DATA protection issues are rife in Guernsey’s globally-reaching finance industry. Carey Olsen partner Advocate Mark Dunster highlighted some potential problem areas.

His first scenario illustrated how the sale of a business could have implications as to whether it was legal to release client details to the new owner.

The moral of the story was to ensure the terms and conditions of a business included a clause enabling them to be sold.

Secondly he considered issues of regulatory arbitrage in trust law. Finally he looked at how an off-island parent company could apply unjustified pressure on its Guernsey-based subsidiary to release client confidential data for its own tax returns.

He explained how the first and third examples highlighted how compliance officers could be put under unbearable pressure from above to break the law.

situation A – the sale of a business

Advocate Dunster put the audience into the shoes of a compliance officer of a fictitious local fiduciary provider he named ABC Group.

The story was based on a real-life situation in which he was involved.

The group was to be sold and a compliance officer found himself under pressure to pass on confidential details to the purchaser.

‘The group had access to high-net-worth individuals and the company looking to purchase it wanted that information to sell them banking services. If it worked out, they stood to make a lot of money,’ he said.

‘The compliance officer came under a lot of pressure from above, but had to know if it was legal.’

Advocate Dunster referred to the relevant terms and conditions of the company registration which read: ‘The group means ABC Trustees (Guernsey) Ltd, ABC Trustees (Jersey) Ltd, ABC Pensions Ltd and associated subsidiaries and associate companies and the respective successors in title.’

He told how it was pointed out to the man by a number of his superiors that if the sale did not go through, significant amounts of money would be lost and jobs put at stake.

‘In this case a solution was eventually found but it was a very unhappy time for him,’ he said.

‘The weakness in the system was that unbearable pressure could be brought to bear on one man.’

situation B – the trustee’s deliberations

Advocate Dunster said Guernsey and Jersey’s highly competitive finance industries often led competitors to search for regulatory arbitrage which was not there.

‘If one island secures a bit of business, the other misses out so bodies in both are constantly looking for arbitrage to give their jurisdiction an advantage.’

He said in every sense and purpose the island’s trust law was identical.

But when it came to an investor’s concerns about data protection, a lawyer from one island might play down the robustness of the law in the rival jurisdiction.

‘Here is an example of human nature trying to twist reality to give their jurisdiction an advantage.’

situation C – the banker’s dilemma

A Guernsey subsidiary bank that is wholly owned by its parent based abroad could come under pressure to release client confidential information.

Advocate Dunster said banks which collect various items of due diligence from new customers, such as copies of passports and utility bills, know a large amount of personal information about them.

He referred to a real-life incident in which he was involved in which data protection problems arose when the off-island parent sought access to such information.

‘The parent based in a separate jurisdiction claimed it needed data for its own regulation or tax return purposes.’

He said it would be highly unlikely that the Guernsey client would have consented for the information to be released.

‘But the pressure in this case was intolerable. The parent said unless it was given the information, it faced prosecution by its own regulators. Bigwigs were coming over to lean on the humble compliance officer.’

Advocate Dunster said in this case there was no legal justification for the information to be freed.

‘It was a straight clash of culture in that someone locally was going to crack under immense physiological pressure from above,’ he said.

‘But they were brave and stood up to the bigwigs and said no.’

Advocate Dunster said there were a number of ways to resist such pressure.

‘You could use conjunctions or notices of direction.

Or you could simply advise the parent that seeking such information broke Guernsey laws and they could be liable to prosecution over here.’