ACTION NO. 306 OF 2001

IN THE MATTER of the Rules of the Supreme Court

AND

IN THE MATTER of an application by Provident Bank & Trust of Belize Limited for interpleader relief against the claims of Emerald Incorporated, Mirage House Holding Co. Ltd. and The Central Bank of Belize for the recovery of monies on deposit in the names of the First and Second Defendants

BETWEEN

AND

ACTION NO. 310 OF 2001

IN THE MATTER OF THE MONEY LAUNDERING (PREVENTION) ACT, CHAPTER 104 OF THE SUBSTANTIVE LAWS OF BELIZE, R.E. 2000

AND

IN THE MATTER OF A RESTRAINT ORDER PURSUANT TO SECTION 23 OF THE MONEY LAUNDERING (PREVENTION) ACT

___

BEFORE the Hon. Abdulai O. Conteh, Chief Justice.

APPEARANCES:

Mr. Emil Arguelles for the plaintiff.
Mr. Dean Barrow S.C. and Mrs. Samira Musa Pott for the second defendant.
Mr. Wilfred Elrington S.C. for the third defendant.
Mr. Rohan Phillip, Crown Counsel, for the Crown.

___

RULING

These two applications were heard together as it was agreed with the respective attorneys that in view of the subject-matter involved, the monies in the hands of the Applicant in Action No. 306 of 2001, the two applications could be consolidated. These monies relate to the accounts of the 1st and 2nd Respondents with the Applicant in Action No. 306 and the monies with The Provident Bank and Trust, Belize City of Emerald Incorporated of which the Respondent in Action No. 310 is chairman and signatory.

Action No. 306 came before the Court as an interpleader issued by Applicant. In this summons the Provident Bank claims relief by way of interpleader. The summons is supported by Affidavits of Leopold Waight sworn to on 14 and 18 June respectively.

Order 63 of the Supreme Court Rules provides for interpleader proceedings in this jurisdiction.

R.1 provides for when relief by way of interpleader may be granted.

R.2 provides for matters to be proved by the Applicant.

R.5 states the summons to be made by the Applicant.

From the Affidavit evidence it appears that the Applicant is a bank or financial institution and in the course of its business came into possession as a banker of certain sums of monies deposited with it by the First and Second Respondents.

As a financial institution however the Applicant is by the provisions of Chapter 104 of the Laws of Belize, R.E. 2000 - Money Laundering (Prevention) Act under the supervision of the Supervisory Authority, who happens to be the Governor of the Belize Central Bank. Also, by the provisions of the Act the Applicant is enjoined to report certain transactions to the Supervisory Authority. The latter is also empowered to instruct the Applicant in respect of certain matters aimed at securing the objectives of the Act.

The Central Bank of Belize is the 3rd Respondent in these proceedings and its Governor on whose behalf appearance was made in these proceedings also swore to an Affidavit and gave viva voce evidence. It transpired that he said he took legal advise upon the strength of which he instructed the Applicant not to allow any more transactions on the accounts of the 1st and 2nd Respondents. The effect of this was practically to freeze operations on these accounts.

The Governor deposed in his Affidavit that his instructions were issued in virtue of s. 11(6) of the Act as he informed; and he stated in oral testimony that this was pursuant to legal advice he was given.

The relationship between the 1st and 2nd Respondents with the Applicant is that of banker/customer. The Act also provides that subject to the Belize Constitution the confidentiality of banker/customer may be overridden in furtherance of the objectives of the Act - section 25.

From the evidence it is clear that the Governor of the Central Bank is not however making any claims to the monies in the hands of the Applicant. Nor is he making any claims on the Respondents in respect of those monies. All he has done is to instruct the Applicant not to allow transactions on the Respondents' Accounts with the Applicant. Also, the 1st and 2nd Respondents are not setting up any competing claims individuals or jointly. They are account holders with the Applicant.

So in effect this application itself is not strictly speaking an interpleader proceedings. There are no competing claims to the monies in the hands of the Applicant, so he is not really a stakeholder: the Respondents inter se have not stated any competing or adverse claims to the monies in the hands of the Applicant.

