Comsure will start posting typical questions and answers to assist those charged with keeping their firms out of trouble…..

Question – Please, can you help me persuade my company to beef up its Transaction profiles?

Answer – To help make a case to the company an MLCOs first port of call should be the JFSCs recent Trust Company Business Examination Feedback (thematic findings) as shown below.

Comment – The following regulatory directions are clear and if not implemented you should not be surprised to have a slap on the wrist or worse.!!!

1. The JFSC Trust Company Business Examination Feedback 2015 Issued March 2016 (5 of 9) – In this they say
   1. Monitoring Examinations in the latter half of 2015, in particular, highlighted failures to establish customer profiles as a “benchmark” to determine patterns of expected transactions and activity within each customer relationship.
   2. In the case of three registered persons, there were either no Policies relating to monitoring or these had not been finalised and rolled out to staff.
   3. In other situations, the registered persons had not considered the implications of setting automated search criteria and screening parameters too narrowly or not documented the action that would need to be taken when matches are identified.
2. The JFSC Trust Company Business Examination Feedback 2014 Issued March 2016 (6 of 8)– In this they say
   1. Monitoring Activity and Transactions The Commission noted a large number of examples of failure to:
      1. Obtain or review documents that are key to understanding a customer’s activities (such as financial statements, Minutes and structure charts); and
      2. Complete or update customer profiles and periodic reviews, so that both remain fit for purpose.
3. Trust Company Business On-site Examination Programme 2013 Summary Findings Issued: May 2013 Page 13 of 15 – Customer Profiling – In this they say
   1. In respect of customer profiling, two common themes emerged in a handful of businesses.
   2. The first related to
      1. Rationale, where the activity of the customer had been recorded rather than the reason for placing the business in Jersey.
   3. The second related to
      1. The profile itself, being too vague or brief and not actually capturing the expected pattern and frequency of transactions.
   4. Other aspects included
      1. The information being recorded in different places, rather than a central point of reference and another instance where a programme for the updating of customer profiles was significantly behind schedule.
      2. Where the rationale is recorded as tax planning or tax mitigation, the Commission would expect the business to hold a copy of the tax opinion or advice.
4. Trust Company Business On-site Examination Programme 2012 Summary Findings Issued: June 2013 Page 7 of 11 5.15 – Customer Due Diligence and Customer Profiling – In this they say
   1. The Commission noted that some businesses were unable to meet the requirements of sections 3 and 4 of the Handbook for collecting and maintaining customer due diligence and customer profiling fully.
      1. This was predominantly borne out in the conduct of business findings, with almost half of all conduct of business reviews resulting in at least one form of deficiency.
      2. Typically, businesses were not able to demonstrate the ability to record succinctly the rationale for the entity or structure being established.
      3. Information was found to be held in disparate places, resulting in difficulty for business to demonstrate effective, timely transaction monitoring.
   2. Inaccuracies in the documentation of rationale were found in a large number of businesses, which corresponded to a lack of understanding of the requirement to record the reason for using an offshore jurisdiction rather than a summary of the underlying activities of the structure.
   3. Frequently, findings of rationale noted that the description was often generalised, for example, “investment/asset holding”.
   4. To achieve significant improvement in this area,
      1. businesses should be actively considering relevant training for staff in all areas of the business tasked with risk management and review so that overall levels of understanding of the requirements are increased.
   5. Often, tax considerations were not documented, or tax advice was not included as part of the customer profile.
      1. Consideration as to the Identification and verification of third parties, or those connected with the wider relationship, was also found to be inconsistent.
      2. In some cases, where adverse, open source information was held, there was no documented consideration of its impact regarding the customer relationship.
5. Close
   1. The Commission will continue to examine in this area until businesses are better able demonstrate a greater level of compliance with the requirements of the Handbook.

YOU SHOULD RE-VIST THIS AREA – YOU HAVE BEEN WARNED