistakes in respect to challenging circumstances in 2010… but it is not a rogue business… It is punished in respect of one mistake but not in respect of its behaviour generally."

Pictured: Advocate Grace said LGL hadn't attempted to mislead the JFSC.

He said it was “a matter of deep regret” that mistakes had been made, but that it was not “an attempt to mislead… or to get the Commission to agree to something it might not have otherwise done.”

“It was unintentional,” he stressed.

Advocate Grace argued that LGL’s guilty plea had saved the court “a lot of time in weighing up what is a difficult question." 

He said LGL’s cooperation had been “beyond the norm” describing it as proactive whether in interviews or in writing. 

He said the company felt it had learned its lesson and wished to move on, having undergone changes in its board and senior management team. 

“It has and will suffer reputational damage from this and that will take time to recover from,” Advocate Grace said. “The business is not going away, it is of Jersey for Jersey.”

He said that while his clients didn’t oppose the principle of costs, the contribution sought by the Crown was excessive in light of LGL’s cooperation.

He also asked for the company to be given three months to pay its fine before telling the Court: “They do not wish to find themselves before the court and they are sorry that they are." 

The case was heard by Royal Court Commissioner Julian Clyde-Smith, with Jurats Jane Ronge and Dr Gareth Hughes, reserved their judgment.

Their decision on the fine to be imposed will be announced later this week.