The Applicant is however in the circumstances in the unenviable position of fulfilling his contractual obligation to the Respondents by allowing withdrawals from their accounts with the Applicant if they so wish, in the face express instructions to the contrary by the 3rd Respondent, its Supervisory Authority.

This puts the Applicant as it were, between the proverbial rock and a hard place. It is, by law, enjoined to carry out the instructions of the Governor in certain respects and to collaborate with him as the supervisory authority, in securing the objectives of the Act.

The Applicant also has the ordinary and usual contractual obligations of a banker towards his clients to pay out monies to them if their accounts are in funds. There is no doubt that the accounts of the 1st and 2nd Respondents are in fund with the Applicant. In fact the evidence is to a sizeable extent in the amount of US $2m plus.

However, although the Applicant's summons states that the Respondents, including the 3rd Respondent the Central Bank, should state the nature and particulars of their respective claims to the money in dispute, it is clear that there is on the evidence no competing or adverse claims by the Respondent to the money in the hands of the Applicant. What is in issue is the instruction by the 3rd Respondent to the Applicant not to allow transactions including withdrawals from the accounts of the 1st and 2nd Respondents.

However, I do not think that there is warrant under any provisions of the Act for the Governor to instruct or order a commercial bank or a financial institution such as the Applicant, not to meet or honour its contractual obligations with its customers. To do so would be a breach of contract and would be unlawful. It may even amount to an illegal taking of property for the purpose of s. 17 of the Constitution of Belize.

To freeze, confiscate or seize property in Belize for whatever reason must be clearly authorized by law or sanctioned by the Courts of this country. Therefore, the stoppage of withdrawals from the Respondents' accounts on the purported instructions of the Central Bank to the Applicant was unlawful. Those instructions cannot find support in or be validated by the provisions of section 11(f) of the Money Laundering (Prevention) Act - more on this later.

It is pertinent to set out here the relevant paragraphs of the Affidavit of the Governor of the Central Bank of Belize, which perhaps explain how the Applicant became caught in the quandary that necessitated this application for interpleader relief. This Affidavit inter alia states:

"I, KEITH ARNOLD, of 89 Bella Vista, Belize City, Belize, Governor of the Central Bank of Belize, the Third Defendant herein, MAKE OATH AND SAY as follows:

1. I am the Supervisory Authority under the Money Laundering (Prevention) Act, Chapter 104 of the Laws of Belize, Revised Edition 2000 (hereinafter referred it as "the Act"), and bear overall responsibility for carrying out anti-money laundering supervision, as more fully described in Part lll of the Act.

2. Section 13 of the Act requires all financial institutions to pay special attention to all complex, unusual or large business transactions, or unusual patterns of transactions, and upon reasonable suspicion that such transactions could constitute or be related to money laundering, to promptly report such suspicious transactions to the Supervisory Authority.

3. Pursuant to the above, the Plaintiff herein did report to me on 18 May 2001 the following business transactions involving the First Defendant and the Second Defendant:

"a) Deposit dated 2 July, 1999 to account of Mirage House Holdings Company Limited (nominee agent for Emerald Incorporated) for Four Hundred Twenty Three Thousand United States dollars (US$423,000.00).

b) Deposit dated 12 July, 1999 to account of Mirage House Holdings Company Limited (nominee agent for Emerald Incorporated) for Two Million Three Hundred Eighteen Thousand United States dollars (US$2,318,000.00).

1) Deposit dated 5 August, 1999 to account of Mirage House Holdings Company Limited (nominee agent of Emerald Incorporated) for One Hundred Seventeen Thousand United States dollars (US$117,000.00).

2) Cheque No. 052445 dated 30 August, 1999 drawn on the Belize Bank Limited for Three Hundred Twenty Four Thousand, Two Hundred Eighty Five United States Dollars (US$324,285.00) deposited to account of Emerald Incorporated.

