Jersey and the JFSC civil penalties (fining) for Breaches of the Codes –  Are you ready, are you prepared?

Are you ready for civil liability?

1. If you have not done so already, every JFSC registered persons should [must?] conduct a thorough gap analysis of their policies and procedures with the purposes of assessing their compliance with the Codes and AML/CFT Handbook.

What to measure

Any gap analysis should look at:

1. The Codes were amended with effect from 1 July 2014 along with such supporting JFSC edicts as
   1. JFSC guides and policies
   2. Dear CEO letters etc
2. The AML/CFT Handbook was amended with effect from 1 January 2015.

Background

1. On 20 February 2015, the Financial Services Commission (Amendment No. 6) (Jersey) Law 2015 was registered (Amendment Law).
2. The Amendment Law makes changes to the Financial Services Commission (Jersey) Law 1998 to include provisions to enable the Jersey Financial Services Commission to impose civil financial penalties for material contraventions of the Codes of Practice and the AML/CFT Handbook and comes into force on 20 March 2015.

Who will be affected?

1. All entities registered under the Banking Business (Jersey) Law 1991, the Insurance Business (Jersey) Law 1996 and the Financial Services (Jersey) Law 1998
2. ALL Entities registered under the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 are required to adhere to the AML/CFT Handbook.

What will be the level of penalties?

1. The JFSC’s consultation paper on the level of civil penalties indicates that there will be three levels of penalty, depending on the seriousness and circumstances of the breach of the Codes of Practice.
2. The highest level of financial penalty would be up to 8% of ‘relevant income’. ‘Relevant income’ is proposed to be income derived from licensed business activities. There is proposed to be no cap on the level of penalty that can be imposed for more serious breaches.
3. The consultation period on the level of civil penalties ended on 2 March 2015.

Consultation on processes and principles

1. The JFSC has published a consultation paper on the proposed JFSC statement on the principles and processes it will adopt under the civil penalties regime.
2. The consultation paper indicates that the JFSC intends to amend its existing Guidance Note on the JFSC Decision Making Process so that it can be used in the context of civil penalties.
   1. The existing four stage decision-making process will be retained.
   2. A discounted penalty scheme would be included so that where a settlement agreement is entered into before Stage Four of the process has been reached then a discount in penalties is available.
   3. The earlier that a settlement agreement is entered into, the larger the maximum discount.
3. The Guidance Note:
   1. Decision Making Process will also be amended to include a statement of principles.
   2. It is proposed that these will include certain principles that the JFSC must take into account under the Amendment Law (such as the seriousness of the contravention and whether it was voluntarily reported) as well as a list of aggravating and mitigating factors (for instance a poor compliance record on the one hand and co-operation with the JFSC on the other).
4. The consultation period on the JFSC statement on the principles and processes ends on 16 March 2015.

Resources

1. The Financial Services Commission (Amendment No. 6) (Jersey) Law 2015 – click here to view. http://bit.ly/1FxO8Lw
2. The consultation paper on the level of penalties – click here to view. http://bit.ly/1C0LBXM
3. The consultation paper on the statement of principles and purposes – click here to view http://bit.ly/1KtXCYc