John Harris, on bank de-risking to fighting the perception of being a tax haven.
John Harris, spoke to Risk & Compliance Journal [Mar 18, 2015] on a variety of topics, from bank de-risking to fighting the perception of being a tax haven.
The conversation has been edited for clarity.
What is the Jersey Financial Services Commission’s role in the HSBC account review?
Mr. Harris: There’s a Financial Times article published today that includes a statement which will give you an explanation.
But, to explain further, all banks and all jurisdictions are required to make sure their customer account databases are up to date. This is an exercise that has been going on for a while in Jersey. For example, if you’ve been in account for 20-odd years in Jersey or elsewhere, the information is not as verified as it would be if you opened one today. All accounts are required to be reviewed under Financial Action Task Force rules; the banks have to re-verify to make sure they’re up to date. That’s one reason why this sort of exercise is going on.
What do you, and Jersey more broadly, think about the island’s perception as being a tax haven?
Mr. Harris: It’s a perception, and it’s an unfair one. Tax evasion is a predicate offense for money laundering; it’s been criminalized here since 1999. Since that time, great efforts have been made to make sure laundered money isn’t in financial institutions. Anti-money laundering rules are as strong here as they are anywhere else; it’s been looked at by international evaluators. We expect our financial institutions to understand their accounts, to understand the purpose of the accounts they hold and to report to authorities when they have suspicious about an account.
What does the Financial Services Commission have to do with sanctions enforcement in Jersey?
Mr. Harris: Sanctions enforcement here is the primary responsibility of government. [Mr. Harris was referring to the chief minister’s office, a spokeswoman said.] But with respect to banks and our jurisdiction, we form a view to see if they have a question to answer on the topic. The primary reporting responsibility, in terms of sanctions, is to the government, but we see that data. We get to see if there are significant issues being presented. We would look at a bank to see if they have adequate controls, or if there are attempts to abuse them. We would form a view on the bank’s sanctions adequacy; that’s an ongoing supervisory issue.
There’s been a lot written recently about automated transaction monitoring and know-your-customer compliance. What is going on in Jersey in this area?
Mr. Harris: This is a developing area in Jersey; we don’t have a firmly settled view. We have an open mind, and we’re driven by specific propositions. If someone comes to us with an automated solution, we’ll look at it to see if it delivers really good risk-management provisions. It might take out the drudgery of identifying clients, but we haven’t seen evidence yet that this technology can do the critical human judgement stuff such as “who is this client,” “where are the funds coming from” or “how I monitor ongoing activity.” All of those things tell us that they haven’t quite figured out how to do this with an algorithm. There’s still a critical human element.
What is Jersey’s position on questions of beneficial ownership?
Mr. Harris: The FSC hasn’t put out any policy statements on beneficial ownership, but there have been statements from the Jersey government. I would direct you to those statements; http://bit.ly/1KPqcSU
there’s a big debate, and a live debate.
It’s helpful to see what Jersey has done on this, which is considerably more than most places. From the commission’s perspective, Jersey already operates a central register for beneficial ownership. It also conducts oversight, by that I mean supervision and oversight of trusts and company service providers. When a company service provider runs a company, they’re required to keep beneficial ownership information up to date. It’s a regulatory requirement to keep it up to date, and available and accessible to authorities.
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