A copy of the covering letter from the Manager of the Plaintiff, together with copies of suspicious transaction reports are now produced and shown to me and exhibited hereto and marked "KA 1".

4. On 24 May, 2001, I received a further letter from the Plaintiff requesting my advice as to what it should do in the event the First and Second named Defendants wished to withdraw funds from the said accounts. A copy of the said letter is now produced and shown to me and exhibited hereto marked "KA 2".

5. On 31 May, 2001, I received another letter from the Plaintiff containing additional information about the business affairs of Mr. James Gibson relating to the said accounts. A copy of the said letter together with the document containing the additional information are now produced and shown to me and exhibited hereto marked as "KA 3" and "KA 4", respectively.

6. On 1 June, 2001, I received a "Request for Information" from the Belize Police Department Anti-Money Laundering Unit, the contents of which indicated that on 31 May, 2001 the Police had received a request for legal assistance from the US Department of Justice Federal Bureau of Investigation with respect to monies which were fraudulently transferred in to the First and Second named Defendants' accounts at the Plaintiff's Bank. A copy of the said request for information is now produced and shown to me and exhibited hereto marked "KA 5".

7. Having considering the said reports and the request from the Police, I had reasonable grounds to believe that a money laundering offence may have been committed, and, accordingly, under the powers vested in me by Section 11(3) of the Act, I directed two Bank Examiners of the Central Bank on 12 June, 2001 to enter the premises of the Plaintiff to inspect the suspicious transactions in question and to carry out further investigation in relation thereto. A copy of the letter sent to the Plaintiff to that effect is now shown to me and marked "KA 6".

8. The Bank Examiners inspected the books of the Plaintiff the same day, 12 June, 2001, and confirmed the suspicious transactions set out in paragraph 3 above.

9. In view of the findings of the Bank Examiners, I considered that further investigation into the matter by the Police was warranted, and accordingly, in exercise of the powers vested in me by Section 11(6) (sic) of the Act, I instructed the Plaintiff not to conduct any further banking transactions in respect of the said accounts, and in particular, not to allow any amount to be withdrawn from, or deposited into, the said accounts. A copy of my said letter to the Plaintiff is now shown to me and marked "KA 7".

10. I verily believe that but for my said instruction to the Plaintiff, the First Defendant and/or Second Defendant would have moved the money from the said accounts, thereby frustrating the ongoing investigation into the matter."

It is clear from this and the Affidavit dated 18 June 2001 of Leopold Waight, the General Manager of the Applicant that the Applicant would refuse to honour requests by the 1st and 2nd Respondent to withdraw from or operate their accounts with the Applicant.

It is also clear that as a Supervisory Authority, the Governor of Central Bank of Belize felt there was evidence of money laundering involving these accounts of the Respondents with the Applicant. The Act however sets out how the Governor as the Supervisory Authority should proceed in such a case.

Under the scheme of the Act certain powers are given to the Governor as the Supervising Authority is he has reasonable grounds for believing that money laundering offences have taken place.

And the Act puts certain obligations on financial institutions such as the Applicant - see sections 12 and 13 of the Act in relation to the detection and reporting of suspicious business transactions.

Section 11 spells out the powers of the Governor as the Supervisory Authority. Among these, he shall receive reports from financial institutions about transactions that could or be related to money laundering; he shall send such reports to the law enforcement authorities if he has after considering such reports, reasonable grounds for believing that a money laundering offence is being committed or has been committed or is about to be committed. The Governor also has powers either by himself or someone authorized by him, to enter the premises of any financial institution during normal working hours, if there are reasonable grounds for believing a contravention of the Act has occurred, to inspect any business transaction record kept by that financial institution and to ask questions and make notes or take copies of such record. Also, the Governor shall, if the examination of the business transaction record of the financial institution gives him reasonable ground for believing that a money laundering offence has been committed, send any information to the law enforcement authorities.

However, it is paragraph (f) of section 11 on the powers of the Governor as the Supervisory Authority, that is at the bottom the reason that necessitated this application.

