Supervision industry seminar Q and As

At the end of September 2019, we held our Supervision industry event. We invited you to send in questions to our panel members during the seminar. We have now published the answers to all the questions you asked.

When will we be advised of our ratings in respect of financial crime risk?

We’re aiming to communicate the overall rating for financial crime risk quarter 2 in 2020.

You mentioned that you will continue collecting supervisory data for the next couple of years. What happens after that?

We will continue to collect data from firms on an ongoing basis. However, we will assess the frequency and content of such data to ensure that what we collect is relevant to support our supervisory activities. For example, in the future we anticipate that we will include further data on conduct risks as currently, the data set is focussed on financial crime.

When do you think the risk model will go live and influence how supervisors interact with us?

We are on track to implement the first phase of the risk model in quarter 1 of 2020. As with any new tool, we need to ensure it is operating as intended and this may take some time. The risk model is driven by input and data, and therefore this will only be built up over a period of time.

Phase two of the risk model development is planned for H2 of 2020. We anticipate moving to an approach based upon the output of the risk model at this time. The risk model is, however, only a supervisory tool which gives rise to further review and analysis and therefore the knowledge and skills of our supervisors remains key to supervisory engagement and effectiveness.

Can you explain a bit more about how the risk model works?

The risk model takes the risk calculation of risk exposure = impact x probability as the basis for assessing the 11 impact risks, or key harms that are set out in the JFSC risk overview. Supervisors can enter information about risk and the way a firm controls risk in a structured way that is combined with data that we hold already about firms to trigger the risk assessment calculation. The results of that calculation are then compared against tolerances that represent risk appetite decisions taken by the JFSC board in a consistent way.

Can firms find out their footprint score for the risk assessment?

The footprint score is based purely on data submitted as part of the supervisory risk data collection exercise, and its primary role is to allocate a firm into one of three broad bands that represent more or less-intensive approaches to supervision. All firms will be told which of these three approaches they are in, so there is little purpose to knowing a precise footprint score unless you believe the data provided is incorrect and is producing a misleading footprint score as a result.

We were told over three years ago that the JFSC’s risk model was imminent, what is taking so long and how can you be a risk-based, data driven regulator without one?

The delivery of the risk model by the end of this year is the final step in what has been a multi-stage process. In order to maximise the potential of the risk model we first had to deliver the portal to securely seek data from industry. This data feeds the model, delivers a case management system and that provides the capability to record the outputs of the model, and the results of the supervisory activity the model drives. In parallel to this, we have been developing the concepts behind the model before delivering the technology solution.

Based on the data collected to date, what are the likely themes for onsite examinations in 2020?

We have agreed the themes for the first three quarters of 2020 and will issue confirmation of such by the end of December.

What is the JFSC’s risk system called and is it an in-house product?

Our risk system was designed in-house using JFSC resources to set the requirements and technology partners to deliver it. The system is a combination of a CRM platform combined with a rules engine that runs the calculations in the model itself. The system does not as of yet have a name, but it may well be named as we move from initial launch through an evaluation and further development next year.

Will the matrix/specifics on how the footprint score is worked out be readily available?

There are no plans to set out in detail the mechanics of how any component of the risk model, including how the footprint works. It will, however, be subject to constant review and evaluation and it is not a productive use of time given the outputs of the footprint model in particular, the approach to supervision a firm is subject to, being shared with industry.

The increasing reliance on data to drive risk assessments of firms is understandable and sensible but data can be misleading or misinterpreted. It also relies on the reliability of that data from the firms providing it. To what extent does a ‘gut feel’ play in the JFSC’s approach?

The risk model does use data as part of the assessments it undertakes, but the primary element in the first phase of development is the consistent assessment of supervisor judgements. This human element will always form part of the risk model, sitting alongside an increasingly data led approach.

When will the impact ratings be communicated (likely timeframe)? And will there be the opportunity to discuss/challenge these if a firm disputes their rating?

We communicated the approach to supervision (enhanced, proactive and reactive) to all firms in 2016. Based on the data recently collected there may be some changes which will be communicated in early 2020.

We have no plans to routinely discuss footprint scores with firms. The footprint score is based purely on data submitted as part of the supervisory risk data collection exercise, and its primary role is to allocate a firm into one of three broad bands that represent more or less-intensive approaches to supervision. Our approach to an entity’s financial crime rating will also be communicated in early quarter two of 2020. This is based on the data submitted and therefore, unless the data is incorrect, there should be no need to discuss the approach communicated.

