Guernsey faces legal test over Guinea coup

Island must this week prove it has shaken off shady image, writes Paul Lashmar

Guernsey's business culture faces a critical test this week, when the offshore tax haven's judges rule on whether bank records relating to the failed coup last year against the government of Equatorial Guinea should be released. Earlier this year, Sir Mark Thatcher pleaded guilty in South Africa to helping to fund the attempt.

Guernsey's business culture faces a critical test this week, when the offshore tax haven's judges rule on whether bank records relating to the failed coup last year against the government of Equatorial Guinea should be released. Earlier this year, Sir Mark Thatcher pleaded guilty in South Africa to helping to fund the attempt.

British lawyers acting for the oil-rich West African state have requested an order from Guernsey's La Cour Ordinaire for records that should reveal who bankrolled the £3m failed coup. The high-profile case has brought unwelcome media attention to the discreet Channel Island. After decades of being seen as a haven for money laundering and tax evasion, Guernsey has been attempting to improve its international image in the past few years.

"It is clear that Guernsey is not and cannot be a safe haven for criminals and fraudsters," the island's Deputy Bailiff, Geoffrey Rowland, said recently. "We have a framework that stands up to international scrutiny." This week's ruling will show whether these comments hold water.

Alex Yearsley of the campaigning group Global Witness says: "This is the perfect opportunity for the regulatory and financial authorities in Guernsey to show the world at large that they are transparent and accountable and to dispel the widely held view that their banking and financial laws hamper serious investigations by the relevant authorities."

Some experts believe that criminals are still using the anonymity afforded by Guernsey companies. "Business practices on Guernsey are very secretive," says Prem Sikka, professor of accounting at Essex University. "Guernsey companies are still not required to publish full audited accounts. The Channel Islands are British dependencies and it is time that the British Government reformed them."

Equatorial Guinea has asked for bank account records and safe deposit boxes belonging to two companies owned by the ex-SAS officer and coup organiser Simon Mann. They are held at the Royal Bank of Scotland International on Guernsey.

The coup plot was foiled when an aircraft with Mann and 67 mercenaries on board was seized in Harare in Zimbabwe over a year ago. Mann and others have since been jailed. Equatorial Guinea's lawyers intend to use the bank documents in a series of legal actions brought against alleged coup plotters in London, Lebanon and South Africa.

Some bank statements were accidentally released last year by the RBS before a court order was granted. They revealed that one "J H Archer" had transferred $35,000 into the coup fund. Lord Archer, the disgraced Tory peer, has denied any connection to this payment.

Mann's lawyers have challenged the court application and seem to have impressed the Guernsey judges with arguments that Equatorial Guinea may have leaked the bank records with the JH Archer reference. Mann's lawyers also appear to have made headway arguing that the government of Equatorial Guinea, which has a poor record on human rights, is not a proper authority to ask for such records.

The case also raises "know your client" issues. According to evidence given in court, RBS opened the account at the request of the Hansard Trust, which is registered on Guernsey and manages Mann's financial affairs. RBS says it did not know who the beneficial owner was.

However, Professor Michael Levi, the offshore fraud expert at Cardiff University, comments: "Both RBS senior management and the Guernsey regulators, proud of avoiding involvement in some major scandals and of their IMF approval for their anti-laundering measures, must be furious at how high-profile people like Simon Mann - who would not qualify as 'low risk' on any customer due diligence model using publicly available data - were able to open accounts on the island."

Professor Levi continues: "If Hansard was able to set up an account for a company without telling RBS who the beneficial owner was, then this is a matter for concern in itself. I am sure the regulators there will be asking Hansard and RBS some difficult questions."

Some experts do believe that Guernsey has succeeded in making real changes. "A few years back, Geoffrey Rowland made it very clear that they do not want dirty money in Guernsey. It was ahead of Jersey and the Isle of Man in this regard," says Jeffrey Robinson, an author and expert on money laundering. "The message has got through and by cleaning up its image, Guernsey had attracted a lot of new respectable investment."

The panel of judges is expected to deliver their ruling in St Peter Port on Wednesday.