Upcoming changes to AML/CFT handbook

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During the session, we received a number of questions from attendees.

Handbook amendments:

Are there any other material revisions likely to come down the line soon (Handbook or Money Laundering Order)? 

In order to meet with international standards and to remain agile in the fight against crime and terrorism financing there are changes made to the AML/CFT Handbook and the regulatory framework from time-to-time. Where changes are material in nature, we will continue to go through a consultation process with industry.

Stylistic amendments to the AML/CFT Handbooks are likely to occur before the end of 2021 in order to render us more effective in processing amendments.

As confirmed in the recent feedback paper on AML Handbook revisions, consolidation of the Handbooks will happen at a future date yet to be determined.

What is the latest on Politically Exposed Person (PEP) amendments to the Handbook? As in being able to declassify PEPs that are no longer in role, etc.

Article 15A of the Money Laundering (Jersey) Order 2008 describes the enhanced due diligence measures in relation to PEPs. Jersey's AML regime continues to incorporate the concept of "once a PEP always a PEP". However, on-going research and work is underway to consider whether this position may change in future.

Are Appendices D1 and D2 staying?

Yes.

Equivalent jurisdiction assessment:

Why is it appropriate for the GFSC to maintain Appendix C, but not JFSC Appendix B? Given the Guernsey Financial Services Commission (GFSC) will maintain their Appendix C equivalent jurisdictions with appropriate links. If used by registered persons will this be compliant?

Refer to the Consultation Paper No. 3 2020 (Revision to the AML/CFT Handbooks: A consultation on proposals regarding revisions to the AML/CFT Handbooks in order to implement the 2012 FATF Recommendations) and the JFSC's feedback paper on Consultation Paper No. 3 2020.

A registered person will not necessarily be compliant. In Jersey a detailed, effective and adequate assessment will need to be undertaken in each individual case to demonstrate that equivalence has been determined. Additional guidance on equivalent jurisdictions is available in section 1 of each of the AML/CFT Handbooks.

Can the JFSC provide further guidance on what they would expect to see in respect of a registered person's evaluation of country risk?

Particularly: what should the analysis look like; what approach should be taken if a particular jurisdiction has not been assessed or the last mutual assessment is non-current; and would there be any regulatory challenge if a Jersey entity, after assessment, classified Jersey as a high risk jurisdiction?

A country or territory may be considered to be equivalent where:

• financial institutions and designated non-financial businesses and professions are required to take measures to forestall and prevent money laundering and the financing of terrorism that are consistent with those in the FATF Recommendations.
• financial institutions and designated non-financial businesses and professions are supervised for compliance with those requirements by a regulatory or supervisory authority.

It remains the responsibility of the relevant person to conduct and document its assessment to determine the level of money laundering and terrorism financing risk that a country or territory is considered to pose, which then may determine appropriate CDD measures. Senior management of the financial institutions and designated non-financial businesses and professions is accountable for this judgement, and for maintaining an effective compliance culture. This may, for example, mean that:

• the reasons are detailed in terms of the conclusions drawn concerning the level of risk
• the reasons are documented at the time of the decision and the date of the decision is clearly identifiable
• the decision is made based on up-to-date and relevant supporting information, the date of which is clearly identifiable
• the decision-makers are clearly identifiable.

Supporting information may be obtained from credible sources, such as detailed mutual assessment reports demonstrating that a country or territory has effective AML/CFT systems and controls. Such reports may be time sensitive and material changes may have occurred since the report was issued. Of relevance is also credible sources that demonstrate low levels of corruption, terrorism financing, money laundering, proliferation financing and other criminal activity. National Risk Assessments may also provide relevant information.

Additional guidance on equivalent jurisdictions is available in section 1 of each of the AML/CFT Handbooks.

Finding out and obtaining evidence of identity:

You mention that we now need Memorandum and Articles of Association for ALL companies: is it acceptable to hold a copy downloaded from a jurisdiction's 'Companies Registry' rather than hold wet-ink versions?

The acceptability of direct downloads from a registrar/registry depends on the registry in question. Where a registrar/registry is in a position to issue a certificate of authenticity (via an appropriately secure portal/mechanism), this may be considered "evidence from an independent and reliable source" as an alternative to an original or certified copy.   