When will the supervisory risk data collection be issued? It uses a large amount of resource and we need to plan for this in advance

We have already issued a communication advising of our plans to collect data for 2019 in quarter 1 2020. A further communication will be issued on the 20 December which will attach the worksheets and accompanying guidance which will require submission of the data by 31 March 2020. We have committed to collecting data for the next two years similarly to what we collected previously. We appreciate that such collection and submission does have an impact and advance notice allows appropriate planning.

Is the JFSC risk model still based on the document that was published by the JFSC a couple of years ago

Yes. The JFSC risk overview sets out the broad approach to risk, and contains a list of the risks that are being assessed in the risk model. This document will be updated to reflect the development of the risk model early next year.

Why does the JFSC indicate that it will only collect data for the next two years? (Surely the expectation would be that the same level of understanding and analysis of the industry will be required every year going forward?)

We will continue collecting data beyond the two year period mentioned in the presentation. We are simply committing to keeping the data set that we will be collecting the same during that period, so firms have some certainty of what is to be collected. We will of course provide further information to firms in time for them to accommodate those new requests as and when we make changes to the data set.

In Jersey it is not always those with the greatest footprint that has the greatest risk. There are many falling in the “pooled” class of risk who are now being dealt with by JFSC administrators or people with generalist experience. Is this not a greater real risk?

The risk model has ways in which small, low impact firms with a pooled approach to supervision can be highlighted when risks are outside the tolerances set in the model, reflecting the range of risks that need to be assessed, and the range of firms in Jersey. Our Pooled Supervision team is made up of skilled and experienced supervisors who are able to manage those risks when they are identified.

Will businesses be advised of their financial crime risk score? And if so, when is this likely to happen?

Firms will be advised of the overall rating assigned to financial crime risk and it is anticipated that this will be communicated in quarter 2 of 2020. It should be noted that this is an inherent rating based on the data provided through the supervision data collection exercises.

Is there an opportunity to discuss / challenge financial crime risk ratings?

We will be conducting some examinations of firms across the financial crime risk ratings to evaluate the scores produced by the risk model and test the new examination methodology. Once that evaluation has taken place we will have a better understanding of how the risk model and Financial Crime Examination Unit approach will work.

Given you are moving to a statistical based risk model supervision, which is by definition, backwards looking, is there a risk that the JFSC will fail to see new risks for the industry until it is too late?

Part of our approach to enterprise risk management is to consider those environmental risks that will drive new and emerging risks for industry and the JFSC.

How does the JFSC's view of risk appetite tie in with the areas of focus of Jersey Finance Limited in terms of new markets? How are conflicts and potential mixed messages to industry to be handled?

We will need to form an independent view of the risks involved in new markets, products and delivery channels, and needs to strike a balance between active regulation and not stifling genuine choices firm make about their businesses. We have and ensure good communication with Jersey Finance and ensure these issues can be discussed.

Is the high level of merger/acquisition activity (presumably a higher risk impact) impacting on resource allocation and review prioritisation?

The aim is to carry out a review of impact ratings annually when new data is collected, but there is a process where ratings can be reviewed when significant event such as mergers or acquisitions take place.

If an entity has a low inherent financial crime risk, and is in the pooled category, would you agree there is a risk that senior management may take their responsibilities less seriously?

Although risk cannot be ruled out, having a low impact or low inherent risk rating does not absolve a firm or senior managers from taking their duties seriously.

Will we get to see our risk model?

There are no plans currently to share the risk model with firms. The risk model is a tool to help a supervisor understand where risks may be present in a firm, and is only a prompt to further consider those areas of concern.

Does the JFSC foresee a move to greater financial data collection involving a standard Chart of Accounts?

This is not something currently under consideration, but as the risk model evolves we will assess what information is required and from whom.

Is there still greater concern of risk with smaller trust companies in Jersey?

All of our activities in respect of risk, plus our involvement in the NRA will help us obtain a clearer picture of risk across industry sectors. As our risk model produces more and more data about risk it will enhance that understanding even further. It is too early to say at this point if one sector, or a group of firms within an industry sector, is more or less risky than another.

People, policies and processes

Will the further change work being done by the JFSC mean that our fees will go up again?

