Stephen Bougourd8th December 2020
The Financial Services Commission (Bailiwick of Guernsey) Law, 1987 (the “Financial Services Commission Law”);
The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 (the “Fiduciaries Law”);
The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (the “POI Law”);
The Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002 (the “IMII Law”);
The Banking Supervision (Bailiwick of Guernsey) Law, 1994 (the “Banking Law”); and
The Insurance Business (Bailiwick of Guernsey) Law, 2002 (the “Insurance Business Law”) (together “the Regulatory Laws”);
Mr Stephen Bougourd (“Mr Bougourd”)
On 7 December 2020, the Guernsey Financial Services Commission (the “Commission”) decided:
1. To impose a financial penalty of £7,000 under section 11D of the Financial Services Commission Law on Mr Bougourd;
2. To make orders under the Regulatory Laws prohibiting Mr Bougourd from performing the functions of director, controller, partner, manager and financial adviser of a regulated entity under any of the Regulatory Laws for a period of 362 days from the date of this public statement;
3. To disapply the exemption set out in Section 3(1)(g) of the Fiduciaries Law in respect of Mr Bougourd for 362 days; and
4. To make a public statement under section 11C of the Financial Services Commission Law.
The Commission considered it reasonable, proportionate and necessary to make these decisions having concluded that Mr Bougourd failed to fulfil the minimum criteria for licensing under Schedule 1 to the Fiduciaries Law.
Between 30 March 2015 and 4 November 2016, Mr Bougourd was a Director and Head of Client Services for a company that undertook fiduciary activities under a full fiduciary licence (the “Licensee”).
In December 2015, Mr Bougourd received a referral from a colleague informing him of an enquiry from a third party (“Party A”), which required a Guernsey company. Party A’s lawyer was known to the Licensee and Party A had an existing client relationship with the Licensee, via one of its subsidiaries. However, Mr Bougourd was unable to follow up this referral at the time due to the pressure of other work commitments.
In early January 2016, Party A, through its lawyer, approached the Licensee directly and again enquired about the purchase of a Guernsey registered company, established in 2015.
On 22 January 2016, Mr Bougourd confirmed to Party A's lawyer that the Licensee had a company (“Company A”), established in 2015, that had only shares issued, no assets, liabilities or trading history. In essence, Company A was a shelf company, that is, a company that remained dormant but was readily available should the case arise. Company A had a corporate director of which Mr Bougourd was the representative.
On 25 January 2016, Party A's lawyer informed Mr Bougourd that Party A wanted to appoint its own directors to Company A, whilst also wishing Company A to be renamed (the “Renamed Company A”). Party A's lawyer also asked Mr Bougourd whether it was possible to have the transfer of the Licensee’s ownership of Company A to Party A, backdated to 2015.
Backdating of documentation
After an unrecorded telephone discussion between Mr Bougourd and Party A's lawyer, on 1 February 2016, Mr Bougourd signed a letter of engagement dated 31 December 2015, despite this date incorrectly representing when the Licensee and Party A had begun the business relationship.
On 8 February 2016, in a series of e-mail exchanges between Mr Bougourd and Party A's lawyer in relation to the transfer of ownership of Company A, Party A's lawyer asked for confirmation of “the transfer as of 31.12.2015 – the auditors are pushing us” whilst stating that in an ideal case “to keep in our records only the name [of the Renamed Company A]”.
On 16 February 2016, Mr Bougourd proposed the new business relationship at the Licensee’s Business Acceptance Committee. The Business Acceptance Form (“BAF”) reflected that the Licensee would provide “a limited service to Party A, (an existing Guernsey “shelf” company formed in 2015……”) whilst noting that "[Party A] will be wholly owned by [“Party B”], a Luxembourg company that is listed on the Euronext Paris market". It included a “post-on boarding action point” which read, “To obtain from the advising lawyer the rationale for the structure and the nature of the services that will be provided intra-group”. Prior to the meeting, Mr Bougourd had not obtained the rationale for the structure, and he did not do so afterward despite the post-on boarding action point. There was no mention on the BAF that any documentation would have to be backdated in order to accept the on-boarding of this client.
