Failure to Prevent offences: the Guernsey approach

The MONEYVAL mutual evaluation report on Guernsey in 2024 noted that Guernsey's primary money laundering threats arise from foreign criminality, which often manifests from criminal conduct such as bribery, money laundering and tax evasion, among other financial crime.

The report highlighted the relative success of the measures Guernsey has adopted in response to these specific threats among other economic crimes, which were initiated following the Bailiwick's own National Risk Assessments in 2020 and 2023 (the NRAs).  

In its efforts to combat economic crimes and bolster its ability to prosecute the same, Guernsey has introduced a number of legislative changes (the Failure to Prevent offences). These seek to place the burden on relevant organisations and entities to ensure effective compliance and monitoring of financial crimes by placing liability on those same organisations if a relevant offence is committed by an associated party to that organisation. 

Failure to Prevent offences 

Money laundering and terrorist financing

These offences, related to anti-money laundering and counter-terrorist financing, apply broadly to those who are licensed by the Guernsey Financial Services Commission (GFSC), including registered collective investment schemes. Licensees commit an offence if they fail to prevent money laundering or terrorist financing. 

A licensee is guilty and faces an unlimited fine if money laundering or terrorist financing occurs through an associated person. This includes employees, agents, service providers or customers acting on behalf of the licensee. 

Tax evasion

Failing to prevent the facilitation of Guernsey or foreign tax evasion is an offence. Importantly, and distinct from the offences of failure to prevent money laundering and terrorist financing noted above, failure to prevent tax evasion applies beyond just licensees supervised by the GFSC.  

Under this offence, a corporate body or partnership (B) (regardless of its size) is guilty if an associated person, such as an employee or agent, facilitates Guernsey tax evasion. The same applies to foreign tax evasion if B is incorporated in the Bailiwick, conducts business there, or if any part of the offence occurs in the Bailiwick. Offending bodies or associated persons are liable to a fine. 

Bribery

The MONEYVAL report highlighted that the Bailiwick's main risk in respect of money laundering is by way of bribery and corruption. In response to its NRAs and by way of section 5A of the PC Law there is now the offence of failure to prevent bribery. Under the offence of failure to prevent bribery, a commercial organisation (C) is guilty if an agent or other person (A) associated with the commercial organisation bribes another person intending either:  

Importantly, A does not need to have been found guilty of an offence under section 1 of the PC Law for C to be guilty of an offence under section 5A, rather C can be deemed guilty of this offence if A would be considered to be guilty of an offence under section 1. Where the prosecution cannot prove beyond a reasonable doubt that an offence under section 1 has been committed there will be no offence under section 5A.

Connection test

Importantly, the test for the connection of A with C is wide. It includes, but is not limited to, A being employed by C. The extent of A's relationship with C is determined by reference to all the relevant circumstances, not merely by reference to any stated relationship between A and C. In circumstances where A is an employee of C there is a presumption unless proved to the contrary that A is a person who performs services for or on behalf of C.  

Relevant commercial organisations guilty of an offence under this section are liable on conviction to a fine. No prosecutions have been made under the PC Law at the time of writing.  

Prevention procedures

Where any of the above offences occur, it is a defence to prove that when such an offence was committed the relevant organisation had prevention procedures and policies in place in relation to those persons associated with it to prevent the occurrence of such offences. The court will determine whether such a defence exists by referring to any relevant codes of practice or guidance issued by the GFSC, as well as any guidance published by the States of Guernsey. 

It is therefore crucial for organisations to be aware that in any case where it seeks to rely on the defence the burden rests on the organisation to prove that it had adequate procedures in place to prevent the relevant offence.

Guidance as to Failure to Prevent

The Preventative Offences Ordinances and the PC Law provide for the States of Guernsey to issue guidance about appropriate prevention procedures which organisations may take to tackle financial crime. For the offences of failure to prevent bribery and tax evasion the States of Guernsey Committee for Home Affairs provided guidance in April 2024. In respect of the offences of failure to prevent money laundering and terrorist financing, the GFSC has updated the Handbook on Countering Financial Crime to now include guidance in respect of the same.  

The committee guidance provides six guiding principles for organisations which apply to the offences of failure to prevent bribery and tax evasion upon which commercial organisations should understand so as to fulfil the relevant approaches to manage such risks. The published guidance is deliberately based on the same principles which exist in the relevant UK guidance documents for the same offences. The principles make clear that commercial organisations, regardless of their size, should adopt a risk-based approach to managing bribery risks.  

Liability of officers

It is important to note for senior management of organisations in Guernsey, where an offence under any of Guernsey's Failure to Prevent Offences is committed by an incorporated or unincorporated body and is proved to have been committed with the consent or connivance of, or can be attributable to any neglect on the part of any of the below, they will be considered to be guilty of the same offence and may be proceeded against accordingly:  

The introduction of the above mechanism to hold corporate entities liable for the acts of associated persons (and indeed the senior management of the organisations) is a result of issues identified in the NRAs. Under the identification doctrine applicable in Guernsey, previously a corporate entity would only be liable for a criminal act if an individual that committed the offence could be identified as the "directing mind and will" of that entity. The Failure to Prevent Offences aim to resolve past difficulties in proving corporate criminal responsibility. 

Broad scope of Guernsey Law and the UK ECCT

Similar to the system in Guernsey under the PC Law, relevant organisations in the UK captured under the Economic Crime and Corporate Transparency Act 2023 (the ECCT Law) can be prosecuted if the associated person’s conduct constitutes a base fraud offence, even if the associated person is prosecuted for an alternative offence or is not prosecuted at all.  

Many Guernsey organisations would not fall under the above criteria and would therefore be under no obligation to have policies and procedures in place to counteract the failure to prevent offences of fraud in this context. Importantly for Guernsey, the ECCT's extra-territorial provisions, akin to the UK Bribery Act 2010, will require that organisations are aware of the broad definition of an "associated person". In the Guernsey context, this includes UK offshore group companies or subsidiaries who, if established in Guernsey, may then need to implement measures to prevent fraud. Significantly, the ECCT law in the UK does not provide the same mechanism for apportioning liability to relevant officers who may have consented or been complicit with the relevant offence.

Key recommendations 

Guernsey law has adopted a broad and stringent approach to preventing financial crimes. We have the following key recommendations for our clients: