Changes to Jersey's AML regulatory framework

In the last year, Jersey has made a series of changes to its AML regulatory framework, with a number of consultation papers being issued by the Jersey Financial Services Commission (“JFSC”).

Below we outline a summary of these changes and what local firms need to consider to ensure appropriate compliance.

The AML changes stem from the recommendations of an IMF report published in 2008 following the IMF’s review of Jersey’s compliance with the recommendations of the Financial Action Task Force (“FATF”). As a result, Money Laundering (Amendment No.6) (Jersey) Order 2013 (“MLO6”) was issued to reflect the IMF’s recommendations. This order has been effective since 18 December 2013.

In 2012, Jersey became a member of MONEYVAL – a monitoring body of the Council of Europe -whose aim is to ensure that its members have in place effective systems and controls to counter money laundering and terrorist financing and comply with relevant international standards in these fields. In December 2013, MONEYVAL issued a progress report on action taken by Jersey to address the recommendations of the IMF in 2009.

The JFSC has since reviewed this report and implemented new legislation including:

  • The Money Laundering (Amendment No. 7) (Jersey) Order 2014 (“MLO7”) (effective 27 October 2014); and
  • The Proceeds of Crime and Terrorism (Miscellaneous Provisions) (Jersey) Law 2014 which was established to create a single set of anti-money laundering provisions including the Proceeds of Crime and Terrorism (Tipping Off – Exceptions) (Jersey) Regulations 2014 (effective from 4 August 2014) which was established to deal with disclosures of suspicious activity (both laws together are referred to as the “Proceeds of Crime Laws”).

A key change that will assist businesses in the practical application of the new legislation is the update to the Handbooks for the Prevention and Detection of Money Laundering and the Financing of Terrorism (the “AML Handbooks”). For instance, the AML Handbooks now include a new Section 8 which provides details and guidance on reporting money laundering and financing of terrorism under the new Proceeds of Crime Laws.

With regards to the JFSC Consultation Papers, November 2014 saw the release of the JFSC’s sixth Consultation Paper detailing the proposed amendments to the AML Handbooks. With one further Consultation Paper due to be released in December 2014, this marks the light at the end of the tunnel in the JFSC’s journey towards the establishment of AML regulatory framework.

Please click here for our guide to the main changes to the AML/CFT regulation

What firms need to consider

Firms need to ensure they understand how the changes will affect them as there is no “one size fits all”. All customer identification procedures need to be performed by 31 December 2014. Furthermore, the JFSC expects all firms to apply the new requirements from 1 January 2015.

Policies and procedures

Are policies and procedures up to date? The amended regulations will need to be reflected in your policies and procedures. For example, monitoring procedures need to include red flag indicators and systems procedures. The new enhanced CDD requirements will require the application of more comprehensive due diligence for individuals who are non-resident (however risk will also need to be taken into consideration). Furthermore, there is new guidance on identifying significant underlying clients and the appropriate identification measures that should be in place as a result of this assessment.

Governance procedures

Are appropriate business risk procedures in place? Section 2 of the AML/CFT Handbook considers that the Board needs to assess its risk appetite and whether there is accumulation of risk. Board members should also be assessing the effectiveness of systems and controls and demonstrating that they are doing so. Management should also consider whether there are appropriate monitoring systems in place which produce effective management information to enable sufficient oversight of AML/CFT risk.

Staff training

Have the relevant staff been trained on the new requirements? The AML Handbooks detail that basic awareness and training requirements should be provided to customer facing employees. In particular, employees must be aware of the new reporting and tipping off provisions.

How can Kinetic Partners help?

Kinetic Partners’ compliance specialists have extensive experience of assisting firms in the delivery of tailored policies and procedures, governance documents and face to face training; we also perform reviews of governance and AML arrangements, including recommendations on industry good practice.

The team includes former regulators, expert industry practitioners and qualified audit staff who have wide-ranging experience of various regulatory matters.

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