As at June 2015 The Jersey Financial Services Commission now has had the power to impose civil financial penalties for significant and material contraventions of the Codes of Practice and the AML/CFT Handbook.

The level of fines has been set and the JFSC has published a statement on the principles and processes it will adopt under the civil penalties regime.

Who is affected?

All entities registered under the Banking Business (Jersey) Law 1991, the Insurance Business (Jersey) Law 1996 and the Financial Services (Jersey) Law 1998 must adhere to the relevant Codes of Practice published by the JFSC.

Entities registered under the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 are required to adhere to the AML/CFT Handbook.

What is the level of penalties?

There are three levels of penalty, depending on the seriousness and circumstances of the breach of the Codes of Practice.

The highest level of financial penalty is up to 8% of ‘relevant income’. Broadly, ‘relevant income’ is income derived from licensed business activities. There is a cap of £4,000,000 on the level of penalty that can be imposed for more serious breaches.

The proceeds of penalties may be retained by the JFSC and applied to reduce licence fees. The Chief Minister can order that substantial penalties must be paid to the States of Jersey.

The JFSC will also be able to issue public statements when it imposes a penalty.

There is a right of appeal to the Royal Court but only on the ground that the decision of the Commission was unreasonable having regard to all the circumstances of the case (a high threshold).

What are the JSFC’s processes when imposing penalties?

The JFSC has published Regulatory Sanctions: Decision Making Process setting out the process and principles that apply to JFSC decisions in a number of areas, including on civil penalties.

It states that early acknowledgment of regulatory breaches will always be considered favourably by the JFSC.

It also includes a statement of principles that the JFSC must take into account when imposing civil penalties (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).

What should I be checking?

While it may be difficult to obtain cover for civil penalties imposed by the JFSC, registered persons may wish to check that their insurance policies cover the costs associated with a JFSC action to impose civil penalties.

Licensees may also wish to confirm that they comply with the Codes and AML/CFT Handbook now that breaches may lead to civil penalties.

In particular, the Codes were amended with effect from 1 July 2014 and further requirements imposed.

The AML/CFT Handbook was amended with effect from 1 January 2015 and 24 March 2015.

ACTION NOW

If they have not done so already, registered persons should conduct a thorough gapping analysis to ensure that they comply to the higher standards.

Resources:

• The Financial Services Commission (Amendment No. 6) (Jersey) Law 2015 – click here to view.
• The Penalties Order – click here to view.
• Processes and Procedures – click here to view.