The Guernsey Financial Services Commission (the Commission) is increasing its capacity to undertake professional and efficient enforcement action[1].

The appointment of Simon Gaudion to the newly created post of Director of Enforcement, and the establishment of a dedicated Enforcement Division, will further enhance the Commission’s ability to undertake proportionate and efficient enforcement action.

“The Commission does not seek to be an enforcement-led regulator but, in the same way that the police require powers of arrest and a capability to make arrests, the Commission requires an effective enforcement capability if it is to be able to deter wrongdoing and poor practice – thereby keeping Guernsey’s financial sector safe,” said William Mason, the Commission’s Acting Director General.

• “If the Commission was not able to take enforcement action, financial services firms and their employees would be undercut and disadvantaged by those with a cavalier attitude to the rules.  Those firms who wish to comply fully with appropriate standards might then be forced to reduce their own high standards – to the detriment of their clients and all in Guernsey who depend upon them – in order to compete with those breaking the rules.  Thus, good quality well-targeted enforcement is something which is important for Guernsey’s wellbeing.”

Mr Gaudion, previously Senior Investigation Officer – Financial Intelligence Service at the Guernsey Border Agency, has decades of experience fighting financial criminals.  He will now lead the Commission’s enforcement activity.

Mr Gaudion said,

• “I look forward to working for the Commission and ensuring that the considerable international reputation it has built, through its historically high standards of regulation, is maintained.  I hope that my 30 years in law enforcement and my interaction with industry to date will enable me to ensure that enforcement activities carried out on behalf of the Commission are dealt with properly and fairly across all sectors.”

Mr Mason said,

• “The Vice Chairman and I were impressed by the large number of strong candidates who applied from different walks of life.  We would like to thank all of them for their interest and the enthusiasm they showed for our work.  We were delighted to be able to select a local candidate with a strong track record of fighting financial crime and we look forward to his starting work with us.”

Further Background

MORE than 100 incidents enforcement incidents were recorded by the GFSC last year.

The commission, which established a dedicated anti-money laundering and counter-terrorism financing division at the end of the year, imposed

– just one fine,
– but issued dozens of warnings to licensees.

fiduciary division

The fiduciary division said, in the commission’s annual report, that its enforcement work had highlighted

–  failings and
– the need for staff training at all levels.

It said that a number of issues were resolved swiftly, with the licensees involved taking action quickly and so only receiving letters formally recording the issues, rather than having conditions imposed on them.

– Six notices were issued seeking information from licensees in support of international co-operation with overseas authorities or where there were suspected breaches of regulatory requirements.

In banking,

– one condition placed on a licensed bank in respect of a remediation plan imposed as a result of a breach of the anti-money laundering handbook.

NON BANKING
– Four warnings were made about non-bank entities using misleading advertising about bank-like products.

Insurance considered
– 43 breaches of regulatory requirements in 2012, of which six resulted in sanctions.
– One was at a high level where a private fine was applied.

INVESTMENT
– Nine licensees had conditions imposed on their investment licences by the end of the year, an increase from six at the start of 2012.

– Issues included not

o meeting due diligence requirements,
o breaches of conduct surrounding business rules, and
o  a restriction on undertaking new business until the company could provide it was appropriately resourced and managed to service additional business.

The anti-money laundering division, set up late in 2012, conducted six visits last year and plans 65 in 2013.

Director-general Nik van Leuven said that the commission had pursued ‘some potentially significant enforcement cases’ during the year, all of which had taxed staff resources.

‘By its nature, enforcement is unpredictable as to occurrence, timing and consequences,’ he said.

‘The only assumption that can be made with confidence is that the commission will inevitably be required to investigate breaches of the regulatory regimes for which it is responsible, with the attendant possibilities of sanctions and legal proceedings. What cannot be predetermined precisely is how any case will develop.’

Mr van Leuven said that the commission’s new enforcement division would lead to more effective and efficient handling of cases, particularly to make them less vulnerable to legal challenge.

External lawyers were engaged on the most serious cases pursued in 2012, but it is anticipated that the new division will reduce the reliance on them.

Enforcement statistics

Warnings     68
Conditions imposed     9
Requirement to provide information on an identified area of regulatory
concern    49
Discretionary financial penalties    1

http://www.gfsc.gg/The-Commission/News/Pages/Commission-to-enhance-its-enforcement-capabilities.aspx

GFSC annual report – http://www.gfsc.gg/The-Commission/Documents%20and%20Forms/GFSC%20Annual%20Report%20and%20Financial%20Statements%202012.pdf