Introduction

The Jersey Financial Services Commission ("JFSC") recently launched a consultation on further amendments to its anti-money laundering/countering the financing of terrorism/countering proliferation finance ("AML/CFT/CPF") Handbook (the "Handbook") (the "Consultation"). In this update, we set out the JFSC's proposals to add new and expanded guidance notes across the Handbook and to add a new code of practice in respect of politically exposed persons ("PEPs").

The consultation

The Consultation sets out a number of amendments to the Handbook, and raises six questions for consideration, as follows:

Addition of designated non-financial businesses and professionals ("DNFBPs")

  • Inclusion of DNFBPs under the term 'financial groups' within the context of collating information for preventing or detecting money laundering/money laundering risks.

Question: Does the addition of DNFBPs have a negative impact on your business?

New code of practice and guidance in respect of the declassification of PEPs and prominent persons

  • Amendment to the definition of 'prominent person' to include "an immediate family member or a close associate of the person";
  • Defining of 'prominent public function' as "in relation to an international organisation, means a member of the senior management, including a director, deputy director, board member or other equivalent function";
  • Reference to Articles 15 and 15A of the Money Laundering Order, which, amongst other things, address the de-classification of domestic PEPs, foreign PEPs and prominent persons where, 2 years, 5 years and 5 years respectively from when they cease to be entrusted with a prominent public function and, following a risk assessment, the person does not present a higher risk of money laundering, and there is no reason to continue to treat the person as a PEP; and
  • Introduction of a code of practice:
    • providing further guidance on the risk assessment to be conducted in respect of the potential de-classification of a foreign PEP, and
    • emphasising that, as immediate family members and close associates of prominent persons, foreign PEPs and domestic PEPs are subject to the same scrutiny as PEPs, supervised persons should exercise sufficient due diligence to ensure that close associates and immediate family are recognised as potentially being high risk.

Question: Do you consider the proposed code of practice and guidance notes [in respect of de-classification of PEPs and prominent persons] to be adequate for the purpose of your business?

New guidance in relation to 'correspondent banking' and 'similar relationships' with regards to virtual asset service providers ("VASPs");

  • Inclusion of the following non-exhaustive list of 'banking services':
    • oproviding a current or other liability account,
    • cash management,
    • international funds transfers,
    • cheque clearing,
    • providing customers of the respondent with direct access to accounts with the correspondent (and vice versa), and
    • providing foreign exchange services;
  • Extension to VASPs of requirement to apply enhanced measures in relation to 'similar relationships';
  • Extension to VASPs of the additional CDD measures required in respect of 'correspondent banking' and 'similar relationships';
  • Extension to VASPs of the prohibition from entering into correspondent banking relationships with shell banks and of the obligation to take steps to ensure that VASPs do not provide correspondent banking services to banks that permit shell banks to have accounts; and
  • Extension to VASPs of guidance on entering into 'correspondent banking' and/or 'similar relationships' with an overseas financial institution or VASP.

Question: Do you consider the proposed guidance [in relation to 'correspondent banking' and 'similar relationships' with regard to VASPs] to be adequate for the purpose of your business?

Guidance on additional terms and interpretations in the Wire Transfer Regulations

  • Consequential amendments to definitions in relation to VASPs further to the coming into force of the EU Legislation (Information Accompany Transfers of Funds) (Amendment) (Jersey) Regulations 2023 (the "Wire Transfer Regulations"); and
  • Clarification of the exemption of VASPs (arising under the Wire Transfer Regulations) from the requirements and application of Regulation (EU) 2015/847 (the "Transfer of Funds Regulation").

Question: Is the guidance on the additional terms and interpretations in the Wire Transfer Regulations clearly explained?

Question: Do you consider the proposed guidance note in respect of the [Transfer of Funds Regulation] exemption to be adequate for the purpose of your business?

Housekeeping matters following the coming into effect of the Proceeds of Crime (Financial Intelligence) (Amendment) (Jersey) Regulations 2022 (the "2022 Regulations")

  • In particular, reference to the Financial Intelligence Unit for Jersey (the "FIU") throughout the Handbook;
  • Expanded guidance throughout the Handbook emphasising the importance of not accepting information/documentation on face value regardless of its source of origin; and
  • Expanded guidance throughout the Handbook on various elements of risk which a supervised person might need to consider.

Question: Do you consider the proposed guidance notes [following on from the coming into effect of the 2022 Regulations] to be adequate for the purpose of your business?

Expanded guidance in relation to suspicious activity reporting by non-profit organisations ("NPOs")

  • Clarification that, in relation to suspicion of money laundering, only NPOs receiving services from a regulated trust company services provider ("TCSP") are subject to the obligation to make suspicious activity reports ("SARs"), and the TCSP and employees of the TCSP are required to report in accordance with the provisions of the Proceeds of Crime (Jersey) Law 1999, as set out in section 8 of the Handbook; and
  • Reference to a flow chart on the JFSC website, which provides an overview of the SAR process.

New defined terms

  • Amendments to the defined terms follow on from the above-mentioned amendments to the Handbook.

Next steps

The consultation period is particularly short, with written responses invited up to close of business 29 August 2023.

The JFSC are holding two drop-in sessions on 24 and 25 August 2023, for anyone requiring further information on the Consultation.

Following the Consultation, it is anticipated that the JFSC will publish feedback and issue an amended Handbook on 31 August 2023, which will come into effect on 1 September 2023.

The proposals in the Consultation will affect all supervised persons, i.e. registered/regulated persons and/or prescribed NPOs, and our dedicated regulatory and risk advisory team will provide further updates as the Consultation progresses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.