The Personal Questionnaire Project and Planned Changes to
Data Collection – Update

Background

This article aims to provide an update to Industry on the PQ project and highlight the key dates relating to the roll out of this new online process.

A previous newsletter (Issued 23 October 2011) highlighted the Commission’s increased focus on improving the way data is collected from Industry. The first of these initiatives, a project to improve the Personal Questionnaire (“PQ’’) process, is now nearing completion.

Following a request in the last communication, several Industry representatives expressed their interest in the project and an Industry working party was formed. The working party has provided valuable insight into their experiences of the current paper-based process which has assisted the Commission with developing the new PQ process.

New Process

The new PQ process has been designed to reduce the administrative burden on Principal/Key Persons and the Commission. Once implemented, in the majority of cases, this reduction in administrative burden should lessen the time taken to review new applications and issue letters of ‘no objection’.

The key features of the new PQ process are summarised as follows:

• Applicants will complete an electronic PQ via a secure web portal.
• Once submitted, a permanent record of the PQ will be available for the Principal/Key Person to review and update as necessary (so avoiding having to retype previous data provided).
• The process provides the opportunity for a third party to assist the Principal/Key Person with partially completing the PQ.
• The Additional Appointments ("AAs") form has been disbanded to simplify the process.
• AAs, or any other changes in personal information, can be advised to the Commission by logging in and updating only the relevant data fields before resubmitting.
• A single page declaration, once printed and signed by the Principal/Key Person, should be posted to the Commission to complete the application process. Principal/Key persons not previously known to the Commission will be required to provide a certified copy of their identification as an attachment to the declaration.
• Once the online system “goes live’’ the acceptance of paper PQ and AAs forms will be gradually phased out.
  

Next Steps

The Commission is due to commence testing the system code this month and will look to the Industry working party for support with this user testing stage. 

The following is a summary of the key dates of the project:

• Testing of the online process by the Commission – Q1 2012.
• Presentation to Compliance Officers (and other interested parties) at St. Paul’s Centre – 27 March 2012.
• Go live date for new online process – Q2 2012 (subject to system testing).
• End of grace period for the acceptance of paper PQ/AAs forms – Q3 2012.

All Compliance Officers and relevant Industry Bodies will shortly receive an email inviting them to attend the presentation at St. Paul’s Centre, on 27 March. If you are not a Compliance Officer and wish to register an interest, or should you have any questions, please email jfscoperations@jerseyfsc.org or telephone Eric Dolan on 822130.

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Money Laundering and Weapons Development (Directions)
(Jersey) Law 2012 (the “MLWD Law”)

On 13 January 2012, the MLWD Law came into force. The MLWD Law provides the Island with additional safeguards in respect of money laundering, terrorist financing and the development or production of weapons, by introducing powers similar to those contained in Schedule 7 of the UK’s Counter-Terrorism Act 2008.

Under the MLWD Law the Chief Minister has the power to give a direction to a person carrying on a financial services business in or from within Jersey, or to any legal person that is established under Jersey law that is carrying on financial services business in any part of the world (referred to as a ”relevant person”).

Directions can be given generally, by Order, to all relevant persons or to a specific category of relevant persons. A direction may also be given to a particular relevant person who must comply with the terms of the direction.
A direction may be given if one or more of the following conditions are met in relation to a country or territory outside Jersey, namely:

• the FATF advises there is a risk of money laundering or terrorist financing in a country or territory;
• the Chief Minister reasonably believes that there is a risk that there is money laundering or terrorist financing in a country or territory, by the government of a country or territory, or by persons resident, or incorporated in a country or territory, that poses a significant risk to Jersey; or
• the Chief Minister reasonably believes that the development or production of weapons in a country or territory, or anything that facilitates such development or production, poses a significant risk to Jersey.
  

In relation to transactions or business relationships with the government of, or a person connected to, a particular country or territory, a direction can require a relevant person, to:

• undertake enhanced due diligence measure;
• provide information and documents; or
• limit or cease a business relationship.
  

Failure to comply with a direction is a criminal offence. No offence is committed where there is evidence that a relevant person failed to comply with a direction but took all reasonable steps and exercised all due diligence to ensure that the requirement would be complied with, including following any relevant guidance or code of practice.
For further information, the full text of the MLWD Law is available here.

