Guide to Section II of risk based supervision data: FSBs with respect to Public Funds 2022

CDD

Customer due Diligence

FSB

Fund Services Business[ii]

MLO/Money Laundering Order

Money Laundering (Jersey) Order 2008

MLCO

Money Laundering Compliance Officer

MLRO

Money Laundering Reporting Officer

NDF

Non-Domiciled Fund (Non-Jersey Public Fund)

POC

Proceeds of Crime (Jersey) Law 1999

SBL

Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008

ZA1(a)

Name of Fund:

Auto-populated with each Public Fund name as it appears on the JFSC systems - lists each Public Fund that the FSB is required to provide information for.

Please answer using the relevant line for each named Public Fund.

ZA1(b)

Principal Jurisdiction of Promoter / Instigator of the Fund:

Select one country from dropdown provided

This question is seeking the principal jurisdiction of the entity that is the driving force behind the fund. This might be the Investment Manager, Distributor or one key individual etc. Factors that may indicate an entity is the Promoter / Instigator may include:

1. The name of the fund is linked to the entity.
2. If the entity had withdrawn from the initial proposal, the fund would not have gone ahead (unlike an administrator that can be replaced).
3. The majority of investors are being put into the fund by the entity.
4. The entity is responsible for the instructions to set up the fund.
5. The fund is the “brainchild” of the entity.
6. The entity is providing the initial directors to the Public Fund’s governing body.
7. The entity owns the management shares/otherwise has control of the governing body of the fund.
8. The entity is financing the initial set up of the fund (which it may or may not get back).
9. The entity has devised the investment advice, investment policy and investment strategy of the fund.
10. The entity gets a performance fee rather than a fixed fee.

Further guidance is available in the JFSC Promoters Policy[iii] and the Code of Practice for Certified Funds[iv].

ZA1(c)

Is the Promoter/Instigator of the Fund regulated/ supervised for AML/CFT/CPF purposes?

Select yes or no from dropdown provided

Indicate whether the Promoter/Instigator of the Fund is regulated and supervised for AML/CFT/CPF purposes in Jersey or elsewhere.

Regulated and supervised for AML/CFT/CPF purposes means:

a)   subject to AML/CFT/CPF requirements; and

b)   supervised for compliance with those requirements by the JFSC or an overseas regulatory authority discharging a similar function in respect of AML/CFT/CPF.

For example: is the Promoter/Instigator of the fund a “relevant person” regulated for AML/CFT/CPF under the MLO, such as a regulated investment business?

ZA1(d)(i)

Is the Fund listed?

Select yes or no from dropdown provided

Indicate whether the Public Fund is listed on an exchange.

ZA1(d)(ii)

If the answer to ZA1(d)(i) is Yes, on what exchange(s) is the Fund listed?

Select the Exchange from the dropdown provided

There is an option to pick up to four Exchanges. In the event that the Exchange the Public Fund is listed on does not appear on this list please provide details of the Exchange on the ZA6 Freetext Explanations page.

ZA1(e)

Does the fund accept cash (coins and notes)?

Select yes or no from the drop down

This question is intended to determine the extent to which physical cash is still used in the funds sector. This does not include bank transfers, cheques or any form of virtual currency transactions.

Whilst we recognise that the use of cash is minimal in the Jersey-based funds sector, it is important that this assumption is validated as cash transactions are a key risk indicator for money laundering and the financing of terrorism.

ZA1(f)(i)

Non -Jersey Public Funds need to answer this question. Jersey Public Funds do not.

Name of the Fund's current MLRO:

Provide the name of the Public Fund’s current MLRO. A Public Fund that is a relevant person is required under the MLO to have an MLRO. The JFSC does not hold in its records the name of the Public Fund’s MLRO.

ZA1(f)(ii)

Non -Jersey Public Funds need to answer this question. Jersey Public Funds do not.

Email address of the Fund's current MLRO:

Provide the email address of the Public Fund’s current MLRO.

ZA1(g)(i)

Non -Jersey Public Funds need to answer this question. Jersey Public Funds do not.

Name of the Fund's current MLCO:

Provide the name of the Public Fund’s current MLCO. A Public Fund that is a relevant person is required under the MLO to have an MLCO. The JFSC does not hold in its records the name of the Public Fund’s MLCO.

