In our previous article, we covered DPAs – what they are, why they are being introduced, the draft legislation and the implications for Jersey. The legislation- The Criminal Justice (Deferred …
FAQs on the extension to the scope of Jersey’s AML/CFT/CPF regime
On the 18 January the Government of Jersey approved the enabling legislation that will extend the scope of Jersey´s AML/CFT/CPF regime to include a wide range of previously exempted persons. In this briefing note Darren Boschat outlines the key changes and their implications.
Please note this briefing note does not constitute legal advice. It is based on the draft guidance and legislation which has yet to come into force and may be subject to further amendment or clarification.
What has happened?
The JFSC has proposed that a series of exemptions from the scope of Jersey´s AML/CFT/CPF regime are withdrawn. The necessary enabling legislation was approved on 18 January 2023 and affected businesses, referred to as Previously Exempt Service Providers (“PESPs”) now have a six-month transitional period during which they must apply to the JFSC for registration under the Proceeds of Crime (Supervisory Bodies)(Jersey)Law 2008 (“SBJL”).
What new obligations will apply to PESPs?
PESPs will be subject to the same AML/CFT/CPF obligations as businesses that are already registered under the SBJL. They will need to register with the JFSC and adhere to the obligations contained in the MLO and the AML/CFT/CPF Handbook.
The JFSC anticipates that many PESPs will be administered by regulated firms in Jersey. Where this is the case, the JFSC has proposed that the PESP may rely on the regulated firm, referred to as an Anti-Money Laundering Service Provider (“AMLSP”) in order to support them in satisfying relevant AML/CTF/CPF compliance obligations, including the provision of a MLCO and MLRO.
How can PESPs determine whether they need to register?
The JFSC has provided draft interpretative guidelines under Article 36 of the Proceeds of Crime (Jersey) Law 1999 (“POCL”) in order to assist firms to determine whether a registration is required under the SBJL. In simple terms, a registration is required where:
- The person carries out an activity specified in Schedule 2 of the POCL in or from within Jersey (this would include Jersey companies and entities with a registered office irrespective of where the activities are carried out);
- The activity is conducted “as a business”; and
- The activity is provided to a third party or customer.
What will be the registration process for AMLSPs and PESPs?
Regulated service providers that wish to act as an AMLSP will be able to apply to the JFSC for registration from the start of the transitional period. AMLSPs will need to provide details of the PESPs for which they will be acting and the names of staff that will be acting as MLCOs and MLROs as part of the application process.
A PESP not appointing an AMLSP must submit their own application and supply the names of persons acting as MLRO and MLCO.
What will be the JFSC´s licensing policy in respect of PESPs? On what grounds could a registration be refused?
The JFSC has not yet published a licensing policy in respect of applications under the SBJL. Article 14 of the SBJL allows the JFSC to refuse to register an applicant on the grounds that either they, or any associated principal person or key person, are not “fit and proper” which includes any conviction for dishonesty or under AML/CFT and regulatory legislation in Jersey, or elsewhere.
Will it be possible for PESPs to have corporate directors?
It is unclear whether the JFSC will allow PESPs to have corporate directors. The JFSC´s licensing policy under the Financial Services (Jersey) Law 1998 prohibits the use of corporate directors but no licensing policy has been published under the SBJL.
What services must be provided by an AMLSP?
PESPs are not obliged to appoint an AMLSP and may instead satisfy the necessary compliance obligations using their own resources, if they wish.
Where an AMLSP is appointed, then the PESP must appoint an employee(s) of the AMLSP as its MLCO and MLRO, as a minimum. The JFSC has stated that in practice it would expect AMLSPs to provide more than the minimum level of services so as to ensure that they properly understand the risks associated with the PESP.
Will PESPs need to maintain their own AML/CFT/CPF Business Risk Assessment, Strategy and policies and procedures?
The answer to this is, yes, for PESPs who do not appoint an AMLSP.
Where an AMSLP is engaged, the JFSC has indicated that it may be possible for PESPs to adopt the AML/CFT/CPF Business Risk Assessment, Strategy and policies and procedures of the AMLSP. This comes with the important caveat that it is necessary to demonstrate that the inherent risks faced by the AMLSP and the PESP are sufficiently aligned.
How should AMLSPs and PESPs prepare for this change?
We would recommend that AMLSPs and PESPs prepare themselves by:
- Assessing the impact – All entities should consider the revised scope of Schedule 2 of the POCL together with the guidelines issued by the JFSC on 15 December 2022. We would recommend that AMLSPs identify the broad cohort of client entities potentially in scope and then proceed to a more detailed analysis.
- Reviewing contractual arrangements – Firms providing AMLSP services will need to consider their existing contractual agreements and fee levels in order to ensure they reflect the additional services that will be required in order to support the PESP in meeting its compliance obligations.
We would also recommend that affected firms (both AMLSPs and PESPs) consider whether their existing insurance arrangements remain appropriate and whether any notification requirements are triggered as a result of the change to their regulatory status and activities.
- Appointing key persons –Where the PESP has appointed an AMLSP, the MLCO and MLRO roles must be filled by Jersey based employees of the AMLSP. The JFSC will perform vetting of these staff and has stated that it expects AMLSPs to ensure that staff nominated to fill these roles have the necessary independence, experience and capacity to discharge their duties.
- Addressing new compliance obligations -PESPs will need to demonstrate that they are meeting relevant obligations under the MLO and the AML/CFT/CPF Handbook. Both the PESP and the AMLSP will need to adapt their existing arrangements in order to ensure that they can demonstrate compliance.
- Making applications – Where firms are satisfied that a PESP registration is required then an application will need to be made using the JFSC´s published application forms and accompanied by the relevant application fees.
Will the JFSC´s enforcement powers, including civil penalties, apply to PESPs?
Yes. The JFSC will be able to use its enforcement powers under the SBJL in relation to PESPs (and AMLSPs) along with its powers to raise civil penalties under the Financial Services Commission (Jersey) Law 1998. It is important to note that the ability to raise a civil penalty will extend to the directors of PESPs, the MLRO of a PESP and, with effect from 13 March 2023, persons performing certain “Senior Management Functions” on behalf of PESPs.
What help can Oben provide?
We are well placed to support firms throughout the transitional period including assistance with:
- Impact analysis – assisting firms to identify PESPs and providing interpretative advice in relation to marginal cases;
- Contract terms – supporting AMLSPs in identifying how contractual documentation may need to be altered to address the services provided to PESPs;
- Applications – assisting AMLSPs and PESPs with their application for registration under the SBJL;
- Risk Assessment and Strategy – assisting AMLSPs and PESPs in preparing and modifying their AML/CFT/CPF Business Risk Assessments, Strategy and risk appetite statements;
- Policies and Procedures – assisting AMLSPs and PESPs in the design and implementation of policies and procedures; and
- Training – providing dedicated training for staff being appointed as the MLCO or MLRO of a PESP, including bespoke e-Learning modules.