3.4 Money service business and use of prepaid cards

A combination of features make bureaux de change and prepaid cards attractive to
criminals; they predominantly involve lower value, cash-denominated transactions with
prepaid cards in particular facilitating cross-border movement of funds. The FATF has
identified a number of money exchange indicators relating to transactions, customer profile
and behaviour, and geographical profile in a typologies report. Bureaux de change need
also to be aware of the risks presented by: disconnected CDD measures; lack of employee
awareness of money laundering and financing of terrorism; and training provided to
customer facing employees.

The risks inherent in the use of prepaid cards are set out in Section 4 of the AML/CFT
Handbooks published by the JFSC.

Despite the example typologies identified below, it is again important to bear in mind that
the vast majority of bureaux de change and prepaid card activity in Jersey occurs for
legitimate purposes and current intelligence suggests only a small minority are used for
the purposes of criminal activity.

Money service business typology 1

In the case of AG v McFeat, Smyth and Howard, the Defendants were each convicted under
the Drug Trafficking Law of one count of assisting another to retain the benefit of that
person’s drug trafficking, by laundering the proceeds thereof in Jersey.

Their offending formed part of a conspiracy headed by Liam and Richard Norris to import
commercial quantities of cannabis resin into Jersey from the UK. Around £2.7 million of
cannabis resin was seized from premises in Staffordshire when several of the conspirators
were arrested in March 2012.

All three Defendants entered guilty pleas on the basis that they suspected the money they
were transacting on behalf of a third party to be the proceeds of drug trafficking. Between
them, the Defendants laundered over £150,000, McFeat over a period of 34 months and
Smyth and Howard (who lived together) over a period of 27 months.

The laundering of those proceeds was accomplished in two ways. First, the Defendants
would exchange Sterling for euros (always in amounts below the threshold likely to have
prompted a SAR) at various post offices throughout the Island. The relatively small
individual sums occasionally necessitated many visits to different post offices on the same
day.

The second method concerned the loading of money in Jersey onto prepaid travel cards,
which cards had been issued in the Defendants’ respective names. These cards enable the
movement of cash between countries. With knowledge only of the required multi-digit
number, cash could be “loaded” by the Defendants onto a card which was in the hands of a
third party in another jurisdiction. That third party could in turn withdraw the money from
the card. Money loaded onto the cards in the names of Smyth and Howard was shown to
have subsequently been withdrawn in Staffordshire, while that loaded by McFeat was
withdrawn in Spain.

Warning indicators:

• The absence of any (or any substantial) remuneration for those alleged to have been
  laundering the proceeds of drug trafficking does not necessarily indicate that those
  persons have no involvement in the laundering. There may be other reasons for their
  involvement, e.g. in payment of a debt, pressure from friends/family etc.
• The Defendants deliberately laundered sums in individual amounts small enough to
  avoid raising questions by counter staff and attracting the attention of authorities, and
  over a significant period of time. Although money laundering is often associated with
  large amounts and using sophisticated techniques, such as the use of corporate vehicles,
  this case demonstrates that vigilance must be maintained even when dealing with
  relatively small amounts. This reinforces the need for comparatively junior staff at a
  relevant person to demonstrate a healthy professional skepticism.

Money service business typology 2

In the case of AG v Ellis, the Defendant is the mother of Liam Norris (referred to in money
service business typology 1) and, as with McFeat, Smyth and Howard (see above), she was
involved with the conspiracy to import commercial amounts of cannabis resin into Jersey.
Liam Norris engaged the services of numerous individuals to launder the proceeds of the
importations. The Defendant was convicted under the Drug Trafficking Law of one count of
assisting another to retain the benefit of that person’s drug trafficking.

Over a 17-month period between 2010 and 2011, the Defendant – who during the relevant
period resided in the UK – travelled to Jersey and changed a total of £25,133 from Sterling
into euros at numerous bureaux de change at Jersey post offices and Co-op stores. She used
an expired passport in her former married name on 5 separate occasions to exchange money
at Jersey post offices. She also used that name on a further 29 occasions to purchase euros.

The value of the drugs being trafficked was substantial, however the Defendant’s own
involvement concerned sums of a far smaller value, which it may be more difficult to
identify as the proceeds of crime.

Warning indicators:

• Given the residence of the Defendant in another jurisdiction, the need to convert Sterling
  into euros (and vice versa) on a regular basis at bureaux de change in Jersey should
  prompt questions.
• The attempted use of an expired passport should prompt questions (since it is unlikely
  to comply with the requirement to obtain evidence from a reliable and independent
  source set out in Article 3 of the Money Laundering (Jersey) Order 2008).

Money service business typology 3

In the case of AG v Figueira, the Defendant was convicted under the Drug Trafficking Law of
two counts of assisting another to retain the benefit of drug trafficking. In the same
proceedings she was convicted of contempt of court, having absconded whilst on
conditional bail after initially having been charged with drug trafficking offences 7 years
earlier.

Over a 17-week period, and in eight separate payments, the Defendant had transferred the
total sum of £14,900 in cash to Portugal via Girobank. These transfers had been made from
different post offices around the Island, but it had not been possible to trace the final
destination of the funds. The Defendant had also opened a bank account in Jersey into
which cash payments totalling £5,150 had been made for which there did not appear to be
any legitimate source.

She confirmed that the transferred monies were not hers and belonged to another person, a
male, who was currently serving a 7-year prison sentence in Madeira. She declined to
identify this individual. In return for her assistance, the Defendant had had her rent paid
over the said period in the sum of £2,890.

Warning indicators:

• Even where the sums are relatively insignificant, if the source of funds is suspicious this
  may be an indicator of criminality.
• The rewards of the third party launderer are not always obvious. In this case, the
  Defendant had her rent paid over the material period at a rate of £170 per week.