Isle of Man: Department Of Home Affairs - AML/CFT Consultation

Further to the Isle of Man Government's continued commitment to combatting money laundering and the financing of terrorism (AML/CFT) a review has recently taken place by the Department of Home Affairs of the Island's current AML and CFT legislation which has resulted in several proposed amendments. These amendments are currently the subject of a public consultation paper entitled "Consultation on the Draft Proceeds of Crime (Business in the Regulated Sector) Order 2014; Draft Anti-Money Laundering and Countering the Financing of Terrorism Code 2014 and Simplified Due Diligence for Intermediary Pooled Accounts."

This article provides an overview of the Consultation.

The proposals in the Consultation relate to three connected matters:

AMENDMENTS TO SCHEDULE 4 OF THE PROCEEDS OF CRIME ACT 2008 TO BE MADE BY THE DRAFT PROCEEDS OF CRIME (BUSINESS IN THE REGULATED SECTOR) ORDER 2014 (THE DRAFT ORDER)

Schedule 4 of the Proceeds of Crime Act 2008 (POCA) sets out the list of businesses that are "in the regulated sector" for the purposes of POCA and are therefore subject to the anti-money laundering provisions of POCA. Schedule 4 of POCA can be made by way of Order. The draft Order extends the list of relevant businesses which will fall within the scope of POCA to include the following:-

  • activities of certain non-profit organisations (so called "Specified Non-Profit Organisations") that have an annual or anticipated annual income over Ł5,000 and remit or are anticipated to remit at least 30% of their income in any one year to recipients on the list of "higher risk jurisdictions" to be maintained by the Financial Supervision Commission);
  • tax advisors;
  • payroll agents;
  • businesses involved in selling or supplying of controlled machines within the meaning of the Gaming (Amendment) Act 1984; and,
  • businesses involved in the issuing, transmitting, transferring, providing safe custody or storage of, administering, managing, lending, buying, selling, exchanging or otherwise trading or intermediating convertible virtual currencies, including crypto-currencies or similar concepts where the concept is accepted by persons as a means of payment for goods or services, a unit of account, a store of value or a commodity.

As well as addressing areas seen as being vulnerable to money laundering, the amendments will also bring the Island in line with the current requirements of the Financial Action Task Force (FATF).

REPLACEMENT OF THE MONEY LAUNDERING AND TERRORIST FINANCING CODE 2013 (THE 2013 CODE) WITH THE DRAFT ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM CODE 2014 (THE DRAFT CODE)

The draft Code will restructure the provisions of the 2013 Code to make certain requirements more accessible and easier to follow. It incorporates the amendments contained in the draft Order, has updated definitions and terminology to ensure consistency, contains clarified risk assessment requirements, splits customer due diligence into standard provisions and enhanced provisions and the provisions regarding simplified customer due diligence will be moved to a separate section.

A table set out in the Consultation lists the changes proposed to the 2013 Code.

PROPOSALS FOR SIMPLIFIED DUE DILIGENCE MEASURES: INTERMEDIARY POOLED ACCOUNTS

In order to reduce the duplication of compliance requirements and, in the words of the Consultation, "to enable a commercially competitive approach by local businesses" the Consultation proposes simplified customer due diligence provisions in relation to certain businesses and activities provided that FAFT recommendations are met. The additional provisions will apply to intermediary pooled client accounts and allow the relevant person providing a pooled account to an intermediary to rely on the intermediary to conduct due diligence on the underlying customers, providing certain criteria are met and information provided. For higher risk underlying customers, there will be a requirement for a separate higher risk pooled account and the relevant person must conduct and document its own enhanced due diligence but may obtain the required information and documents from the relevant intermediary, which must be in date and certified by a suitable certifier. The criteria to be met are set out in the Consultation.

Relevant persons will be required to bring existing intermediary relationships in line with the new requirements within a reasonable timeframe once the proposals are in force.

DEADLINE FOR RESPONSES

The consultation period runs until 10 October 2014; further information regarding the proposed changes and copies of the draft documents can be found on the Isle of Man Government website at http://www.gov.im/ConsultationDetail.gov?id=455

The Island joined MONEYVAL, the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and Financing of Terrorism, in October 2012. The first progress report can be found at - http://www.coe.int/t/dghl/monitoring/moneyval/Evaluations/progress%20reports/MONEYVAL(2013)14-ProgRep_IoM.pdf

With a team from MONEYVAL due to visit the Island in the first half of 2016 to assess the Island's AML/CFT regimes, it is clear that more proposed changes to the Island's legislation in this area will be forthcoming. Watch this space...........!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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