Alliance loses second round of licence suspension court battle

Alliance Financial Services Limited, AFSL, has failed in its bid to have the suspension of its cambio and remittance licences lifted while it fights the action taken by the central bank in court.

The Bank of Jamaica, BOJ, suspended the licences in early December, following criminal charges and allegations of contravention of banking laws against Alliance Financial, its subsidiary Alliance Investment Limited, and key shareholders Robert Chin and Peter Chin. Robert Chin has since entered a guilty plea on behalf of the company.

Late last month, AFSL won the first concluded round of what has become a multipronged court battle, when its application to the Supreme Court for a judicial review of the central bank’s actions was granted. However, in mid-January, the company failed in its request for an injunction against the licence suspensions while that appeal was being considered.

The substantive case continues in court this week.

Alliance was initially denied its request for an injunction staying the suspensions and keeping the licences in place, until the substantive review of the BOJ actions was heard and determined by the Supreme Court last year, which it appealed on December 29.

In the submissions to support its appeal against the decision of Supreme Court Judge Dale Palmer not to grant the injunction, lawyers for AFSL withdrew a request for an order lifting the BOJ suspension of AFSL’s licence to operate as a payment service provider in the central bank’s fintech regulatory sandbox.

In a written decision handed down on January 18, representing the conclusion of a second round of the court matter, Justice Vivene Harris said the Court of Appeal was satisfied that on the core issue – that is, whether the Supreme Court judge erred in the exercise of his discretion, when he refused to grant an injunction pending the determination of the claim for judicial review – no such error occurred.

Case management was set for the January 27 in the substantive appeal against the suspension of the AFSL licences by the central bank, in what the judge agreed should be the expeditious hearing of the matter. The expeditious disposal of the case had also been supported by the Supreme Court judge, who had noted “potential financial loss and loss of opportunities” for the financial services company, given the denial of the injunctions sought by AFSL and the resulting, effective shutdown of its operations.

The Court of Appeal judge agreed with the conclusion in the earlier Supreme Court hearing that, as argued by lawyers for the BOJ, led by Michael Hylton QC, the risk to the financial sector outweighed the economic loss and inconvenience AFSL could suffer as a result of the continuation of the suspensions.

The BOJ had contended that the public interest outweighed the financial welfare of the company, and that a continuation of the operations under the central bank’s licensing while answering charges of financial crime, could jeopardise Jamaica’s correspondent banking relationships and reap negative repercussions under global anti-financial crimes regimes.

“It would seem to me, on the strength of these authorities, that to warrant the grant of an injunction to restrain a public body from exercising its functions and performing its duties, AFSL is required to demonstrate that, on the face of it, it has a case strong enough to justify the imposition of such an exceptional remedy as against the interests of the public, and the interests of justice so require,” said Justice Harris.

“In other words, there ought to be compelling evidence of apprehended harm that could affect not only AFSL’s commercial activities and well-being, but also the wider public (and by extension, the Jamaican economy and the country itself), which BOJ serves. The evidence presented by AFSL, in my view, has failed to meet this threshold,” she wrote.

The court added that given the absence of evidence, an injunction would not only curtail BOJ’s ability to perform its regulatory duties, but also give AFSL an advantage over similarly regulated entities.

“This would certainly not be in the best interests of the public, the Jamaican economy, and the country itself,” Harris said.

The judgment showed that the court was not moved by AFSL’s arguments that BOJ’s assertions of risk to the financial system were exaggerated and that the suspensions were indicative of the central bank acting on an assumption of guilt, even before the conclusion of prosecution in the courts.

The court also dismissed AFSL contention that the BOJ actions were illegal and ultra vires since, the company argued, the central bank was not authorised under the Bank of Jamaica Act to immediately suspend the cambio licence. Alliance Financial had also claimed that the notification to cambios and remittance companies ‘fit and proper’ criteria, on which BOJ relied in its determination that AFSL’s principals were no longer fit and proper, did not have legislative effect since it had not been gazetted.

Additionally, AFSL was of the view that the Supreme Court judge, in denying the request for an injunction against the BOJ licence suspensions, had failed to consider alternative remedial steps that could have been implemented to alleviate BOJ’s concern.

The BOJ was unsuccessful in arguments regarding the appropriateness of a single judge of appeal hearing the application by AFSL.

In December, Alliance Financial and Peter Chin were charged with carrying on the business of lending foreign currency without being an authorised dealer, in relation to more than 20 foreign currency loans, totalling approximately US$8 million, to various entities.

Robert and Peter Chin were jointly charged for alleged breaches of the Banking Services Act in accepting deposits without the requisite licence from the BOJ relating to a series of deposits in excess of US$7.5 million over a three-year period, from 2014 to 2017. Alliance said in a statement on January 13 that the charges against Robert and Peter Chin in their personal capacity are expected to be lifted in March.

Alliance Investment was charged with failure to file threshold transaction reports to the Financial Investigations Division, as mandated under the Proceeds of Crime Act for transactions of or above US$15,000.

huntley.medley@gleanerjm.com

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Correction: This article has been updated to correct the name of the lawyer who represented Bank of Jamaica.