Under the Commission Law, the income from our fees must cover our liabilities and our expense, while ensuring we have sufficient reserves. We are always mindful of the level of fees we set and endeavour to keep these increases as low as possible. Just as you need to invest in your businesses and your staff, so must we. Our consultation papers set any increases, which are primarily driven by countering financial crime, investing in our reserves and our data analytics function

The sector chapters have been drafted and submitted to The World Bank for review. In addition a consolidated draft report has been prepared and is also under review. A further workshop was held with The World Bank at the end of November. Following this there will be further refinement to the sector chapters and overall report which is due to be finalised in quarter 2 of 2020.

Who is going to pay for the additional Directors coming in to the JFSC structure?

We have made a number of structural changes during 2019 which has resulted in a reduction in the number of Executive Directors. As a result, we have reviewed the future needs of the organisation and considered any gaps in our structure to create a number of senior roles to support the Executive Directors and build upon our succession planning.

Only now a special focus on financial crime seems late in the game?

We have always maintained focus on financial crime. However, the current changes are in response to developing international standards and the learnings of other jurisdictions who have undergone the MONEYVAL assessment on effectiveness.

What has the main impact of the new DG been on the JFSC?

Martin Moloney took over the reins as Director General at the end of February 2019. Martin set out his short term goals in the annual report and business plan, which were plugging into the local ecosystem and opening up dialogue with industry and Government about where we need to go, as well as getting to know the intricacies of the JFSC.

A key focus for Martin over recent months has been working with his senior leadership team and the Board of Commissioners in setting our strategy over the next four years. This is progressing well and we plan to share this in full with industry as part of the 2020 business planning process.

What is the JFSC doing to speed up the processing of principal persons or key persons applications?

We recognise that the current system processing personal questionnaires is outdated and difficult to use and is resulting in some delays. Replacing the current system is a key activity in our business plan for 2020.

Should we expect a proactive or reactive stance from the JFSC in respect to digital KYC over traditional methods? Jersey should surely be well-positioned as a leader in this respect.

The current regulatory framework enables the use of digital KYC. We are supporting an industry working group at present, exploring the actual and perceived barriers to enable greater use.

Does the JFSC anticipate it will be able to provide industry with policies and guidance for new asset classes, such as cannabis, in a reasonable time to allow the industry to benefit?

There is an update pending to the Sound Business Practice Policy pending for cannabis.

Customers care more about good customer outcomes rather than obscure AML ideals. Are you making us fail our customers with excess focus on AML?

As an IFC, Jersey is constantly in the international spotlight, and is a well regulated jurisdiction which has no appetite for its finance industry to be used to facilitate money laundering or financial terrorism.

As such it is imperative that not only are international standards met by Jersey's regulatory framework, but also that the requirements are effectively applied by service providers. Whilst it is acknowledged that meeting the AML/CFT requirements may be seen as somewhat of a burden on clients and service providers alike, this is a price to pay for doing business in a well regulated jurisdiction. Jersey is fully committed to continuing to meet international standards.

The JFSC are assessing industry. How do you plan to review and assess your own units’ efforts and effectiveness?

We are constantly looking at ways to improve effectiveness and ensure we meet our statutory objectives. We are accountable to the States of Jersey and produce an annual report to account for our activities. In addition to this, we are also subject to international assessments.

How closely do the various agencies OIC, JFCU, CI Ombudsman and the JFSC co-operate?

We work closely with other agencies both within the jurisdiction and internationally through Memoranda of Understanding and these are available on our website.

Will the PQ portal be improved any time soon?

We acknowledge that the PQ (Personal Questionnaire) system needs to be replaced and we are in the process of scoping the requirements for a new and improved system. In 2019, we formed an external portal users groups with members of trade associations and are looking to work principally with this group to develop the new system. We are also looking for a wider consultation process to commence in early 2020 to obtain other feedback on the existing system and the functionality requirements for a new system. How do you interact with enforcement?

Supervision and Enforcement work closely together where there are significant and material issues identified or where intelligence is received that requires further analysis. We follow an agreed process for referring entities and/or individuals to enforcement for consideration. Supervision and Enforcement usually work hand in hand on any enforcement cases.

Slow acknowledging email communication. An acknowledgement of receipt within 24 hours would be appreciated.

Thank you for the feedback. If you require an urgent response from, please call your supervisor or JFSC contact.

There is a perception in industry that the JFSC needs to better demonstrate its ability to enforce its codes through harsher and higher penalties. How do you respond to this perception and how does this encourage openness and transparency?

