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MLRO Common Mistakes Identified – The JFSC 2020 Themed Report

The 2020 JFSC themed examination report “The Role of the Money Laundering Reporting Officer” has now been published. The Report highlights continued failings by Relevant Persons.

37 Relevant Persons took part in the examination. Findings in relation to 3 Relevant Persons were considered so serious that a formal referral was made to the JFSC Enforcement Division.

With the Civil Penalties Regime encompassing Registered and Principal Persons and negligence, it is vital that Registered Persons and their boards of directors have close regard to the Report and respond to the lessons arising.

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The Board of Directors – Ensuring Effective AML/CFT Training

The 2020 JFSC themed examination report “The Role of the Money Laundering Reporting Officer” has now been published. The Report highlights two key issues for the boards of directors of regulated entities:-

  • AML/CFT training and awareness of Registered Persons’ employees is often insufficient; and
  • Continued poor understanding of the responsibilities around the filing of suspicious activity reports.

Ten adverse findings relating to training and awareness were found across the 17 sample Relevant Persons reviewed. The Relevant Persons concerned undertake Trust Company, Funds Services, Investment and Deposit-Taking Business.

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2019 JFSC Supervisory Reports – Important Themes

In 2018 the JFSC completed the major restructuring of its supervisory operating model during which time supervision visits were suspended.  For 2019 the JFSC has announced it is enhancing its risk-based approach and focussing on projects that mitigate the greatest perceived risks.  Supervision visits have now restarted and we are advising a number of entities and individuals both before and after such visits.

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JFSC Knocking At the Door: The A to D of a Response

It is common for a regulatory investigation to be launched when the JFSC becomes aware of potential serious breaches of the Island’s regulatory laws and codes.  Your business may already be under the JFSC’s magnifying glass, with disclosure having been required and, possibly, directions in place regulating how business is conducted. With an investigation, your business, and all those principal and key persons operating in it, are about to come under the JFSC’s microscope. 

The JFSC is obliged to give written notice of an investigation.  That notice should set out, typically in the accompanying scoping document, the general background and purpose of the investigation and the areas of business of concern on which the investigation report is to make findings.  Usually, the JFSC will require the entity to appoint, at its own financial cost, reporting professionals who will act as investigators. As an investigation proceeds, should its necessary focus change, the registered entity will be kept updated.  The JFSC may require periodic reporting by the reporting professionals of the work to date and findings. The reporting professionals will collect all relevant documentation and conduct interviews of any officers or employees considered to hold relevant information.

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The JFSC Decision-Making Process and Maxwellisation

When considering whether to exercise its statutory powers of sanction against an individual, the JFSC follows its published Decision-Making Process (the “DMP”). This is a detailed, multi-stage process outlined in its issued published guidance note entitled “Decision-Making Process”. The DMP has four distinct stages.

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Restricted Information: What Is It? What Shall I Do?

The Jersey Financial Services Commission (the “JFSC”) has wide statutory powers to compel the disclosure to it of otherwise confidential and private information, by both regulated and unregulated entities and individuals. Overseas regulators may also share such information with the JFSC.  

Articles 37 and 38 of the Financial Services (Jersey) Law 1998 set out the “restricted information” regime that protects the confidentiality of an individual’s otherwise private information once disclosed to the JFSC. The unlawful disclosure of restricted information, in breach of Article 37, is a criminal offence, carrying up to two years’ imprisonment.

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Landmark Judgment: Francis v JFSC

The Royal Court Judgment published 25 May, 2018 is a landmark case not only for the Jersey Financial Services Commission (JFSC) also but for the finance industry in Jersey.

The Royal Court has upheld the JFSC’s findings that Mr David Francis acted with the most serious lack of integrity and competence. The Court concluded that the issue of a public statement by the JFSC setting out his misconduct was a reasonable step to take.

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Integrity – a Cornerstone of the Island’s Finance Industry

All principals of regulated financial services businesses are required by Jersey's regulatory laws and Codes of Practice to ensure their business is conducted with integrity at all times. 

In the recently-released landmark judgment in the appeal of Francis v The JFSC the Royal Court has fully endorsed the JFSC’s findings that Mr Francis, the former CEO and principal shareholder of the Horizon Group, had acted with a most serious lack of integrity and incompetence of a very serious kind. The Royal Court also agreed with the JFSC that a ban from working in the Island’s finance industry was a reasonable sanction.

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