Court blocks disclosure in UK investigation

The Grand Court of the Cayman Islands has denied an application by an unnamed U.K. bank to disclose confidential customer information to the Metropolitan Police in a British money laundering investigation.

Disclosing the information would violate Cayman’s Confidential Relationships (Preservation) Law (2009 Revision), according to the April 26 ruling by Justice Angus Foster.

However, according to local legal sources, the ruling was not surprising and conformed with previous decisions of the court dealing with similar circumstances.

They noted that the order served upon the bank did not fall within any of the established channels set out in Cayman Islands legislation that provide a gateway through which confidential information can be passed to law enforcement and regulatory authorities within and outside the Cayman Islands.

The ruling identified the applicant only as a London-based “major British bank” that was subject to a production order by an English court under the U.K. Proceeds of Crime Act.

The British police had asked the court in Kingston, England, to compel the bank to produce records for a period of six years in relation to a specific bank account and other accounts in which the police suspect had an interest.

Specifically, the court order directed the bank to hand over to the police paid checks, credit/debit slips, mandates, statements of accounts, managers’ notes, inter-account and telegraphic transfers, customer correspondence, other vouchers, customer interview notes and all other transaction details.

The bank believed the terms of the production order covered information related to professional matters involving the Cayman Islands. Although this information was recorded on its computer systems in London, the bank considered itself to be bound by the Cayman Islands Confidential Relationships (Preservation) Law and asked the Cayman Islands Grand Court for direction.

Under that law, the bank would be liable to criminal penalties if it divulged confidential information without express permission of the Grand Court.

The Confidential Relationship Preservation Law was enacted in 1976 with the intention of protecting lawful business dealings and imposing strict penalties on those who disclose confidential information unlawfully.

At the same time, the law has often been denounced as an indication that the Cayman Islands is a secrecy jurisdiction, which involuntarily or otherwise protects illicit transactions.

However, confidential records can be passed on to law enforcement and regulatory authorities in and outside the Cayman Islands if one of many exceptions set out in the legislation applies. One of the exceptions extends to cases where information is given to “a court, tribunal or other authority” in connection with any “proceeding” both within and outside the Cayman Islands.

Application denied

The Grand Court’s denial of the bank’s application to release the customer information to the U.K. police hinged on the definition of the terms “authority” and “proceeding” under the Confidential Relationships (Preservation) Law.

The judge held that the police investigation and U.K. production order do not constitute a “proceeding” which the law defines as “any civil or criminal court proceeding,” “including a preliminary or interlocutory matter leading to or arising out of a proceeding.”

Once the court had granted the production order, there was no longer a “proceeding” before the English court, the ruling said.

“It was clearly an application by the police for information held by the bank to be produced to them for purposes of their investigations. There is no evidence that that application has or inevitably will lead to any other proceeding.”

In addition, the exception under the law applies to a proceeding tried, inquired into or determined by “any court, tribunal or other authority.”

Justice Foster ruled “there is no evidence that at present anything is being tried, inquired into or determined by any court or tribunal for which or in connection with which the confidential information is required to be given in evidence.”

Nor, he wrote, could it be argued that the law intended the term “authority” within the context of “courts and tribunals” to include the police. As such, the ruling is compatible with a similar Grand Court decision in 1999, which held that the German police and state attorney do not fall under the definition of “authority” in the context of the Confidential Relationships (Preservation) Law.

“In my opinion, to suggest that section 4 of the CRPL extends to the provision of confidential material to the police to assist them in their investigations is a step too far and would in effect amount to sanction of the acquisition by the police of a wide range of generalized material that is clearly confidential; in effect sanction of a ‘fishing expedition,’” Justice Foster stated.

While the ruling might appear to put a stop to confidential information requests as part of any foreign police investigation that has not yet lead to court proceedings, local legal sources said the information could in fact potentially still be obtained in several other ways. The U.K. police could for instance request assistance from the RCIPS as confidential information can be obtained by the local police in relation to investigations of offences committed both within and, on authorization by the governor, outside of the Cayman Islands. In addition, a number of other statutes provide exceptions to the Confidential Relationships (Preservation) Law in order to permit international legal assistance but were not used in this case.

Penalties and reputational damage

The bank, which according to the application appeared to have every intention to make the information available to the police, argued that it would be subject to penalties and reputational damage, if it did not comply with the U.K. court’s production order.

The bank invoked section 3 (2) of the law, according to which the legislation does not apply to a bank “to the extent to which it is reasonably necessary for the protection of the bank’s interest.”

Citing case law, Justice Foster rejected this argument stating that the provision only applies to “matters to which the bank is a party.” This did not include being party to a disclosure application in the sense intended by previous judgments.

Justice Foster briefly contemplated the potential effect of his ruling by stating he accepts international cooperation and assistance are desirable and that his decision is not indicating any disrespect for the orders of the English court. “However, I must interpret and give effect to the provisions of the relevant legislation,” he wrote.

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