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Money Laundering and Weapons Development (Directions) (Iran)
(Jersey) Order 2012 (the “MLWD Iran Order”)

The MLWD Iran Order is the first direction to be issued under Article 6 of the MLWD Law. The MLWD Iran Order came into force on 19 January 2012 and was issued to all relevant persons.

The MLWD Iran Order prohibits relevant persons from entering into or continuing to participate in, any transaction or business relationship with:

• a credit institution incorporated in Iran, including any of its branches wherever located;
• the Central Bank of Iran, also known as Bank Makazi Jomhouri Islami Iran
  

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Iranian Business

The Commission would also like to take this opportunity to remind relevant persons of the Public Statement made by the Financial Action Task Force (“FATF”) on 28 October 2011, in respect of Iran. In that Public Statement, the FATF reiterated its concerns about Iran’s failure to address the risk of terrorist financing, despite the serious threat that this poses to the integrity of the international financial system.

The FATF also reaffirmed its call on members and urged all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions. In addition to enhanced scrutiny, the FATF reaffirmed its 25 February 2009 call on its members and urged all jurisdictions to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism risks emanating from Iran.

Under Article 11 of the Money Laundering (Jersey) Order 2008 (the “Money Laundering Order”) relevant persons are required to maintain appropriate policies and procedures in relation to risk management. Whether such procedures are appropriate depends on the degree of risk of money laundering - taking into account the type of customers, business relationships, products or transactions with which the relevant person’s business is concerned. In accordance with Article 15(3A) of the Money Laundering Order, enhanced due diligence requirements apply to relationships and transactions with Iran (for further information see Section 3.4.2 of the AML/CFT Handbook).

The following specific measures also exist in Jersey in relation to Iran:

• the MLWD Iran Order; and
• Community Provisions (Restricted Measures – Iran) (Jersey) Order 2010 (as amended).
  

Over recent months, the Commission has seen a number of examples where compliance with Articles 11 or 15(3A) of the Money Laundering Order and/or the Community Provisions (Restrictive Measures – Iran) (Jersey) Order 2010, by relevant persons has been inadequate in respect of Iranian resident, or incorporated, customers. Frequently relevant persons have been insufficiently sighted as to the activities and transactions of their Iranian resident, or incorporated, customers, despite the high risk nature of the business. The Commission recommends that relevant persons review any Iranian resident, or incorporated, customers with great care and with regard to the measures identified above.

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Jersey Launches Private Placement Fund

On 26 January 2012, the Commission published a Guidance Note on a new Private Placement Fund product that will be given consent under the Control of Borrowing (Jersey) Order 1958.

The Private Placement Fund will be aimed at professional and sophisticated investors and approved on a fast track streamlined authorisation process – developed in consultation with the Jersey Funds Association and Jersey Finance Limited.

The streamlined authorisation process will be achieved through a self certification application by the Designated Service Provider to the Fund who is registered as a Fund Administrator under the Financial Services (Jersey) Law 1998.

The Commission’s Director General, John Harris, said, “The Jersey Private Placement Fund is a significant new business opportunity for Jersey. The Funds Industry has identified a need for a private fund product aimed at professional and sophisticated investors where speed to market is critical. The self certification process is a new approach for the Commission and requires our registered Fund Administrators to certify to the Commission that the promoters of the Private Placement Fund are of good standing.

It will be possible to issue consent within 72 hours on receipt of a complete application subject to the application meeting the criteria set out in the Jersey Private Placement Fund Guide.”

The Jersey Private Placement Fund Guide may be viewed on the Commission’s Website by clicking here.

The associated Application Form may be viewed on the Commission’s Website by clicking here.

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Banking - Themed Examinations

The Banking Team undertook a series of themed examinations on two separate topics during 2011, namely:

• Information Security; and
• Prudential Reporting.

The Information Security theme has now been concluded and the Commission will shortly be publishing a feedback paper setting out its general findings and recommendations. The Prudential Reporting theme will continue to be examined throughout 2012; however, the Commission will also publish interim findings on this topic.

