JSCCA Regulatory update report
On October 13th 2017, the Jersey Society of Chartered and Certified Accountants (JSCCA) held a regulatory update seminar at the Hotel de France, with John Harris as a speaker.
John Harris stated in his introduction that “There will be major changes in the way the JFSC regulates the finance industry when going forward”
There were 6 main areas which were covered, which are External influences, progress of the Finance industry, National Risk Assessment, Beneficial Ownership, Data and data use by the JFSC and Domestic influences
External Influences
The EU enjoys putting jurisdictions on lists. Brexit / EU – Jersey still needs to meet EU/UK regulations and expectations if it wants to gain any benefit. EU will be performing another blacklisting exercise. The only possible “dislike” with our regime is the 0% tax rate. This is due to the EU not understanding the regime that we implement. Regulatory trends – Basel III will be available for 2019; Jersey is yet to decide.
Finance industry Progress
The Headline growth is paired by profit numbers – however this doesn’t tell the true story as the type of business being carried out within Jersey isn’t always profit determined. There are currently over 13,000 jobs in the finance industry and over 80% of them are in the banking sector. The number of banks is decreasing because their operating models is changing. However three new banks have applied for licences and the JFSC is considering them. The Jersey Private fund has made a contribution to the growth in funds. This currently stands at approximately £300 billion.
National Risk Assessment
For JFSC this is a massive deal. This is not a short term project, 18+ months. There will be massive amounts of data that will be gathered from the industry. This will enable the JFSC to have empirical evidence that their own risk analysis and plans stand up to scrutiny. Andrew le Brun has been seconded to this project as chief liaison between government and JFSC/Industry. Due to the scope being extremely broad, there is a need to have multi-disciplinary teams. Industry participation is also envisioned. This is a World Bank tool. This methodology was chosen instead of the IMF tool, which is what Guernsey have chosen instead (so no help from that quarter!). As stated before, the initial report will be out mid 2019, and this is the first of many steps in what will be a very long progress.
Beneficial ownership
Most Jersey businesses have met with the June 2017 deadline. Jersey is the first and might be the only finance centre to meet the June UK deadline. Even this is not a level playing field, because the UK data collection is on a non-verifying basis. To date this has resulted in several spurious entries for example Micky mouse as a beneficial owner. There is no world-wide standard yet. Until the rest of the world make their Registers public, Jersey will continue to maintain its register as non-public. This will cause a new risk for the JFSC. Due to there being highly sensitive data, all in one place, this makes the JFSC vulnerable to cyber-attacks, and need to ensure that their security systems are of the highest standard
Data and its use by the JFSC
There is a consultation paper out that all firms are encouraged to comment on. There will be a fundamental shift in the regulatory data that industry provides. Because of this, this will change the way it is collected and used. From 900 supervised firms – around less than 300 warrant proactive ongoing supervision. Remaining 600 to be reactively supervised – ie JFSC intervention only when something happens. The JFSC will need to focus on the important issues and fix them. To do this, they need facts that need to be objective and supported by data. In order to do the points above, the JFSC will need to operate supervision in a data-led environment.
Domestic influences
Jersey review Phases 2 and 3. Basel III implementation path. Cyber Security Survey and follow-up actions. This is a big issue and will be resourced appropriately.
Conclusion
The future is going to be extraordinarily busy and demanding at times, and the way financial service performance is currently performing is a reason to be positive. New risks are emerging, and with limited resources will be challenging. Focusing on the core domestic policy remains a priority.
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