By Alric Lindsay
According to the cause list published by the Cayman Islands judiciary, Canover Norbert Watson and Bruce Andrew Blake will have their matters heard before The Rt Hon Sir John Goldring, The Rt Hon Sir Michael Birt, and The Hon Clare Montgomery KC in the Cayman Islands Court of Appeal on September 12, 2024. While the grounds of appeal are unknown, lawyers might bring forth arguments regarding Watson’s convictions under the Proceeds of Crime Act and the Penal Code and Blake’s convictions under the Penal Code. The outcome of Watson’s appeal is especially expected to draw international attention since, during his trial and at the time of the convictions, Cayman Islands authorities were actively seeking money laundering prosecutions to demonstrate to the Financial Action Task Force that the Cayman Islands were serious about prosecuting for money laundering and other offences under the Proceeds of Crime Act. In essence, the more evidence that the Cayman Islands could present to the FATF, the more likely the Cayman Islands could be removed from the FATF grey list or not be placed on the FATF blacklist.
Watson’s charges
Looking back on Watson’s charges, on October 28, 2022, a jury found Watson guilty of the following offences:
Count 1- making a secret commission of US1,540,900, in connection with Watson’s alleged intent to decelve the Confederation of North, Central America and Caribbean Associations Football (CONCACAF) by giving Enrique Sanz, an agent of (CONCACAF), three sales invoices which contained statements that were false or erroneous in a material particular and which were intended to mislead CONCACAF
Count 3- transferring criminal property, contrary to section 133 of the Proceeds of Crime Law 2008, whereas it was alleged that Mr Watson transferred criminal property, namely US$600,000 from the account of Forward Sports International Management Inc. in Panama, to the account of the Cayman Islands Football Association (CIFA) , in Grand Cayman, knowing or suspecting it to represent, in whole or in part, the proceeds of crime
Count 4- transferring criminal property, contrary to section 133 of the Proceeds of Crime Law 2008, whereas it was alleged that Mr Watson transferred criminal property, namely US$300,000 from the account of Forward Sports International Management Inc. in Panama, to the account of CIFA in Grand Cayman, knowing or suspecting it to represent, in whole or in part, the proceeds of crime
Count 6- entering an arrangement, contrary to section 134 (1) of the Proceeds of Crime Law 2008, whereas Mr Watson allegedly entered into or became concerned in an arrangement with Blake, which he knew or suspected, facilitated the retention, use or control of criminal property namely US$140,000 by or on behalf of another person
Count 7- false accounting, contrary to section 255 (1) (b) of the Penal Code (2013 Revision), whereas Mr Watson and Mr Blake allegedly furnished information for the purposes of an audit, dishonestly, and with a view to gain for themselves or with intent to cause loss to CIFA, produced or made use of a document, namely a loan agreement dated 31st December 2013 between CIFA and Forward Sports International Management Inc. in Panama in the sum of US$600,000, which to their knowledge was false or deceptive in a material particular, in that CIFA and Forward Sports International Management Inc. had not entered into a loan agreement in the terms set out in the document
Count 8- false accounting, contrary to section 255 (1) (b) of the Penal Code (2013 Revision), whereas Mr Watson and Mr Blake allegedly furnished information for the purposes of an audit, dishonestly, and with a view to gain for themselves or with intent to cause loss to CIFA, produced or made use of a document, namely a loan agreement dated 31″‘ December 2013 between CIFA and Cartan International Management Inc. in Panama in the sum of US $600,000, which to their knowledge was false or deceptive in a material particular, in that the CIFA and Cartan International Management Inc. had not entered into a loan agreement in the terms set out in the document
On October 28, 2022, a jury found Blake guilty of the following offences:
Count 7- false accounting, contrary to section 255 (1) (b) of the Penal Code (2013 Revision), whereas Mr Watson and Mr Blake allegedly furnished information for the purposes of an audit, dishonestly, and with a view to gain for themselves or with intent to cause loss to CIFA, produced or made use of a document, namely a loan agreement dated 31st December 2013 between CIFA and Forward Sports International Management Inc. in Panama in the sum of US$600,000, which to their knowledge was false or deceptive in a material particular, in that CIFA and Forward Sports International Management Inc. had not entered into a loan agreement in the terms set out in the document
Count 8- false accounting, contrary to section 255 (1) (b) of the Penal Code (2013 Revision), whereas Watson and Blake allegedly furnished information for the purposes of an audit, dishonestly, and with a view to gain for themselves or with intent to cause loss to CIFA, produced or made use of a document, namely a loan agreement dated 31″‘ December 2013 between CIFA and Cartan International Management Inc. in Panama in the sum of US $600,000, which to their knowledge was false or deceptive in a material particular, in that the CIFA and Cartan International Management Inc. had not entered into a loan agreement in the terms set out in the document
Blake was found not guilty of the following offences:
Count 2- entering an arrangement contrary to section 134 (1) of the Proceeds of Crime Law 2008, where it was alleged that Mr Blake entered into or became concerned in an arrangement with Mr Watson which he knew or suspected facilitated the retention, use or control of criminal property, namely US$500,000 by or on behalf of another person
Count 5- acquiring criminal property, contrary to section 135 of the Proceeds of Crime Law, whereas Mr Watson allegedly acquired criminal property, namely US$I40,000 from Forward Sports International Management Inc. Panama, knowing or suspecting it to represent, in whole or in part, the proceeds of crime.
Sentencing
In connection with the above guilty counts, Watson is currently serving eight years in prison, while Blake is serving two years. The sentences were delivered on April 19, 2023.
L-R: Canover Watson, Bruce Blake
The international importance of Watson’s conviction
As widely publicised by the FATF, evidence of additional prosecutions for money laundering offences was necessary before the Cayman Islands could be considered for removal from the FATF grey list.
