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This is a “sad but cautionary story” and a vital read for all in the financial services sector. In 2023 MONEYVAL will again be assessing Jersey's compliance against the international Financial Action Task Force (“FATF”) standards. 

This judgment therefore comes at a timely moment and serves as a useful reminder to ensure that policies and procedures are up-to-date and are being complied with at all levels.

Background

Mr Dowling was dismissed from his employment for gross misconduct and brought a Tribunal claim for unfair dismissal against his former employer Concentric Analytics Limited (“Concentric”), which “provides financial services to the public and is regulated by the JFSC”. Mr Dowling was described by the Tribunal as having “decades of senior experience within the financial services industry.”

Suspicious activity and SARs

Mr Dowling was in communication with a potential new client (“PNC”) regarding the PNC’s tax affairs. The correspondence includes questions such as the following from the PNC:

“PNC: as you told me, there will be no automatic exchange of information with my tax jurisdiction is that right?… And that I could choose to give [redacted] or any other tax number why even give a real tax number?” 

“PNC: … But how could I have funds transferred to me without raising flags?...”

Concentric’s staff handbook required all staff to “report any and all suspicions of money laundering or terrorist financing as soon as practicable by fully completing an internal suspicious activity report form [“SAR”] and passing it directly to the MLRO.” Not only was this an internal requirement but it is also a statutory obligation under the Proceeds of Crime (Jersey) Law 1999.

Mr Dowling did not file a SAR in relation to his communications with the PNC. He subsequently sought to justify this on the basis that, given his experience of dealing with clients in relation to their sensitive and private tax affairs, he was not suspicious and in any event the client take-on process was still at a very early stage.

Concentric’s Money Laundering Reporting Officer (“MLRO”) came across correspondence between Mr Dowling and the PNC by accident, because it had been misfiled.  She was immediately concerned – the emails were “obviously suspicious” – and the matter was escalated. Concentric subsequently summarily dismissed Mr Dowling for failing to comply with the contractual and statutory duty to report suspicious activity.  

Key issues before the Tribunal

There were two key issues before the Tribunal:

• Was Concentric justified in deeming the behaviour in question to have constituted gross misconduct, ie “conduct so serious that it justifies instant dismissal without notice”?
• Did Concentric following a fair process?

Gross misconduct

The Tribunal’s judgment highlights the critical importance of following compliance and anti-money laundering requirements:

“37. Is it right to characterise either form of conduct – not raising an internal SAR; not forwarding this correspondence to the MLRO, supposing a substantive difference - as ‘gross misconduct’ so as to find that it undermined the contract of employment and so as to justify summary dismissal? To answer that, I revert to some of the language which I used in another case involving the financial services sector, namely Wilkinson v Fairway Trust Limited. [2020] TRE 091. I do so as follows, not because I attempt to equate the facts of both cases, but because the language continues to be apposite:

‘The procedures are in place in regulated entities for a crucial purpose, namely to recognize and manage situations in which, with the best will in the world, the entity and therefore the Island, risk becoming vulnerable to money laundering, terrorist financing and corruption. Non- compliance is highly dangerous and a regulatory default…

Not every breach of a contractual term will amount to gross misconduct, and not every instance of gross misconduct will inevitably warrant summary dismissal. I have therefore gone on to consider the effects of the conduct in this case. …it has left the Company vulnerable to a finding of fault by the regulator, it has left the Company vulnerable to loss of reputation, it was careless of the vulnerability of the Company and the Island to money laundering,…’

38. In those circumstances I find that Mr Dowling was guilty of gross misconduct for: harbouring suspicion but not raising an internal SAR; and/or having reasonable grounds to suspect that the PNC was engaged in money laundering and/or that  the property being discussed constituted or represented proceeds of criminal conduct, yet not reporting it; and/or for his admitted fault in not forwarding this correspondence to the MLRO of the Company.  
39. I conclude on those bases and on any of them, or any combination of them, that the Company was entitled to dismiss Mr Dowling without notice. Given the nature and effect of the conduct described, I believe that any reasonable employer might have acted as the Company did in the circumstances of this case. Summary dismissal was within the band of responses reasonably open to a reasonable employer engaged in the provision of financial services in Jersey.”

Procedural fairness

On the question of procedural fairness, by reference to the test established in British Home Stores Limited v Burchell [1980] 1 CR 303 the Tribunal held:

“I find that the Company has been able to satisfy the Burchell  questions affirmatively in its favour;  that it was entitled to regard the behaviour as gross misconduct, i.e. conduct so serious as to justify instant dismissal without notice; I find that the processes adopted by the Company were fair both in appearance, giving everything its fair context, and in substance, at the stages both of the disciplinary hearing and of the appeal. I take into account that this was a small company in terms of personnel and had only been in existence for some three years. It was dealing with a matter of this kind for the first time.  I note that it had made good the absence of in-house specialty by paying for and taking the advice of an external experienced HR professional, and of external Jersey lawyers.”

Accordingly the unfair dismissal claim was dismissed.  The judgment concludes with the following comment:

“In this case, a professional has lost his livelihood at the latter end of his career as a result of falling short of the scrupulous attention to the processes of protection against money laundering which employers, the law and the well-being of the Island demands of all those in positions such as his. It is a sad but cautionary story.”

At Viberts we can advise on disciplinary procedures, compliance and regulatory law matters, conduct independent workplace investigations and represent clients in the Tribunal and Royal Court. Here is a link to the full tribunal judgement:

Simon Dowling v Concentric Analytics Limited (jerseylaw.je)