ZA1(g)(ii)

Non -Jersey Public Funds need to answer this question. Jersey Public Funds do not.

Email address of the Fund's current MLCO:

Provide the email address of the Public Fund’s current MLCO.

ZA1(a)

Name of Fund:

Auto-populated with each Public Fund name as it appears on the JFSC systems - lists each Public Fund that the FSB is required to provide information for.

Please answer using the relevant line for each named Public Fund.

ZA2(a)

If the Investment Policy Code is E10, S06 or S07, please explain, in 5 words or less, the investment policy / asset class of the Fund. (The list of Codes are the same as those required in the “CIF/UCF application form for a Jersey fund”.)

These 3 codes are non-specific therefore please provide a brief 5 word description of what the Fund invests in.

e.g. Art, Fintech etc.

ZA1(a)

Name of Fund:

Auto-populated with each Public Fund name as it appears on the JFSC systems - lists each Public Fund that the FSB is required to provide information for.

Please answer using the relevant line for each named Public Fund.

ZA3(a)

Total number of investors and their principal country of residence, as at the end of the reporting period.

Answer this question on Country Tab ZA3(a)

Each of the Public Funds are listed vertically in column A and there is a choice of countries listed horizontally. Input the number of investors in each country per fund. If there are none leave the entry as “0”.

ZA3(b)

Number of type of investors: (i) Individual; (ii) Legal Person; (iii) Legal Arrangement.

Insert the number of each of these types of investors.

A legal person will be a company, incorporated limited partnership, incorporated cells etc.

A legal arrangement will be a limited partnership, trust etc.

If the investor is a non Jersey entity pick the designation (ii) or (iii) that matches it best. If this is not possible explain the nature of the entity and provide its principal country in ZA6 Freetext Explanations.

ZA3(c)(i)

Number of investors in each category of risk (as defined by the fund) as at the end of the reporting period: (i) Lower; (ii) Standard; (iii) Higher.

Question ZA3(c)(i) requests data about the number of investors that have been assessed as presenting a higher, standard or lower ML/TF risk (on the basis of factors set out in sections 3.3.4 and 14.2.3 of the AML/CFT/CPF Handbook).

Where use is made of a more precise risk scoring scale, it will be necessary to determine which categories in that scale approximate to higher[v], standard or lower risk. For example, if a Public Fund measures risk on a score of 1 to 10, it may consider anything between 1 and 3 to present a lower risk, 4 to 7 to present a standard risk, and 8 to 10 to present a higher risk.

If a Public Fund includes other factors in its customer risk rating of its investors e.g. commercial risk and the ML/TF risk element cannot be reported separately, please report the combined risk rating.

ZA3(c)(ii)

Do the Funds risk ratings of its investors include factors other than money laundering and the financing of terrorism?

Select yes or no from dropdown provided

Please indicate whether the risk rating is only related to money laundering and the financing of terrorism. The Public Fund may take into consideration other factors such as investor eligibility risk.

Yes- other factors

No –if only AML/CFT/CPF factors

ZA3(d)

Number of investors that are: (i) retail; (ii) institutional/professional.

Insert the number of each of these types of investors.

ZA3(e)

Number of investors regulated and supervised for AML/CFT/CPF.

Indicate how many investors in the Public Fund are regulated and supervised for AML/CFT/CPF purposes in Jersey or elsewhere.

Regulated and supervised for AML/CFT/CPF purposes means:

a)   subject to AML/CFT/CPF requirements; and

b)   supervised for compliance with those requirements by the JFSC or an overseas regulatory authority discharging a similar function in respect of AML/CFT/CPF.

For example, an individual living and working in Jersey is unlikely to be regulated for AML/CFT/CPF unless they are a relevant person such as: (i) a lawyer/accountant (a financial services business as described in Schedule 2, Part B of the POC); or (ii) a Class G director (a holder of a Trust Company Business class of financial service business issued under the Financial Services (Jersey) Law 1998).

ZA3(f)

Number of investors and their beneficial owners and controllers where enhanced CDD measures have been applied:

This question is designed to get a general feel for the extent to which enhanced CDD is obtained in relation to investors.

This question requires the total number of investors and their beneficial owners and controllers who have had enhanced CDD measures applied during 2022 for any of the specific reasons listed in Section 7 of the AML/CFT/CPF Handbook or as a result of the application of an entity CDD policy.