Following the changes to the Handbook relating to evidence of obtaining identity, all sections now make reference to having audited accounts - how do the JFSC envisage this being implemented as foundations/partnerships do not need to have their financial statements audited?

The reference to "audited financial statements" was not introduced by the latest revisions (i.e. Consultation Paper No. 3 2020). The wording referred to has been part of the Handbooks for some time. "Latest audited financial statements or copy of such statements certified by a suitable certifier" is one of a list of options for evidence. If audited statements are unavailable, a relevant person should consider the other listed options.

Finding out Identity - Limited Partnership (LP) - Given that the assets in such arrangements stem from the LPs, can you please explain why the focus is on the General Partner and management given the potential AML risks of the assets being proceeds of crime and subsequent ML risks?

A legal arrangement cannot form a business relationship or carry out a one-off transaction itself. It is the general partner(s) of the limited partnership who enter into a business relationship or carry out the one-off transaction with a relevant person on behalf of the legal arrangement and are therefore the customer(s).  

Regarding reliance and evidence to be provided in two days rather than five: in order for the evidence of identity to be valid, my understanding is that the documents need to be original certified true copies. How will the JFSC view documents taking longer than 2 days due to postage?

Any instances of inability or unwillingness to follow guidance are always considered on the merits of the case and in the context of the particular circumstances. A one off instance is likely to be considered differently from repeated instances and will likely receive a differing response from the supervisor.  

Does the JFSC expect entities to update terms of reference / assurances with obliged persons to deal with the change to 2 days provision of information requirement?

Yes.

In respect of obtaining evidence from an Obliged Person, is the JFSC suggesting that if the 2-5 day turnaround is not met to obtain verification documentation that the relevant person should not place reliance on that Obliged Person any further, and full CDD should be obtained by the relevant person?

Having given an assurance that such documentation will be available within the specified timetable, should the obliged person fail to deliver as specified, then the relevant person should reconsider whether reliance on that obliged person is appropriate.

When a bank has a reliance relationship with an Obliged Person and where the customer is a legal entity with directors provided by the Obliged Person, is the bank expected to "in every case" still obtain the constitutional docs?

Yes.

For trusts, how far do you expect a relevant person to go to obtain information on trustee powers?

Until it can demonstrate that it understands the nature of the powers.

Can you please give some examples of Strategic Decision Makers that would not be directors of a company?

Do we require CDD on all senior managing officials or just the names when considering who exerts influence? Is there a minimum requirement for this?

An example of a Strategic Decision Maker, that may not be a director is a Senior Manager. Senior managers have an important role to play in establishing the right governance and compliance culture within the business. They may in their day-to-day work have the adequate knowledge, skills and competence, as well as sufficient authority, to make strategic decisions within their area of expertise.  Duties and responsibilities may be documented in the employee's job description and assessments are based on factual circumstances.

CDD remediation:

Will the two day (from 5 day) requirement need to be applied retrospectively when testing?

Are we expected to update terms of references / assurances from obliged persons, in respect of two day requirement?

If a relevant person had an existing company client but had used evidence of identification not including the Memorandum & Articles of Associations, is a remediation process required?

Are the changes to company CDD retrospective?

Will there be a time limit for corporate CDD to be updated (to ensure Mem & Arts / LPA / Deed / Charter etc. are now obtained)?

Relevant persons should ensure that their policies and procedures are consistent with the new guidance from 31 May 2021 when the new regime comes into effect.

No retrospective remediation project is required.   Rather,  Article 13(1)(c)(ii) of the Money Laundering (Jersey) Order 2008 requires a relevant person to apply identification measures where the relevant person has doubts about the veracity or adequacy of documents, data or information previously obtained.

This means that where, during the course of its regular review of a business relationship (pursuant to Article 3(3)(b) of the Money Laundering (Jersey) Order 2008 and discussed at Section 3.4 of the AML/CFT Handbook) a relevant person becomes aware that documents, data or information previously obtained do not satisfy the current customer due diligence requirements, the relevant person will need to apply customer due diligence measures to that customer at that time, in line with the requirement in Article 13(1)(c)(ii) of the Money Laundering (Jersey) Order 2008.