Regarding this, the FATF clearly stated its position in each periodic plenary.
For example, on June 17, 2022, the FATF said the following about the Cayman Islands:
In February 2021, the Cayman Islands made a high-level political commitment to work with the FATF and CFATF to strengthen the effectiveness of its AML/CFT regime. The Cayman Islands should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) imposing adequate and effective sanctions in cases where relevant parties (including legal persons) do not file accurate, adequate and up-to-date beneficial ownership information in line with those requirements; and (2) demonstrating that they are prosecuting all types of money laundering cases in line with the jurisdiction’s risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.
The FATF encourages the Cayman Islands to continue to implement its action plan to address the above-mentioned strategic deficiencies as soon as possible as all deadlines have now expired.
On October 21, 2022, a week before the jury found Watson guilty of money laundering offences, the FATF said:
Since February 2021, when the Cayman Islands made a high-level political commitment to work with the FATF and CFATF to strengthen the effectiveness of its AML/CFT regime, the Cayman Islands has taken steps towards improving its AML/CFT regime, including by imposing adequate and effective sanctions in cases where relevant parties (including legal persons) do not file accurate, adequate and up-to-date beneficial ownership information in line with those requirements. The Cayman Islands should continue to work on implementing its action plan to address its strategic deficiencies, including by demonstrating that they are prosecuting all types of money laundering cases in line with the jurisdiction’s risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.
The FATF urges the Cayman Islands to swiftly complete its action plan as all deadlines have now expired and to address the above-mentioned strategic deficiency by February 2023.
It is evident from the FATF’s statements that it was critical for the Cayman Islands to demonstrate “that they are prosecuting all types of money laundering cases in line with the jurisdiction’s risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.”
The significance of not satisfying the FATF’s requirements is that the Cayman Islands risked remaining on the FATF grey list or being placed on the FATF blacklist.
In the case of FATF blacklisting, it would have been catastrophic for the financial services industry in the Cayman Islands.
Fortunately, the Cayman Islands were finally removed from the FATF grey list in 2023, coincidentally following Watson’s conviction in October 2022 and sentencing in April 2023.
Concerning this, the FATF said the following on October 27, 2023:
The FATF welcomes the Cayman Islands’ significant progress in improving its AML/CFT regime. The Cayman Islands strengthened the effectiveness of its AML/CFT regime to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2021 related to (1) applying sanctions that are effective, proportionate and dissuasive, and taking administrative penalties and enforcement actions against obliged entities to ensure that breaches are remediated effectively and in a timely manner; (2) imposing adequate and effective sanctions in cases where relevant parties (including legal persons) do not file accurate, adequate and up to date beneficial ownership information; and (3) demonstrating that they are prosecuting all types of money laundering in line with the jurisdiction’s risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions. The Cayman Islands is therefore no longer subject to the FATF’s increased monitoring process.
The Cayman Islands should continue to work with CFATF to sustain its improvements in its AML/CFT system.
The FATF’s reason for the Cayman Islands’ removal from the grey list is the same as previously stated in their plenaries i.e., the Cayman Islands had finally demonstrated “that they are prosecuting all types of money laundering in line with the jurisdiction’s risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.”
Put another way, if the Cayman Islands authorities did not actively prosecute businesses or individuals to obtain money laundering convictions and apply “dissuasive, effective, and proportionate sanctions,” it is likely that the Cayman Islands would have remained on the grey list or placed on the blacklist.
As an illustration of another active pursuit of prosecutions, it was publicly reported that the Crown alleged in 2022 that another person, Dalton Watler-Lyons, had criminal property in his home in the form of cash of US$30,000.
In that case, the Crown had to prove that Watler had US$30,000 in his possession and it was criminal property, constituting Watler’s benefit from criminal conduct.
Justice Marva McDonald-Bishop (Actg.) concluded in Watler’s case that “a jury properly directed could not be satisfied to the extent that they are sure that criminal conduct gave rise to the US$30,000 found in the possession of the defendant.”
She added: “The no-case submission is upheld, and for that reason I will not call upon the defendant to answer.”
While it is unclear how many other cases like Watler existed in 2022 and what weight the FATF may have placed on the security of successful money laundering prosecutions, the Cayman Islands were clearly and actively pursuing money laundering prosecutions. In the absence of the relevant prosecutions, the Cayman Islands risked remaining on the grey list or being placed on the blacklist.
Significance of Watson’s appeal
Although Watson’s grounds for appeal are unknown, the outcome of his appeal on September 12, 2024, is particularly significant for political, regulatory, and other reasons.
From a political perspective, the FATF noted in its plenaries that “the Cayman Islands made a high-level political commitment to work with the FATF and CFATF to strengthen the effectiveness of its AML/CFT regime.” It is unclear how a win or loss by Watson would affect the FATF’s perception of Cayman’s political commitment “to strengthen the effectiveness of its AML/CFT regime.”
From a regulatory perspective, if Watson is successful, the FATF may take the view that Cayman Islands’ sanctions for money laundering are ineffective or weak. On the other hand, if he loses the appeal, the FATF may reinforce its view that the Cayman Islands have successfully applied “dissuasive, effective, and proportionate sanctions.”
Lastly, it will be interesting to learn on September 12, 2024, whether members of the jury knew about and followed the FATF’s global publication of the Cayman Islands on the grey list, particularly the FATF’s statement about what prosecution was necessary for the Cayman Islands to be removed from the grey list. ( Ideally, the members of the jury would have avoided these FATF publications from their date of appointment, however, the extent of their actual knowledge is unknown.)