As with any regulator, our reputation, and therefore to some extent, the island's reputation, given the scale of the financial sector, is based on performance against our objectives i.e.: our guiding principles.

In considering any action against an individual or entity, we will, follow our agreed and published decision making process. In doing so, we take account of the significance and materiality of issues to ensure that actions are fair and proportionate. In the majority of cases, we will look to work with the individual or entity to resolve and remediate without sanction. This position remains. There are occasions however where sanction is the right course of action and therefore we will use the tools we have available, including penalties, to achieve this.

You have referenced lack of resource a few times. What risk does Jersey face if you do not increase staff numbers?

Resourcing in any business is always a challenge, particularly during periods of change and strategy development. We are not immune to this. We are conscious, as it would be for any regulator, of striking a balance between costs and fees. In terms of our current proposed strategy, we are considering the resourcing impact and how we can achieve our objectives whilst balancing costs. We are looking at options such as secondments, contracts, professional services and working to increase our trainee programme.

In terms of relationships, how much attention is paid to staff turnover in the JFSC?

We review staff turnover on a regular basis and appreciate that any changes have an impact on a regulated entity, which we try to keep to a minimum. It is difficult to recruit readymade supervisors and therefore, with our trainee programme we are looking to minimise the impact of any departures and provide a framework to 'grow our own' supervisors.

Will the JFSC be making assessments as to sufficiency of resourcing of compliance teams in business as part of their risk assessments?

The effectiveness of compliance functions is one of the areas that the risk model will assess, using a combination of data drawn from the recent collection exercises and information obtained by the supervisors during the course of their regular engagement activities.

How secure is our data with the JFSC?

We protect our systems and the underlying data with appropriate security measures to ensure the confidentiality, availability, and integrity of the data - both in transit and at rest. These measures include several technical and logical controls, along with disciplines around policy, training and awareness.

Many of the security measures deployed have been independently reviewed and tested by external providers who have significant experience with the security of highly sensitive information.

In a personal data breach situation would you not expect a firm to report to the Information Commissioner (OIC) first as this is a legal requirement and then notify the JFSC?

It is important that the ICO is notified as soon as possible. The JFSC has no issue with the OIC being advised first or at the same time.

National Risk Assessment (NRA)/ MONEYVAL

What happens if we fail the MONEYVAL assessment?

The next MONEYVAL assessment, due to take place in 2021/2022, assesses against technical compliance with the standards but also the effectiveness of applying the standards. We know that this has been a challenge for many other jurisdictions and therefore must ensure we apply the lessons learned in our preparation and focus to achieve a positive outcome for Jersey.

Jurisdictions which have not met the required standards have received action plans and have required remediation to ensure compliance, which is resource intensive and potentially damaging to reputation. It is important focus for Jersey in the coming months and years and is the collective responsibility of Jersey plc.

Can you update us on the progress of the NRA?

Co-ordination of the National Risk Assessment is being led by the States of Jersey and involves all relevant agencies and representatives from industry. Jersey is following The World Bank methodology.

Are there any expected changes to next year’s NRA questions - particularly in relation to funds?

As it has in previous years, the supervision data collection exercise which also supports the NRA, will collect the same data in 2020 and 2021. We have sent out communication advising that the 2019 data is due by 31 March 2020. We will share communication with firms by 20 December. This will include a workbook that will need to be completed and respective guidance.

You refer to Jersey meeting the MONEYVAL gold standard, given the number of other jurisdictions who have failed their assessments, how realistic is it that Jersey will pass let alone achieve the gold standard?

We know that achieving a positive MONEYVAL assessment is a significant challenge given the experience of other jurisdictions. We must take the learnings of these jurisdictions and ensure that Jersey is prepared and can evidence effectiveness with the standards. The jurisdiction has a strong reputation and expertise in this regard.

Is the JFSC going to pursue more AML related enforcement action in order to get the numbers up for the NRA and MONEYVAL?

We are required to demonstrate regulatory effectiveness and part of this will be the appropriate use of powers which may include enforcement powers. Given the increased level of on-site activity, it is inevitable that there will be an increased level of findings, which may result in enforcement investigations.

Is there any point in passing MONEYVAL when the international community will just find something else to hit the jurisdiction with due to it being an international finance centre?

Jersey is committed to compliance with the relevant international standards. Ensuring ongoing compliance to such standards is critical to Jersey. Continuing to be viewed as a well regulated jurisdiction drives ongoing market access. Without such assessments it leaves Jersey in a vulnerable position in maintaining such market access.