This section states: The Governor of the Central Bank, the Supervisory Authority "may instruct any financial institution to take such steps as may be appropriate to facilitate any investigation anticipated by the Supervisory Authority following a report or investigation made under the provisions of this section."

Does this provision empower the Governor to instruct a financial institution not to make operational the accounts of its customers? In other words, can a freeze on clients' accounts be imposed by instructions of the Governor?

In my view, clearly not, for to do so would be interfering with a banker/customer relationship not expressly authorized by the Act. Such an instruction would not in my view be a "step (that) may be appropriate to facilitate any investigation anticipated by the Supervisory Authority . . ." (emphasis added).

From the scheme of the Act, it is clear that the power to freeze property or assets in connection with the money laundering is vested in the Courts and then only on the application of the competent authority who is the Director of Public Prosecutions.

Section 11(f) cannot imbue the Governor with power to effect a freeze on bank accounts of customers. If from the investigations or reports the Governor receives and he forms the belief or reasonable grounds that money laundering has occurred, he shall send information regarding this to the law enforcement authorities. This way the Director of Public Prosecutions is brought into the picture and he shall pursuant to section 19 of the Act make the necessary application to the Court for a restraint or freezing order.

To freeze a customer's account with his banker is a grave and serious action which can only be allowed by express words of a statute. Under subsection (2) of section 19, the Anti-Money Laundering Act spells out the requirements to be stated in the Affidavit that accompanies the application to the Court for a restraint order.

I cannot overemphasize the need for coordination, speed and secrecy and timely action for the provisions of the Act to be deployed in the fight against the pernicious practice of money laundering. But all this must be done in consonance with the law. I believe that properly invoked and deployed, the provisions of the Act are flexible and accommodating enough to meet the evils money laundering may present to the economy.

In this case however, the learned Attorney for the Applicant ultimately came to the conclusion, after some hesitation, that he would not persist with the application for interpleader relief, he therefore withdrew it.

However, costs have, no doubt, been incurred, and I am mindful that it was the instruction of the 3rd Respondent to the Applicant, which though well-intentioned, was however, on rickety legal footing, that necessitated this application.

I will therefore award costs to the 1st and 2nd Respondents to be taxed if not agreed, the 3rd Respondent to meet its own costs.

In relation to Action No. 310, the Director of Public Prosecution is seeking by Notice of Motion dated 18 June 2001 restraint orders that would in effect freeze "the realizable property or assets" of the Respondent, James Gibson, by preventing him from dealing or disposing with such properly or assets, or preventing him or any person from removing from Belize such property or assets and preventing the Respondent and or any person from disposing or in any way dealing with or diminishing the value of any of the Respondent's assets whether they are in or outside Belize and whether held in his own name or not and whether solely or jointly owned.

The Application is supported by the Affidavit dated 18 June 2001 of Assistant Inspector of Police, Sandra Bowden. To this Affidavit are affixed certain exhibits from which it emerges that the Director of Public Prosecutions' application was prompted by actions taken against the Respondent by authorities in the United States of America. This fact no doubt, caused the application to be made under section 23 of the Money Laundering (Prevention) Act.

Subsequently, the learned Attorney representing the Director of Public Prosecutions, Mr. Rohan Phillip, applied to move the motion as well under section 19 of the Act. He also applied to have Emerald Incorporated joined as a Respondent to the motion.

However, Mr. Dean Barrow S.C. the Attorney for the Respondent vigorously objected to the joinder of Emerald Incorporated on the grounds that there was no request of it nor was it the subject of any local prosecution.

I disallowed the application to join Emerald Incorporated because there was no evidence of proceedings against it before me nor any request in relation to it and stated that if, as was contended that the Respondent James Gibson had an interest in it, then if the Orders sought by the Crown were granted, they would necessarily affect any interest James Gibson might have in Emerald Incorporated.

