The Jersey Financial Services Commission (JFSC) has today published its Annual Report and financial statements for 2016, and in section 5 of the report, they provided their key visit findings summary. This summary is repeated below:-

Key Visit Findings Summary

The Supervision division Undertook 25 examinations in 2016. The visits covered the whole Industry including banks, investment businesses, fund services businesses, trust company businesses, designated non-financial businesses and professions.

In the vast majority of cases, entities comply with regulatory requirements. However, below are some of the key issues identified during the year that needs improvement:

› In Banking,

• The JFSC found weaknesses in the customer risk assessment process, including failure to identify customers with relevant connections to higher risk countries and former politically exposed persons (PEPs), as well as failure to Corroborate source of wealth.
• This meant that customer due diligence (CDD) was not always commensurate with the Customer risk.
• The JFSC noted that both Jersey branches and locally incorporated banks sometimes follow group policies and procedures or rely on group functions, Which do not always meet Jersey requirements.
• There were also failures to apply simplified due diligence

› In Investment Business,

• There were continued instances of insufficient evidence to confirm the suitability of advice provided, based upon the client’s circumstances and investment objectives.
• This remains a particular concern about elderly clients.
• Continued failings relating to corporate governance arrangements were also identified, as well as a lack of adequate reviews being undertaken of conflicts of interest arising

› In the FSB and TCB sectors,

• Some findings related to AML control weaknesses, for example, Business Risk Assessments did not reflect sufficiently the current risks within a business and were not updated When risks changed.
• Other weaknesses included deficient sanctions policies, reliance on intermediaries (obliged persons) without conducting a risk assessment, and poor risk rating methodology.
• There were also instances of unsatisfactory assessments of PEPs, periodic reviews not being undertaken Promptly, and the use of exception registers permitting Client take-on without full CDD.
• Further findings related to policies moreover, procedures being out-of-date and weaknesses in board oversight and risk assessment.

During 2016, the Supervision teams worked with some entities to ensure that identified risks were adequately mitigated alternatively, that plans were in place to achieve this Over time.

Where appropriate, failings were referred to the enforcement division and such referrals will continue where repeat findings occur.

http://www.jerseyfsc.org/pdf/JFSC-ANNUAL-REPORT-2016-FINAL.pdf