Financial crime: Court orders banks to open account for convicted fraudster
14 Dec 2018

The Royal Court in Jersey has ruled that a trust for a convicted fraudster should be allowed to open a bank account on the Isle, despite being denied banking services in other jurisdictions.

The case put before the Jersey court is linked to another infamous scam, unrelated to the trust settlor’s conviction – the Bernie Madoff fraud.

In 2005 a Jersey-based trust, the M Trust, invested over $1 million into an investment fund which itself had invested in the Madoff scheme.

The Jersey court notes that there is no implication that the funds from the M Trust are not from legitimate sources.

As part of the victim compensation program, the trust holds an undrawn cheque from the Madoff Victim Fund (overseen by the US Securities Exchange Commission) for £211,379.27, with the possibility of more payments to come.

‘Banned for life’

The complication, however, is that the trustee has been unable to open a bank account for the M Trust to receive the funds.

At the heart of the problem is the previous conviction of the M Trust’s settlor.

In 2009 the settlor was convicted for his role in a scandal involving New York State’s US$122 billion pension fund.

Prosecutors accused the settlor of obtaining millions of dollars in sham “finders fees” to facilitate lucrative investment opportunities for hedge funds, whilst secretly paying kickbacks to public officials.

Whilst other figures involved in the scandal received prison sentences, the settlor pleaded guilty, cooperated with authorities and as a result was convicted on misdeameanour rather than felony charges. He received a US$12 million fine, and was banned from the securities industry for life.

The inability to secure financial services for the trust has driven the trustee to turn to the courts for help under Article 51 of the Trusts (Jersey) Law 1984.

Under Article 51, trustees can apply to the court for direction on how the trustee may or should act in any manner concerning the trust.

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