If part of the MONEYVAL requirement is based on the characteristic of a financial institution, is it right that the JFSC has risk rated principally on the basis of footprint?

The footprint of a firm dictates the day to day approach to supervision for a firm, but the risk model takes other data about firm characteristics, the judgement of supervisors and combines them to produce risk assessments.

Throughout the development of the risk model we have worked to understand the international requirements and we believe that so far, as we can tell at the moment, our model is as compliant as it can be. There is a specific cut of the risk model that aims to identify how firms will be examined by our Financial Crime Examination Unit.

Before the next round of NRA, will the JFSC be hosting more guidance workshops as there seems to be still confused about specific data questions?

During 2018/19, we evolved our approach to collecting supervisory risk data to include data to inform the NRA project. The feedback from industry has played a key part in refining the data collection of workbooks and the accompanying guidance. We will be collecting materially the same data for 2019 and 2020 and we will communicate this with industry in December.

There are no plans, at this stage, for data collection workshops with industry. However, we are open to exploring various forms of interaction with industry to improve the quality of data submission and completeness. Your supervisor or day to day JFSC contact will be happy to answer any questions you may have in relation to data submissions.

With the need to keep NRA current, can we assume unlikely level of data collection will materially decrease?

We will shortly be issuing a communication confirming the data that will be collected for the next two years will be on the same basis as the previous two years. Whilst there may be some revisions to future collection exercises, it is unlikely to substantially decrease.

When can we expect NRA findings feedback?

The target is to issue the NRA report in quarter 2 of 2020.

Why has it taken so long to publish the NRA?

The National Risk Assessment is co-ordinated by the Government of Jersey. We have and continue to play a supporting role. It is, however, acknowledged that this has been a considerable effort from all agencies and industry to enable Jersey to produce an informed assessment based upon data. Not all jurisdictions have taken this approach and are now findings that they are having to follow this process to truly identify gaps and take corrective action.

Civil penalties, sanctions

Will key persons be subject to civil penalties and if so, why would I want to take the risk of becoming one?

The current civil penalties regime covers registered businesses and individuals who have either to a significant and material extent, contravened a Code of Practice. This is in line with international standards and many other jurisdictions.

Whilst there are no current plans to extend the regime further, we will keep it under review in line with developing international standards. We appreciate that this may give rise to concern and should Jersey look to implement such a regime to include key persons, this will be subject to consultation.

How is the JFSC going to apply all of the money it is going to raise via civil penalties?

We will shortly be issuing a communication to advise how the JFSC proposes to apply monies received from civil penalties.

Is the JFSC under pressure or feel it will be to increase the instance of fines and /or sanctions that it issues? If so, how does the JFSC intend to address the same?

In considering any action against an individual or entity, we will follow its agreed and published decision making process. In doing so, we will take account of the significance and materiality if issues to ensure that actions are fair and proportionate. In the majority of cases we will look to work with the individual or entity to resolve and remediate without sanction. This position remains. There are occasions however where sanction is the right course of action and therefore we will use the tools it has available, including penalties, in this regard.

AML

What do you expect from internal risk and compliance units, what about combatting financial crime?

The requirements are set out in the respective legislation and handbooks. We also publish feedback papers following on-site examinations which enable entities to undertake a self-assessment review against the findings and put in place actions to address any shortcomings.

When is the island going to update its AML typologies given that the published documents are now 11 and 5 years old respectively and industry needs to have an up to date understanding of the risk trends in order to prepare adequate Business Risk Assessments?

We are currently considering this as part of our strategic project – enhancing financial crime capabilities. Once we have undertaken more detailed planning we will be able to advise of timescales.

The lack of AML prosecutions of regulated entities is likely to be a negative part of the 21/22 assessment. What can or should be done?

Prosecutions are a matter for the Attorney General. We will continue to fulfil our responsibilities in line with our published guidance Making a Referral to the Police/or the Attorney General.

Will the JFSC make suggestions to Government to evolve the AML/CFT laws in line with our technological world? For example, utility companies are going paperless. Will electronic CDD (UBs by email, facial recognition software) ever be acceptable?

The current regulatory regime enables the use of digital KYC. We are currently supporting an industry working group to further explore the actual and perceived barriers to enable greater use of technology. And this may result in recommendations for further legislative enhancements.

Supervision, supervisors and examinations

Why are visits not proportionate to firm size? Surely the bigger firms require more than five days.