In addition to a Public Fund deciding that an investor presents a higher risk of money laundering or financing terrorism, there are some circumstances, set out in Articles 15 and 15A of the Money Laundering Order, where enhanced CDD measures are required. See also section 7 of the AML/CFT/CPF Handbook which details scenarios where enhanced CDD must be applied.

The following scenarios are considered most relevant for a Public Fund:

a)   the investor is, or some other prescribed person is, a politically exposed person (PEP) (section 7.6)

b)   the investor has a “relevant connection” to an “enhanced risk state” (section 7.5)

c) the investor is a company with nominee shareholders or issues bearer shares (section 7.10)

d)   the investor is a personal asset holding vehicle (section 7.9)

e)   the investor, or one or more beneficial owners/controllers of the investor, is not physically present for identification purpose (section 7.4) or

f)   the investor is a non-Jersey resident (section 7.7)

For example – every individual investor in a Public Fund who is not a Jersey resident individual will need to have enhanced CDD applied to them. Under Article 15(1)(a) of the MLO, if a customer has, or proposes to have, a business relationship or proposes to carry out a one-off transaction with the relevant person and the relevant person is not resident in the customer’s country of residence or in the same country as the country from which, or from within which, the customer is carrying on business, a relevant person must apply enhanced customer due diligence measures on a risk-sensitive basis.

Where the investor is not an individual but for example a company or a limited partnership, then not only the jurisdiction of the company/limited partnership will need to be considered, but so will its beneficial owners and controllers.

For example: if you have a Jersey company which is controlled by its board of 3 directors, 2 are Jersey resident and 1 is UK resident, then enhanced CDD will be applied to that 1 UK resident director, so the Jersey company/limited partnership will need to be reported as 1 investor who has had enhanced CDD applied.

We understand, from our work with the NRA working group industry representatives, that some Reporting Entities have incorporated the EDD measures that are required for non-Jersey-based customers into their standard customer take-on processes. However, this question seeks information against the requirements of the MLO, therefore if there is a significant difference between the number of customers who have enhanced due diligence applied to them and the number of non- Jersey-based customers, then please be ready to explain the difference.

Questions ZA3(g) to ZA3(i) request data on 3 particular reasons for enhanced CDD being applied.

ZA3(g)

Total number and jurisdiction of PEPs who are, or are connected with investors (including via beneficial owners and controllers).

Answer this question on Country Tab ZA3(g)

Each of the Public Funds are listed vertically in column A and there is a choice of countries listed horizontally. Input the number of Politically Exposed Persons (PEPs) in each country per fund. If there are none leave the entry as “0”.

This question requires the number of investors to which enhanced CDD measures have been applied due to a PEP connection.

On 12 June 2019 the Money Laundering Order was amended (see Article 15A of the Money Laundering Order and Section 7.6.2 of the AML/CFT/CPF Handbook). From this date enhanced CDD measures became mandatory for the following:

a)   a domestic politically exposed person only where a high-risk business relationship or high-risk one-off transaction is involved (domestic PEP);

b)   a foreign politically exposed person (foreign PEP);

c) a prominent person;

d)   individuals falling within (a), (b) or (c) that are:

beneficial owners or controllers of an investor;

a third party for whom the investor acts AND the third parties beneficial owners or controllers ;

purporting to act on behalf of the investor.

When considering whether an investor is connected with a domestic PEP or foreign PEP, it must be remembered that the definition of a PEP includes close associates and immediate family members of any individual. Close associate and immediate family member are both defined in Article 15A(3) of the Money Laundering Order.

The information to be considered when deciding if an investor is a close associate of a domestic PEP or foreign PEP is limited to information in the possession of the Public Fund or information that is publicly known (Article 15A(4) of the Money Laundering Order).

PEPs should be reported under the country (or countries) which give rise to their PEP status. For example, in a case where an individual is entrusted with a public function in country A and the close family member of that foreign PEP resides in country B, both PEPs should be reported under country A.

ZA3(h)

Number of investors that have a relevant connection to an enhanced risk state (including via beneficial owners and controllers).

