The JFSC response to the Panama Papers should prompt you all to review the recent Trust Company Business Examination Feedback reports

In light of the recent news about the Panama Papers and the JFSC responses (JEP 7/4/2016) about Jersey’s safeguards, I think it is worthwhile revisiting the Jersey Financial Services Commission (JFSC) summary findings from its programme of onsite examinations conducted during 2014 and 2015.

 

Summary findings from its programme of onsite examinations conducted during 2014 and 2015.

The publication of these findings provides a useful guide as to the JFSC’s expectations of licensees.

The JFSC conducted

1. 40 examinations during 2014 and
2. 35 examinations during 2015,

Themes included

1. supervision,
2. themed and
3. sole trader examinations;

Each included an examination of

1. corporate governance and
2. The key person functions.
3. Conduct of business.

Visit outcomes

1. 2014 – The examinations led to enforcement action in three cases, with public statements being issued in two of these cases.
2. 2015 – The examinations led to enforcement action in four cases.

2014 Examination Findings

1. Most findings resulted from a failure to reflect the requirements of Article 21 of the Money Laundering Order (Jersey) 2008 in internal procedures for Suspicious Activity Reporting (SAR).
2. These included arrangements that may result in reports not reaching the MLRO, as well as undocumented and a lengthy decision-taking process.
3. Deficiencies were also identified in initial and ongoing customer due diligence, particularly where enhanced due diligence is required.
4. The JFSC also found an inadequate overall assessment of AML/CFT risk as part of the Business Risk Assessments (BRA) and Strategies, particularly due to a lack of consideration of specific risks currently facing the business.
5. A third of the findings related to policies and procedures either being incomplete, inaccurate or absent.

The JFSC also continued to identify:

1. Inadequate resourcing of the compliance function

2. Limitations in or non-completion of compliance monitoring

3. Limitations in compliance reporting

4. Failures in corporate governance, including failure for the Board to meet on a sufficiently frequent basis and ineffective monitoring through periodic reviews

5. Failures in conduct of business, including failure to identify potential conflicts of interest or failure to act on trigger events

2015 Examination Findings

The principal theme for 2015 was AML/CFT and compliance with the Financial Services (Trust Company Business (Assets – Customer Money)) (Jersey) Order 2000 (“the Customer Money Order”).

Nearly half of these examination findings related to governance concerns, in particular the maintenance of a sufficiently robust BRA, and the corresponding policies and procedures underpinning each registered person’s AML/CFT framework.

1. The lack of enhanced due diligence in relation to PEPs and high-risk clients was again a recurring theme, as were failures to obtain and/or maintain the appropriate tax advice needed for monitoring and deficient SAR procedures.
2. Missing or inaccurate policies and procedures and deficiencies in record keeping led to the most findings in the internal controls category, while failure to maintain a robust corporate governance framework remains an area of concern.
3. Given the AML/CFT theme for the 2015 examinations, a large number of findings were also identified in the Customer Money section, leading the JFSC to conclude that this area requires renewed attention by all registered persons.

How COMSURE Can Help

The above findings and associated enforcement action resulting from the examinations give insight into the JFSC’s expectations in areas of corporate governance and compliance and AML arrangements.

Firms should take care to regularly assess their controls and resourcing and ensure policies and procedures are appropriate and accurately reflect the nature of the business.

As Jersey’s longest serving Channel Islands based regulatory consultancy business (12 year of business!!) Comsure’s experienced Compliance and Regulatory Consulting team can assist your firm with meeting the JFSC’s regulatory standards through:

1. Reviewing policies and procedures
2. Drafting policies and procedures
3. Undertaking a health-check and gap analysis of your OPERATIONAL & regulatory & AML approach
4. Designing and implementing a Compliance Monitoring Programme [CMP]
5. Delivering staff training on areas including AML, Compliance, Corporate Governance and Regulation