The length of the visit will be proportionate to the size of the business, and may be shorter or longer depending on the complexity and size of the firm. Five days have been cited as an example.

How do you think the multiple lines of defence (internal, accountant, supervisory boards, and regulator) can work more effectively? There is so much reporting /control going on, that business and second line lose sight of their own responsibility.

What we look for as supervisor, as well as basic compliance with regulatory requirements, is a clear definition of who is responsible for what. We find that different firms can have different models for their control frameworks, but in general, the qualities of those that work best are those that are well defined, clearly and consistently understood across the business, and look to review effectiveness and improve over time.

With two examination units, are we likely to have concurrent examinations?

The examination timetable will be co-ordinated to avoid different visits running concurrently.

How will the JFSC assess the true effectiveness of their examination units?

By implementing an enhanced risk methodology, we will be able to track the impact of activity in terms of changes to entity and sector risk profiles. It is the overall effectiveness of supervision that will be measured.

How do we have a good relationship with a supervisor when they constantly change?

Change in staffing - both at the JFSC and in regulated entities – is a simple fact of working lives. We all have to do our best to not let this unbalance our relationships. Usually, even if your supervisor changes, there would be someone else in the immediate team who has some knowledge of your business, so we look to build continuity that way, and through ensuring effective handovers.

You have not mentioned financial supervision this morning. Is there still a focus on reviewing ANLA calculations and financial statements?

Yes, definitely. In addition to routine reporting of financial information through quarterly prudential returns (for banks), or ANLA requirements, there are a number of entities where we have additional focus on for financial soundness. While we are increasing our focus on AML, conduct of business and financial soundness remain on our radar.

How is the JFSC dealing with the overlap between the areas covered by the supervision team and the new Financial Crime Examination Unit?

The examination timetable will be co-ordinated to avoid different visits running concurrently. The scope of each examination will also be carefully considered to avoid duplication.

Are we moving towards a regime similar to the UK? Jersey is quite different to the UK. Can the panel comment on the comparisons it draws as a regime as compared to the UK?

The regime for Jersey has been developed taking into account our offshore nature and that of the sectors, regulatory framework and resourcing model. We need to ensure that resourcing is focused on those firms that given rise to the greatest potential impact to our guiding principles. The approach will have some similarity to the UK given regulators across the globe are looking to implement risk based approaches to optimise resource and manage risk.

Will you expand regulation to have greater coverage over family office or private trust company? If so, how much and when?

Expanding our regulatory remit is a matter for the Government of Jersey. It is, however likely that the output of the NRA will highlight some additional areas which need to be considered from a regulatory perspective and, therefore as a result, our remit may increase.

Will schedule 2 businesses be under more scrutiny going forward and which businesses are you focusing on first? May I suggest lenders who lend for private individuals and family offices, as these funds are used as an investment opportunity to make easy returns and the sof/sow is not always checked?

In 2018, a new team was introduced in Supervision - the Pooled Supervision team who primarily focus on schedule 2 businesses. This change was to ensure that there was a dedicated team with supervisory responsibility for such businesses. In 2018, the team undertook a thematic examination of property managers and in 2019, they undertook a thematic examination of the MLRO function and business risk assessments across a selection of firms.

In line with our risk methodology, these businesses may be rated as medium or high risk from an AML/CFT perspective and will be subject to on-site examinations by the Financial Crime Examination Unit. Other such businesses will continue to be in the scope of our thematic examinations.

Will the AML supervision team provide feedback in a similar manner to thematic reviews? And if so, how often?

The Financial Crime Examination Unit will undertake entity visits only and therefore, we will provide consolidated feedback on at least an annual basis on the key issues identified and also best practice. The Supervision Examination Unit will continue to undertake thematic examinations and we will continue to publish feedback at the end of such programmes.

In the FCEU presentation, it was noted that recommendations will no longer be given following a visit. Instead, there will be an action plan. Why have you dropped the recommendations?

This is the process that the Supervision Examination Unit has been following for the last two years and therefore this will align. The individual firm is best placed to determine what action is required and appropriate for their business and the timescales by which this can be achieved, but will support firms in this.

Is the production of monthly financial statements / ANLA by a third party an outsourced activity?

Our Outsourcing Policy describes outsourcing as "an arrangement of any form between a registered person and a service provider by which the service provider performs any activity, that would otherwise be undertaken by the registered person, where a service provider’s failure to perform or inadequate performance of such activity would materially impair the continuing compliance of the registered person’s regulated activity, with the requirements of the regulatory laws".