Using the response to question ZA3(f) as a base for responding, this question ZA3(h) requires the number of investors (including via beneficial owners and controllers) to which enhanced CDD measures have been applied because of a connection to an enhanced risk state. As at 16 December 2022 the following were listed:

a)   Iran;

b) The Democratic People’s Republic of Korea (North Korea); and

c)   Myanmar (Burma).

Section 7.5 of the AML/CFT/CPF Handbook provides further guidance, including an example of what may constitute a relevant connection.

For example: an investor’s source of funds is, or derives from:

a)   assets held in either Iran, North Korea or Myanmar by the investor or any person on behalf of an investor; or

b)   income arising in Iran, North Korea or Myanmar.

ZA3(i)

% of investors that are individuals that have not been met.

Select 0-20, 21-40, 41-60, 61-80, 81-100 from the drop down

An investor may be considered to have been met for the purposes of this question where they have been met and seen by (physically or through video conferencing facilities):

a)   any member of the board of the governing body of the Public Fund,

b)   by an employee or director of any one of the fund service providers acting for the Public Fund (provided it is regulated and supervised for AML/CFT/CPF purposes),

c) by an employee or director of a company in the same group as the Public Fund, the governing body of the Public Fund or the fund service providers acting for the Public Fund (provided they are regulated and supervised for AML/CFT/CPF purposes).

ZA3(j)

How are investor relationships monitored?

Select from dropdown provided

Trigger events

Scheduled reviews

Electronic screening

All of the above

Other

Transaction monitoring may arise in an administrative context such as spot checks by compliance (scheduled or triggered by transactions) or as part of a transaction where checks are undertaken as to whether a transaction matches a profile of expected activity.

Trigger events – such as payments in and distributions to the investor, change of address, change of bank account, deviation from investor profile and expected transactions etc.

Scheduled review- a periodic review based on the risk rating of the investor, with higher risk investor scheduled reviews taking place more frequently than lower risk investors.

Electronic screening – for PEPS, Sanctions and/or intelligence such as judgements or news alerts.

Other/All of the above - Please use Other in the event that additional types of monitoring are undertaken and explain what is done in ZA6. Also choose Other if not All of the above is done but more than one. Please explain in ZA6 what is done.

In the event that investor relationships are not monitored please choose Other and explain why investor relationships are not monitored in ZA6.

ZA1(a)

Name of Fund:

Auto-populated with each Public Fund name as it appears on the JFSC systems - lists each Public Fund that the FSB is required to provide information for.

Please answer using the relevant line for each named Public Fund.

ZA4(a)

Total number and principal country of residence of individuals who are the beneficial owner or controller of an investor that is not an individual, as at the end of the reporting period.

Answer this question on Country Tab ZA4(a)

Each of the Public Funds are listed vertically in column A and there is a choice of countries listed horizontally. Input the number of beneficial owners and controllers of each investor, by principal country of residence per Public Fund. If there are none leave the entry as “0”.

The principal country of residence of the beneficial owners and controllers of investors who are not individuals, is recognised as a key factor in determining the riskiness of an investor– section 3 of the AML/CFT/CPF Handbook provides further guidance.

The term “beneficial ownership and control” is defined in Article 2 of the Money Laundering Order. It refers to the individuals who ultimately own or control an investor that is a legal person[vi]. In line with guidance provided in the AML/CFT/CPF Handbook, the following will be considered to be the beneficial owner or controller of a company:

a)   Each individual with a material controlling ownership interest in the capital of the company (through direct or indirect holdings of interests (shares) or voting rights) or who exerts control through other ownership means.

b)   To the extent that there is doubt as to whether the individuals exercising control through ownership are beneficial owners, or where no individual exerts control through ownership, any other individual exercising control of the company through other means.

c) Where no individual is otherwise identified, individuals who exercise control of the company through positions held (who have and exercise strategic decision-taking powers or have and exercise executive control through senior management positions - directors).

ZA4(b)

Total number and principal country of residence of third parties on whose behalf an investor is acting, as at the end of the reporting period.

Answer this question on Country Tab ZA4(b)

Each of the Public Funds are listed vertically in column A and there is a choice of countries listed horizontally. Input the number of third parties for whom investors are acting for by principal country of residence per fund. If there are none leave the entry as “0”.