On the evidence before the Court, and this was common ground between the parties, through their respective Attorneys, there is no action contemplated or pending against the Respondent, James Gibson in any Court in Belize. All the evidence is that he has been proceeded against in the U.S.A. As a consequence of this, the Belizean authorities have been approached by those in the U.S.A. with respect to James Gibson.

In the averment of Assistant Inspector of Police Bowden's Affidavit at paragraph 3:

"On June 1 2001, a correspondence was received from Jonathan L. Kelly, Special Agent, of the Federal Bureau of Investigations, U.S. Department of Justice, requesting that an investigation be carried out to trace, and seize the assets of the Respondent, James R. Gibson. I have been informed by Special Agent Jonathan Kelly and do verily believe that as a result of an extensive investigation, the said James R. Gibson was indicted for various crimes relating to money laundering. The request of Jonathan L. Kelly now shown to me and marked SB1 is exhibited hereto."

Quite properly therefore, the Director of Public Prosecutions' application was well grounded in section 23 of the Act and the Notice of Motion is correctly entitled, "In the Matter of a Restraint Order Pursuant to Section 23 of the Money Laundering (Prevention) Act".

This section is intended to render assistance to foreign countries in matters concerning money laundering offences. This provision forms Part V of the structure of the Act on international cooperation. It is in my view, a necessary and vital component of the Act in the context of anti-money-laundering. It is a fact that in this digital age with electronic banking, it is possible and it is quite common, with the click of a mouse, for millions of dollars and other assets to move in and out from one jurisdiction to another.

Given the nature of money laundering defined in the Act as meaning:

"a) engaging, directly or indirectly, in a transaction that involves property that is the proceeds of crime, knowing or having reasonable grounds for believing the same to be the proceeds of crime; or

1. receiving, possessing, managing, investing, concealing, disguising, disposing of or bringing into Belize any property that is the proceeds of crime, knowing or having reasonable grounds for believing the same to be the proceeds of crime."

It is vital that there are provisions to meet trans-national transactions if the fight against money laundering is to be effective. This is all the more so when the movement, transfer and disposal of assets are so readily facilitated by digital electronic banking within states and across boundaries. Hence the need for international cooperation and the raison d'etre of section 23.

However, for the purposes of securing a restraint on assets within Belize at the request of another State in connection with money laundering, section 23 is not free-standing: it allows the Court to take appropriate action including those specified in section 19 of the Act. This section as mentioned earlier, permits the Court to freeze or restrain assets shown or believed to be connected with money laundering.

Thus, section 23 must ride in tandem, as it were, with either section 19 or 20 (this latter deals with forfeiture with which we are not concerned in this application).

It is a principle of law that generally, absent treaty obligations, the criminal laws of one country are not enforceable in another country.

This principle is recognised and given effect to by section 23(6) of the Money Laundering (Prevention) Act which states:

"Assistance referred to in this section shall be provided only to those countries with whom Belize has entered into mutual assistance treaties on bilateral or multilateral basis, and all such assistance shall be subject to the terms of such treaties." (emphasis added)

It is clear therefore that in the circumstances of this application, there has got to be a mutual assistance treaty between Belize and the United States in terms of subsection (6) of section 23 of the Act relating to matters concerning money laundering offences before the Court can properly act on it.

Mr. Barrow S.C. for the Respondent, vigorously opposed the application on several grounds. He contends that the Treaty between The Government of Belize and The Government of The United States on Mutual Legal Assistance in Criminal matters signed on 19th September 2000 in Belize is not yet in force in accordance with the stipulations in Article 19(2) of the Treaty.

Article 19, paragraph 1 of the treaty stipulates that it shall be subject to ratification and the instruments of ratification shall be exchanged in Washington as soon as possible.

Article 19, paragraph 2 stipulates that the treaty shall enter into force upon the exchange of instruments of ratification.

I am constrained to say that in spite of the best endeavours of Mr. Phillip, the learned attorney who represented the Director of Public Prosecutions, the Court has not been helped in ascertaining whether the stipulations of paragraphs 1 and 2 of Article 19 have been fulfilled, in particular, whether the reciprocal instruments of ratification have been exchanged in order to bring the treaty into force.