It is therefore incumbent upon the registered person to assess whether a disruption to, or drop in standards of, an outsourced activity would have a significant impact on its ability to remain compliant.

How does the JFSC plan to support MLCOs/ROs in future? It has always been a conflict to balance ensuring compliance and pleasing the directors to keep your job. Would it not make more sense for MLCOs to be employed by the JFSC and increasing fees to industry to support the cost?

The responsibility for compliance remains with the board of a regulated entity and therefore very much looks to the board to demonstrate compliance with such requirements. It would cause a conflict should we look to employ key persons. Where an individual has concern then we would encourage them to discuss with their supervisor.

Legal advice and PII considerations can impact what can be shared. To be open against legal advice could negate insurance. How do we approach this?

We understand that there can be tensions between the requirement for registered persons to be open and transparent with it with regards to material matters which could affect a registration, and the stance of insurers with respect to any acceptance of liability or disclosure of certain facts. Should insurers indicate that disclosure of all relevant matters to us could put insurance cover at risk. This should be flagged with us as soon as possible.

While recommendations have been dropped, do you comment on / guide action plans?

The simple answer is, yes. When a firm submits their action plan we will review and provide feedback and work with them to finalise.

“If you don’t know what we mean, ask us”. In my recent experience the answer you give to “what do you intend by this wording” is get your own legal advice...

When it comes to understanding the law, it can be difficult for us to provide interpretations - we are not here to provide legal advice. Sometimes it is appropriate for firms to engage legal advisors. However, when it comes to general supervisory communication, such as why we want a meeting, what information we have requested, or feedback in an examination report, we should be clear to you what we are saying, and so if you're not sure, please do ask.

If you have a branch operating in Jersey but is centralised in London, how often would you expect the head of compliance to visit the Jersey branch...every month or quarter?

Primarily it is the responsibility of senior management to ensure that compliance arrangements are adequate; and the usual requirement is that the compliance officer is based in Jersey. A head of compliance sitting above/elsewhere (to the compliance officer) in a wider entity/group structure may also be involved in Jersey compliance matters. How involved this person is really depends on their remit.

After 20 years of principle based regulation is there any appetite to introduce rules to cover certain areas where non-compliance continues to be an issue?

For specific areas which require greater clarity or continue to present issues, we will continue to issue guidance setting out expectations.

Where are we in relation to pension regulation and do you feel that you are sufficiently resourced in this area?

This is under consideration and the timing of it is dependent upon the Government of Jersey progressing with the legislation. We will ensure that we have sufficient resource with the right level of knowledge and experience to supervise such businesses.

How do you intend to balance the growing regulatory burden on regulated entities whilst trying to ensure we remain a competitive industry against our rivals in other jurisdictions?

We are conscious of costs and burden on industry. In order to support the island in protecting its reputation as a well regulated international financial centre, we must continue to invest and evolve to meet the growing demands. As part of our strategy for the next four years, we are committed to working with industry on structuring fees.

The JFSC has been formally interviewing new key and principal persons being appointed within industry. Is this across the board or on a risk based approach re supervisory effectiveness? What should be expected in terms of format and content?

We have increased the number of interviews for key and principal person roles across the industry. However, we have adopted a risk-based approach. These interviews may be conducted, for example, where an individual is being appointed to a key or principal person role for the first time, to assess an individual’s understanding of a particular business, or to further explore information contained within the application. In assessing fitness and proprietary, we will assess knowledge and experience and therefore some interviews may include some technical questions based upon the Jersey regulatory framework.

Will you be providing industry-wide feedback following the AML supervision visits?

Reports will be issued for each firm along with consolidated industry feedback annually. This will outline the key findings from the on-site examinations and also evidence of best practice.

Are you considering personal conduct questions in considering whether a person is fit and proper (considering the recent #me too movement)?

Our regulatory remit includes conduct, be it financial or otherwise. We expect firms and/or key and principal persons to report serious and material misconduct as part of the duty to be open with the regulator. The routes for doing so include the whistleblowing helpline. The conduct risk within the firms we regulate is a focus us. We acknowledge that this risk is manifested in many forms including those associated with the #me too agenda/movement.

Have the first six entities due to be visited by the Financial Crime Exam Unit been notified?

The six firms have been notified of their visits and we have agreed the dates.