For example, a legal arrangement cannot form a business relationship or carry out a one-off transaction itself. It is the trustee(s) of the trust or general partner(s) of the limited partnership who will enter into a business relationship or carry out the one-off transaction with a Public Fund on behalf of the legal arrangement and who will be considered to be the investor(s). In line with Article 3 of the Money Laundering Order, the trust or limited partnership will be considered to be the third party on whose behalf the trustee(s) or general partner(s) act(s).

In these cases the Public Fund should have identified the persons for whom the investor is acting in line with Article 3(2) of the Money Laundering Order.

In a case where a third party is a collective investment fund, data should be provided on any beneficial owners and controllers, i.e. individuals exercising control of the collective investment fund through ownership means, other means or through the position that they hold (see section 13 of the AML/CFT/CPF Handbook which specifically addresses Funds and Fund Operators).

Question

Data period

Date(s)

Global Concessions

ZA5(a)

During the reporting period

1/1/2022 – 31/12/2022

Client identification and verification (Article 13)

ZA5(b)

At end of reporting period

31/12/2022or closest business day

ZA5(c)

During the reporting period

1/1/2022 – 31/12/2022

Reliance on obliged persons (Article 16 and 16A of the MLO)

ZA5(d)(i)

At end of reporting period

31/12/2022or closest business day

ZA5(d)(ii)

At end of reporting period

31/12/2022or closest business day

Exemptions from applying third party identification requirements (Articles 17B-D of the MLO)

ZA5(d)(iii)

At end of reporting period

31/12/2022or closest business day

ZA5(d)(iv)

At end of reporting period

31/12/2022or closest business day

ZA5(d)(v)

At end of reporting period

31/12/2022 or closest business day

ZA5(d)(vi)

At end of reporting period

31/12/2022 or closest business day

Further exemptions from applying identification requirements (Article 18 of the MLO)

ZA5(d)(v)

During the reporting period

1/1/2022 – 31/12/2022

ZA5(d)(vi)

During the reporting period

1/1/2022 – 31/12/2022

ZA5(d)(vii)

During the reporting period

1/1/2022 – 31/12/2022

ZA5(d)(viii)

During the reporting period

1/1/2022 – 31/12/20222

ZA5(d)(ix)

During the reporting period

1/1/2022 – 31/12/2022

ZA1(a)

Name of Fund:

Auto-populated with each Public Fund name as it appears on the JFSC systems - lists each Public Fund that the FSB is required to provide information for.

Please answer using the relevant line for each named Public Fund.

ZA5(a)

Total number of individuals/entities to whom concessions have been applied who are investors or connected to investors in the Public Funds (including via beneficial owners and controllers or as third parties for whom the investor acts).

The JFSC is seeking to understand the frequency of the use of concessions. Consequently, this question is designed to elicit the total number of concessions applied to investors by the Public Fund. It is acknowledged that more than one concession may be utilised for the same investor.

The response to this question should equal the sum of ZA5(d)(i) to (ix).

ZA5(b)

Number of investors, as at the end of the data reporting period, where identity has not yet been verified as the relationship started before February 2008 and Article 13(2) of the MLO is being relied upon.

Article 13(2) of the Money Laundering Order provides for the timing of identification measures for the existing investors of a Public Fund at the time the Money Laundering Order came into force – 4 February 2008.

Article 13(2) sets out very particular circumstances which enabled a Public Fund to delay verification of an investor’s identity – section 4.7.2 of the AML/CFT/CPF Handbook provides further guidance.

A Public Fund should have finalised the position of its existing investors by 31 December 2014, unless a later date has been agreed by the JFSC (paragraphs 260 of section 4.7 of the AML/CFT/CPF Handbook). Consequently, it is expected that most Public Funds will report “0” in respect of ZA5(b).

ZA5(c)

Number of investors where delayed verification in line with Article 13(4) of the MLO was applied.

In accordance with Article 13(4) of the Money Laundering Order a Public Fund is permitted to delay verifying the identity of an investor where (finding out the identity of the investor must not be delayed):

a)   it is necessary not to interrupt the normal course of business;

b)   there is little risk of money laundering or financing of terrorism occurring as a result of obtaining evidence of identity after establishing the relationship; and

c) evidence of identity is obtained as soon as reasonably practicable.

Question ZA5(c) collects data about the number of investors where delayed verification in line with Article 13(4) of the Money Laundering Order has been applied.

If a Public Fund has not delayed the verification of any investors identity during the data reporting period, please respond with “0”.

