Consultation on new Guernsey AML/CFT Handbook

12.06.2017

Revisions to the Bailiwick’s AML/CFT Framework – Consultation Paper, June 2017.

Summary

After many months of hard work and, with much anticipation, the consultation paper on revisions to the Bailiwicks AML/CFT framework was released jointly by the States of Guernsey, Policy and Resources Committee and the Guernsey Financial Services Commission on Friday 9 June 2017.

Whilst there has always been a clear direction of travel for the revised document, driven by international standards issued in 2012 by the Financial Action Task Force (“FATF”) and recommendations from MONEYVAL’s mutual evaluation of Guernsey, published in 2016, there remained the unknown of how Government and the regulator would propose the implementation of these with the least impact on the Bailiwick business community.

The biggest clue to what may be proposed was the Jersey AML Handbook which has been effective from March 2015 and from this consultation there are very few surprises when compared to the Jersey regime. In fact, many pan-island businesses, that have already implemented Jersey standards, may see few differences.

It is very important that all businesses consider this consultation fully and make representations as may be necessary to ensure that their business and industry have an effective and workable AML/CTF regime. We have detailed below some of the headline changes and further high level assessment of the changes to each chapter can be found in our factsheet.

  • There will be only one Handbook for “Specified Businesses”, removing the current separate Handbooks for “Financial Services Businesses” and “Prescribed Businesses”. This is done on the basis that prescribed businesses have now had sufficient time to develop and be experienced in AML and CFT requirements.
  • Business Risk Assessments (“BRAs”) must clearly distinguish between AML and CFT risks. This can still be covered in one document. The proposed Handbook clearly puts more emphasis throughout on CFT, compared to the current Handbook. BRAs must also refer to the National Risk Assessment.
  • Additional CDD (“ACDD”) is proposed for the following relationships
  • Non-resident Customer
  • Private Banking Services
  • A customer that is a legal person or a legal arrangement used for personal asset holding purposes
  • Company with nominee shareholders that issues shares in the form of bearer shares.
  • There is a proposed change in the treatment of PEPs with “Domestic PEPs” and “Foreign PEPs” to be classified appropriately and the addition of International Organisation PEPs (“IOPEPs”) and finally, a risk based approach for the treatment of PEPs with no assets in a structure
  • The role of Money Laundering Reporting Officer (“MLRO”) is to change to Financial Crime Reporting Officer (“FCRO”), which again highlights the coverage of CFT as well as AML.
  • In addition to the FCRO, a new role of Financial Crime Compliance Officer is proposed. This role can be undertaken by the FCRO but this role must be undertaken by someone independent of business development and client facing roles.
  • A revised approach to identifying beneficial ownership is proposed which extends beyond just legal ownership, instead focussing on actual ultimate ownership and control.
  • There are new rules proposed for authorised and registered Collective Investment Schemes. This will define the responsibility for AML and CFT requirements which fall under the responsibility of the nominated businesses which are licensed under the Protection of Investors Law.
  • Following the publication of Schedule 3 and the revised Handbook, firms will have at least three months to review and amend their business risk assessment and policies, procedures and controls, with a four month period proposed in the consultation paper for the BRA and a six month period proposed for policies, procedures and controls. .
  • The Handbook provides a two-year window for existing business relationships to be reviewed and remediated. This includes ensuring that the ACDD requirements are met where required; identifying and appropriately risk assessing business relationships involving domestic PEPs and IOPEPs; and where the firm has been nominated in respect of an authorised or registered CIS, ensuring that the requirements of Schedule 3 and the revised Handbook are met in respect of the investors in that scheme.

The Commission and Government have clearly made a concerted effort, with stakeholder engagement along the path, to develop a regime that meets international requirements but is mindful of the impact on Bailiwick Businesses. This consultation gives all parties the opportunity to raise any further considerations that may be of benefit and we would encourage everyone to take the time to consider how this new Handbook will affect their business and industry, and to make representation if any improvements could be considered. The deadline for responding to the consultation is close of business on Monday 31 July 2017.

For a further in depth assessment of the changes found in each Chapter of the proposed AML/CFT Handbook in comparison to the existing AML Handbook please see our factsheet.