Court finds FIU’s decision to remove Wanfuteng’s Acting CEO unlawful

November 26, 2024 9:43 pm | Posted in Business News | Share now Twitter Facebook

The Supreme Court has quashed the Vanuatu Financial Intelligence Unit’s (VFIU) decision that the Wanfuteng Bank’s former Acting Chief Executive Officer (CEO) was not fit and proper under the Anti-Money Laundering and Counter-Terrorism Financing (ALM&CTF) Act.

The court heard that the VFIU, through its Acting Director Josiah Kuatpen, determined in letters that Acting CEO Mariana Lal was not fit and proper to hold the position at the bank. Lal sought Judicial Review (JR), and the court ruled that the decision was unlawful.

In his letter dated November 2,2023, Kuatpen referenced five allegations and stated that Mrs. Lal was not fit and proper, instructing the Bank to arrange for an interim replacement as Acting CEO.

Four days after his letter, the former CEO resigned, after being instructed by the Bank Director to vacate her office.

The Claimant, through her lawyer, requested more details about the decision, but the Acting FIU Director did not provide them in his response on March 24, 2024.

Lal sought a ruling that there were no reasonable grounds for the decision and that she was not given fair treatment before the decision was made.

Acting Director Kuatpen was the First Defendant, and the Attorney General was the Second Defendant in the case.

They argued that the letter was sent to the bank after a VFIU investigation into breaches by the former Acting CEO, and that Kuatpen acted lawfully in making his decision.

The day before the trial, the Defendant applied for the bank to join the proceedings as an interested party, but the court declined, stating it was unnecessary as Mr. Kuatpen could answer the allegations himself.

After considering the fit and proper criteria and other provisions of the Act, Judge Viran Molisa Trief turned to the issues, starting by determining whether Lal was given an opportunity to be heard before Kuatpen made his decision.

Judge Trief found that the VFIU did not give Mrs. Lal an opportunity to be heard before the decision was made.

The letter dated November 2, 2023, was addressed to the Director of the Bank, not copied to her, and the allegations against her were never specified.

The next issue for the court to determine was whether there had been a breach of natural justice and/or procedural fairness.

Judge Trief found that Mr. Kuatpen did not afford natural justice to Mrs. Lal when making the decision.

“…Mr. Kuatpen did not comply with the any of the provisions of the section 50I of the Act. He did not give a written notice to the Bank and Mrs. Lal requiring them to make submissions to him on the five allegations he set out in his letter.

Consequently, he did not receive any submission from them. Instead, he wrote the letter setting out the allegations and concluding that Mrs. Lal was not a fit and proper person without giving either her or the Bank an opportunity to be heard.

Mr. Kuatpen did not give a copy of his direction to remove Mrs. Lal as Acting CEO to herself as required by subsection 50I (5) of the Act,” the judge stated.

Trief rejected the Defendants’ submission that section 50I of the Act did not apply as the VFIU Director was discharging his functions under sections 8A, 9, and 9A of the Act.

“On the contrary, there is no dispute that subs.8 (A) of the Act requires VFIU to supervise reporting entities for compliance with the Act.

However, Mr. Kuatpen applied para.9(4) (C) and para.9(A)(a) of the Act to Mrs. Lal when each of those provisions applies only to a reporting entity, therefore he acted ultra vires or beyond the power of those provisions,” she stated.

“The only power that the VFIU Director had to remove a manager or officer of the Bank was in section 50I of the Act however, as already held, Kuatpen failed to comply with s.50I and as a result, Mrs. Lal was not afforded natural justice.”

The judge concluded that there were no reasonable grounds for the Acting VFIU Director to determine that the former Wanfuteng Acting CEO did not meet the fit and proper person criteria.

According to the verdict issued on Monday this week, costs will follow the event, with the Claimant seeking costs on an indemnity basis.

The Defendants must submit their cost arguments by December 6, 2024, and any reply by December 13.

The court will decide the costs based on the submitted papers.