During the course of February 2016, a number of administrative steps were taken to prepare 7 documents backdated to 31 December 2015. Mr Bougourd signed these documents as an "A" signatory, either in his capacity as a director of the Licensee or as a representative of the Corporate director of Company A.
These documents created false and misleading business records showing the Licensee formally transferring their ownership of Company A to Party A, whilst resolving to change Company A’s name to Renamed Company A.
These documents included a stock transfer form, a Company A board minute, a share certificate, a declaration of trust, a written resolution, a letter from the Licensee and minutes of an Extraordinary General Meeting. Any third party reviewer of this documentation would have had the false impression that these events occurred on 31 December 2015, when they did not.
Submission of false and misleading information
On 24 February 2016, as a result of Mr Bougourd’s actions, a filing by the Licensee to a public body resulted in the creation of a false and misleading record that showed on 31 December 2015 two directors replaced Company A’s director, when this was not true.
Mr Bougourd also signed a further document backdated to 31 December 2015 in a formal request to change Company A’s name to Renamed Company A as of this date, in the knowledge that this would be submitted to a public body to alter an official record, despite this being untrue.
Although it transpired that changing the name of Company A to Renamed Company A could not be backdated by the public body, this does not detract from Mr Bougourd’s intention.
Subsequent enquiries with Party A as to the rationale for the requirement of backdating the documentation failed to obtain any explanation from Party A.
When in 2016, Mr Bougourd was asked by Party A's lawyer whether it was possible to backdate the transfer and renaming of Company A to 2015, Mr Bougourd failed to enquire at that time of Party A's lawyer as to the rationale for backdating the transfer, or consider the potential regulatory, legal or financial crime risks of signing business records that would convey false information and be misleading.
Mr Bougourd should have known that by backdating the letter of engagement with Party A to 31 December 2015 it served as a false instrument, ensuring that any further documentation signed on or after 31 December 2015 would give the false appearance of having been executed after the client had been taken on.
Mr Bougourd failed to question certain financial crime red flags in his e-mail exchanges with Party A's lawyer on 8 February 2016, such as:
(i) Why the auditor would be pushing for documentary evidence to show Party A’s ownership of the Renamed Company A, when on 31 December 2015 it was still owned by the Licensee and was Company A; and
(ii) Why Party A would not want any reference to Company A in their business records and whether this was an attempt to disguise the fact that the Renamed Company A, up until 31 December 2015, had a previous identity.
By Mr Bougourd backdating the transfer of ownership and appointing new directors so it appeared that on 31 December 2015 the Renamed Company A was owned by Party A, with Party A’s appointed directors, led to inaccurate business records that gave a false and misleading impression, as none of these events occurred until 2016.
Mr Bougourd maintained that his actions were done only to service an existing client’s needs on an enquiry that he believed he should have serviced in 2015, when Party A was first referred to him, but he was unable to deal with due to being under the pressures of work due, to a lack of staff resources.
In summary, Mr Bougourd abused his authority whilst as a director of the Licensee, prioritising servicing the client’s needs to the detriment of all else, failing to identify certain red flags or otherwise failing to give more immediate attention to those red flags that were identified, and forgoing his legal responsibilities as a director. At no time did he adequately consider the potential legal, regulatory, financial crime or reputational risks of knowingly signing documentation that misrepresented the facts and that he would have known were misleading, and which would have permanently formed part of Company A’s business records.
The failures by Mr Bougourd outlined above demonstrate a lack of probity, diligence, competence, soundness of judgement and as a result, Mr Bougourd failed to fulfil the fit and proper requirements set out in paragraph 3 of Schedule 1 to the Fiduciaries Law.
Mr Bougourd’s actions which led to the creation of false and misleading business records, whilst also causing a public body to be misled into creating a false official record, were serious.
Mr Bougourd, whilst citing he was under pressure at work, asserts he was not motivated by financial gain in relation to accepting this client. Mr Bougourd fully cooperated with the investigation throughout and accepted the findings against him, agreeing to settle at an early stage. This has been taken into account by applying a 30% discount in setting the penalties imposed.