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Trustcorp Services Limited

The Commission has recently issued a public statement in respect of Trustcorp Services Limited, its affiliated members and five former Principal Persons.  The public statement concludes that the Commission regards effective corporate governance as key for a regulated entity to be able to demonstrate compliance with applicable legislation and Codes of Practice.

A copy of the public statement can be viewed by clicking here.

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Consultation Papers

Proposed Fees for Collective Investment Funds and Fund Services Businesses

On 1 February 2012, the Commission published Consultation Paper No. 1 2012 setting out the proposed fees for Collective Investment Funds and Fund Services Businesses.

The base line application and annual fees for Collective Investment Funds have not increased since 2002. The proposed increases are significant but where possible they have been kept in line with, or below, the cumulative annual Jersey Retail Price Index since 2002 or from the date of the last increase. If agreed, the proposed fees will take effect from 1 July 2012.

The increase in fees is required at this time to partly fund the existing operational needs for this sector, as these are running at a significant annual deficit which is currently being covered by the Commission’s Reserves. The increase also reflects the identified need for additional policy resources necessary for Jersey to continue to align its regulations with International Standards and emerging European Union (EU) requirements.

Consultation on changes to Customer Due Diligence measures

On 17 November 2011, the Commission issued Consultation Paper No. 6 2011 on proposals to amend some specific provisions in the Money Laundering (Jersey) Order 2008 (the "Money Laundering Order") and AML/CFT Handbook for regulated financial services business (the "AML/CFT Handbook") that deal with customer due diligence measures.

The Paper has been published ahead of a wider review of the basis for, and scope of, customer due diligence concessions in the Money Laundering Order that will take account of the imminent revision to international standards set by the Financial Action Task Force.

Amongst other things, proposals in the Paper will:

• Clarify the additional customer due diligence measures that must be taken when a relationship with a customer is established remotely - where the customer is not seen - and money laundering and terrorist financing risk is considered to be higher than the norm.
• Provide additional guidance on identifying countries which may be considered to present a higher risk of money laundering or terrorist financing.
• Specify some additional due diligence measures to be applied where a customer has a connection to Iran or North Korea, and where a customer is considered to present a higher risk as a result of a connection to Bolivia, Burma (Myanmar), Cuba, Ethiopia, Kenya, Nigeria, São Tomé & Príncipe, Sri Lanka, Syria and Turkey.
• Extend the circumstances in which it may be appropriate to simplify customer due diligence measures because the risk of money laundering or terrorist financing occurring is considered to be less for a particular customer, product or service.
  

The Consultation Papers may be viewed on the Commission’s Website by clicking here. Hard copies of the Consultation Papers are available upon request.

Responses to both Consultation Papers are invited and should be provided, in writing, to the Commission no later than 29 February 2012.

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Internal Restructure

As advised in Consultation Paper No.1 2012, which sets out the proposed fees for Collective Investment Funds and Fund Services Businesses, a new Funds Policy Team has been set up to deal with changing International Standards and emerging European Union (EU) requirements. This expansion of the policy role currently undertaken by David Banks (Director of the Securities Division) will focus essentially but not exclusively on securities matters internationally to be supported by the deployment of Mike Jones, at Deputy Director level, and the creation of two new posts to undertake this funds policy work. In addition, two supervision staff will be added to the Funds Supervision Team to help the Commission resource the current regulatory package and deal with the increasing number of supervisory issues arising within the funds sector over the last few years.

Given the increasing headcount within the Securities Division, it became necessary to reallocate some of the Teams and Units within the other Supervision Divisions. The following changes have been made:

• the transfer of the Securities Information Unit (SIU) to the management responsibility of Eric Dolan, Deputy Director of Supervisory Operations, who continues to report to Debbie Sebire at Director level;
• the transfer of Investment Business (IB) – in greater alignment with our Insurance Division – under the common management of David Hart at Deputy Director level, who continues to report to Mark Sumner at Director level; and
• the previously planned transfer of the AML Unit from International & Policy ("I&P") to the management of Mark Sumner at Director level.
  

Finally, there has been a redefinition and tightening of the role of I&P and its absorption into a new Division to be known as the Office of the Director General, which will continue to be headed by Andrew Le Brun at Director level.

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