Mr. Philip however, helpfully furnished the Court with a copy of A Note Verbale - No. 35 from the Ministry of Foreign Affairs to the Embassy of the United States forwarding Belize's ratification of the treaty on 8th January 2001. However, even Mr. Phillip had to threw in the towel when he informed the Court that the relevant state agency, that is, the Ministry of Foreign Affairs, was not, up to the conclusion of the hearing of this application, able to provide him with evidence of ratification by or receipt of instrument of ratification from the United States.

I am unable therefore in the circumstances, to find or pronounce that the treaty of mutual assistance signed on 19th September 2000 between this country and the United States is in force, notwithstanding its evident ratification by Belize since January this year.

In my view, in the circumstances of this application, the requirements of subsection (6) of section 23 of the Money Laundering (Prevention) Act, are mandatory: assistance by this Court for the purposes of money laundering offences shall be provided only to those countries with whom Belize has entered into mutual assistance treaties either on a bilateral or multilateral basis. And all such assistance shall be subject to the terms of such treaties.

I am prepared to hold that this treaty would have been, by the operation of subsection (6) of section 23, incorporated into the laws of Belize and therefore part of those laws, notwithstanding the arguments and submissions of Mr. Barrow to the contrary.

I do not understand incorporation of a treaty into domestic law as meaning the wholesale verbatim incorporation of the treaty in question or its ipsissima rendition into a piece of domestic legislation. A treaty may be incorporated into and alter the laws by means of legislation and to the extend that a treaty becomes incorporated into domestic laws by statute, to that extend it is part of the laws of which the Courts are bound to apply. Melanie Watson & Co. Ltd. v Department of Trade and Industry, and International Tin Council (1989 3 All E.R. 522.

In my view, therefore, subsection (6) of section 23 of the Money Laundering (Prevention) Act incorporates into the laws of Belize any mutual assistance treaty on money laundering offences, either bilateral or multilateral which is ratified and in force. It does not, in my view, make any difference that in the instant application, the treaty in question is subsequent to the legislation. This would be a case of prospective incorporation, a procedure made necessary by the expanding international cooperation between states in the field of legal assistance, especially in the administration of criminal justice.

As part of the process of incorporation, the relevant local or domestic legislation subjects all assistance by the Court in matters of money laundering offences to the terms of the treaty of mutual assistance in question.

In the instant case, it is a term of the treaty in issue that it shall enter into force upon the exchange of instruments of ratification. This is a reciprocal act and therefore, in the absence of proof that there has been ratification by the other side and that its instrument of ratification has been duly forwarded or exchanged, it would be difficult to find that the treaty is in force.

Mr. Phillip gamely tried to point out that subsection (6) only speaks of "countries with whom Belize has entered into mutual assistance treaties" and not necessarily "entry into force". The short answer to this is that a treaty is a signed and ratified agreement or instrument between two or more states, and where like in the treaty in question, it provides for its entry into force, then that provision should prevail for it to be effective.

I conclude therefore that on the evidence, there is, as yet, no operative mutual assistance treaty in force between Belize and the United States. This is so, notwithstanding the evident unilateral ratification by Belize of the Mutual Legal Assistance in Criminal Matters Treaty between the two countries signed on 19th September 2000 in Belize and ratified by Belize on 8th January 2001. To bring this treaty into force there has to be its ratification by the United States and the exchange of its instrument of ratification with Belize.

In the circumstances, I hold that in view of the provisions of subsection (6) of section 23 of the Money Laundering (Prevention) Act, this Court is unable to accede to the application of the Director of Public Prosecutions for the several orders prayed for in his Notice of Motion.

In the event, in view of this finding, it is not necessary to pronounce on the other objections taken by the learned Attorney for the Respondent.

This application in Action No. 310 of 2001 is therefore dismissed and the temporary restraint orders granted during the hearing of this application are hereby discharged.

A. O. CONTEH
Chief Justice

DATED: 25th June, 2001.