Compliance and Regulatory Consulting
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On December 12, 2018, the States of Guernsey voted to approve legislation which represents the culmination of a substantial effort to revise Guernsey’s proceeds of crime framework in order to meet the 2012 Financial Action Task Force (FATF) standards and address the recommendations made by MONEYVAL in its 2016 assessment report of the Island.
The updates have also included a revised Guernsey Financial Services Commission (GFSC) Handbook on Countering Financial Crime and Terrorist Financing (the “Handbook”) which was issued on November 12, 2018, a year on from the original consultation issued in June 2017.
The November 2018 Handbook version has not changed significantly from the original 2017 consultation, but proposed terminologies have been amended to align them with Jersey standards and minor revisions have also been made to requirements and guidance. For example, the Financial Crime Compliance Officer (FCCO) will now be referred to as the Money Laundering Compliance Officer (MLCO), the term employed by the Jersey Financial Services Commission (JFSC) Handbook.
Whilst the Handbook is close to final form, the GFSC will formally issue the rules in the Handbook in Q1 2019 to address any technical issues that may potentially hinder or prevent compliance with the revised regulatory framework. The revised legislation is due to come into force on March 31, 2019.
In order to meet the FATF 2012 standards, the legislative framework hierarchy has been re-configured and the Criminal Justice (Proceeds of Crime) Regulations for Financial Services and Prescribed Businesses will be repealed and replaced by Schedules 3, 4 and 5 which will form part of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 (“Proceeds of Crime Law”). This allows retention of the existing three tier approach of one layer of legislation (the Proceeds of Crime Law), the Schedules and the accompanying rules and guidance (the Handbook), as opposed to having two layers of primary and secondary legislation and rules and guidance.
The revised Proceeds of Crime Law and Handbook are now much more focused on risk and Schedule 3 imposes the general requirement for firms to identify, assess and understand and mitigate Money Laundering and Financing of Terrorism (MF and FT) risks. The Handbook expands on Schedule 3 to the Proceeds of Crime Law and due to the changes to the underlying framework, updates are likely to require significant time and resources to implement.
Most regulated firms in Guernsey will already be working towards implementing the proposed updates. To assist firms with their implementation efforts, we have developed a high-level guide reflecting key changes likely to impact business’ AML/CFT arrangements proposed in the November 2018 version of the Handbook, including transitional timeframes. We also provide a summary below.
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” solution. High-priority actions include the introduction of revised Business Risk Assessments, updated AML/CFT policies and procedures, the appointment of an MLCO and a review of all client files to ensure they are appropriately risk rated and suitable CDD is held (prioritized in order of risk rating).
Firms will also need to give consideration to updating Board reporting and relevant compliance monitoring program testing. In addition, staff will need to be trained on the Handbook updates and on an ongoing basis.
The GFSC set out timeframes for the implementation of the above in Chapter 17 of the Handbook (see our guide for further details).
How Duff & Phelps can help
Duff & Phelps’ compliance specialists have extensive experience of assisting local and global firms in the delivery of business risk assessments, governance frameworks, compliance monitoring programs and policies and procedures. We also regularly perform assessments and gap analysis reviews of governance, risk and compliance frameworks against regulatory regimes.