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AML/CFT relevant supervisory examination reports
Six examinations were conducted encompassing registrations relating to 14 Relevant Persons, covering deposit-taking business (banking); investment business, fund services business and trust company business.
- The objective of each examination was to review and assess the extent to which:
the risks of money laundering, the financing of terrorism and other financial crimes were understood by the Relevant Person’s Principal Persons; Key Persons and other employees, and
- whether the Relevant Persons had implemented effective systems and controls to prevent, detect and report financial crime in compliance with the AML/CFT regulatory framework.
The Relevant Persons had usually invested in a suite of systems and controls to prevent and detect financial crime in line with the obligations of the regulatory framework and, in general, the JFSC observed high levels of awareness amongst their employees of: financial crime related risks, and the consequences of non-compliance with policies and procedures.
However, just because industry standard systems and controls have been put in place, doesn’t mean they are always adequate and fully effective for each particular business. In general, we think this is due to the amount of senior management’s involvement in designing, implementing and quality assuring the Relevant Persons systems and controls.
To achieve effective systems and controls, Relevant Persons need to have a robust, well documented, corporate governance framework with risk management at the core of decision making. There should be clear lines of responsibility from MLCOs and MLROs to board/senior management who must ensure adequate oversight of these roles, in order to demonstrate adherence to the regulatory framework.
The board/senior management must be able to demonstrate that it has thoroughly considered its financial crime risks, including subjecting its risk assessment to adequate challenge and scrutiny. It is also important to have an effective, tailored and risk based monitoring plan to ensure that such systems and controls are complied with and remain effective over time.
Adequate policies and procedures are key to the implementation of effective systems and controls. It is imperative that procedures are:
- tailored to the business
- mapped against the Jersey regulatory requirements
- adequately maintained
- well understood
- effectively adhered to
- clear on what an employees should do if issues arise
Thematic examination focusing on the role of the Money Laundering Reporting Officer. The objective was to review and assess, where relevant, the following: (i) whether the MLRO had appropriate independence, sufficient seniority and authority in the business; (ii) the MLRO’s assessment of internal SARs; (iii) the decision of whether or not to externalise a SAR was always documented appropriately; (iv) the Relevant Person’s governance, oversight and support of the MLRO; and (v) the effectiveness of the Relevant Person’s internal control systems in respect of all the above.
Thematic examination to better understand the property management and letting agency sector and determine whether specific financial services business was being undertaken outside the permitted registration exemptions. Activities considered were: (i) accountancy services; (ii) investing, administering or managing funds or money on behalf of third parties; (iii) Trust Company Business; and (iv) General Insurance Mediation Business.
Significant issues were identified and the report provides guidance with respect to two specific registration exemptions as these were found to be widely misunderstood: (i) property managers exemption (paragraph 7(2) of Part B of Schedule 2 to the Proceeds of Crime (Jersey) Law 1999) and (ii) TCB incidental providers of services exemption (paragraph 7 of Part 1 of the Schedule to the Financial Services (Trust Company Business (Exemptions)) (Jersey) Order 2000).
Thematic examination focusing on investment and trust company businesses compliance with the regulatory requirements relating to client assets (IB) and customer money (TCB). Whilst this is predominately a conduct of business examination the report includes a finding (paragraph 6.2.14) with respect to sanction screening deficiencies when there was a free receipt/delivery of a security.
Thematic examination focusing on trust company businesses compliance with the Registry requirements regarding beneficial owners and controllers of Jersey corporate vehicles introduced on 1 January 2017. The report details areas of improvement and examples of good practice identified in respect of: (i) corporate governance – Board oversight; (ii) systems and controls including policies and procedures and training; (iii) record keeping; (iv) revisions to customer terms and conditions; (v) disclosure of relevant information; (vi) API submissions, as well as general observations resulting from our review of customer files.
Thematic examination focusing on enhanced and simplified due diligence, completed in two phases across 2016 (eight banks) and 2017 (six trust companies and one money service business). Specifically the examination considered whether there was evidence that Relevant Persons were applying adequate: (i) due diligence measures to the individual risks of each business relationship, and exercising appropriate judgement in each case, as required by Article 15 of the Money Laundering (Jersey) Order 2008 (Order) regarding enhanced due diligence; and (ii) simplified due diligence measures in appropriate circumstances and in a manner consistent with the requirements set out in Articles 17 and 18 of the Order.
The report details prime observations for both phases of the examination. For the banks the observations cover: Group influence and support; PEPs; account opening and operation; and the control environment. Whereas, for the TCBs and MSB the observations cover: record keeping; intermediaries; compliance monitoring; operations; conflicts; and PEPs.
Thematic examination focusing on investment businesses compliance with the regulatory requirements relating to the advice given regarding the suitability of investments. Whilst this is predominately a conduct of business examination AML/CFT finds are present as when considering whether an investment is suitable for a client it is imperative that a complete client risk assessment is completed. Consequently the report includes AML/CFT findings specifically paragraphs 2.15 (risk assessment), 2.17 (politically exposed persons), and 2.18 (customer due diligence (including source of funds and source of wealth).