ZA5(d)

In relation to the answer to ZA5(d) please indicate the numbers of individuals / entities to whom each of the concessions apply:

This question is designed to analyse the number of types of concessions applied to investors, their beneficial owners and controllers and third parties for whom the investor acts during the CDD process.

Reliance – Article 16

In line with  of the Money Laundering Order, reliance may be placed on an obliged person only where the six conditions, explained in section 5.1 of the AML/CFT/CPF Handbook, are met. In practice, this has the effect of:

a)   limiting the number of obliged persons that can be relied upon; and

b)   requiring the basis for placing reliance to be recorded in writing.

In line with Article 16A of the Money Laundering Order, reliance may be placed on an obliged person that is part of the same financial group only where the six conditions, explained in section 5.2 of the AML/CFT/CPF Handbook, are met. The effect of this is similar to Article 16.

This question is not seeking the number of entities upon which reliance is placed it is seeking the number of investors where reliance has been used in the CDD process. This might be where reliance is used in relation to the investor or any beneficial owners or controllers of the investor. For example if reliance is used in relation to both the investor and its 4 beneficial owners and controllers, then this would count as 1 investor.

Exemptions from applying third party identification requirements- Articles 17B-D

In line with Articles17B-D of the Money Laundering Order, a Public Fund may apply CDD exemptions and not find out the identity of a third party on whose behalf a customer acts or obtain evidence of identity. The application of the exemption is dependent upon the status of the customer and in some circumstances the Public Fund.

The Public Fund may apply exemptions from applying third party identification requirement in 4 circumstances if the Public Fund has reasonable grounds for believing that its investor is:

a)   regulated and supervised by the JFSC for AML/CFT/CPF purposes;

b)   a person who carries on equivalent business (refer to Section 1.8 of the AML/CFT/CPF Handbook); or

c) a person who is wholly-owned by a person listed above and meets certain conditions.

The application of exemptions from third party identification measures is also always subject to one or more conditions (depending on the particular case). In practice, these provisions have the effect of:

a)   limiting the number of investors to which exemptions can be applied; and

b)   requiring the basis for applying exemptions to be recorded in writing.

The four circumstances are:

a)   Article 17B(1): customer/or parent of customer is a JFSC regulated (or equivalent business) deposit-taker, fund, insurer, investment business or fund services business

b) Articles 17C(1)(a) and 17C(1)(b): customer is or carries on business in respect of an Unregulated Fund or non-public fund (or equivalent business)

c)   Article 17C(1)(c)(i): where the relevant person is a deposit-taker and investor is a TCB (or equivalent business)

d) Article 17C(1)(d): where the relevant person is a deposit-taker and investor is a lawyer (or equivalent business)

This question is seeking the number of investors where third parties who it acts for have not been identified pursuant to Articles 17B-D. For example 1 regulated bank (the investor) acts on behalf of 10 clients. The number of investors to whom this concession relates is 1 and should be reported as 1.

Further CDD exemptions – Article 18

Article 18 of the Money Laundering Order sets out a number of very specific circumstances where a Public Fund may be able to apply further CDD exemptions to its investors. Not all of these CDD exemptions have the same effect. Investors to whom CDD exemptions have been applied could include:

a)   Article 18(2) – pension, superannuation, employee benefit, share option or similar scheme

b)   Article 18(1) – insurance policies

c) Article 18(4) – public authorities, companies listed on an IOSCO-compliant market or regulated market

d)   Article 8(3) – regulated businesses or equivalent

e)   Article 18(5)– employees of regulated businesses or equivalent

This question is seeking the number of investors to whom CDD exemptions have been applied pursuant to Article 18.

ZA6

If any explanation of an answer to a question in ZA1 to ZA5 is required then use this page.

Identify the Public Fund and the question number when providing the explanation.

Examples of matters which may be included here:

a)   Where a Public Fund is in liquidation, has been liquidated, is terminating or has terminated or where the FSB has ceased to act (subject to 1.4.6 and 1.4.7 above) responses are not required for each question but please identify here the Public Fund and an explanation as to their status i.e. terminated/liquidated/FSB ceased to act.

b)   Where the answer to ZA3(j), is Other and further explanation is needed such as to why an investor relationship is not monitored or another type of monitoring is used.