Originally published in Expat Investor, November 2007

2007 has seen Guernsey maintain its pre-eminent position as a leading international finance centre. Across the board banking, funds, trust and insurance there has been continued growth in business flows, from both institutional and private investors, which now stand at record levels.

This success has been in part facilitated by the Guernsey Financial Services Commissions (GFSC) robust yet pragmatic approach to regulation. The Guernsey environment provides investors with the widest range of products and services, transactions are made simpler and quicker because there is no unnecessary bureaucracy and yet they can be assured that the Islands financial services businesses are working to high international standards there is safety and security.

However, Guernsey is far from resting on its laurels. A series of measures are in the pipeline to ensure that the Islands attractive environment for conducting business is maintained into the future.

The GFSC has prepared revised regulations for financial services businesses on anti-money laundering (AML) and combating terrorist financing (CFT), which will be contained in a new handbook. This will result in businesses taking risk into account more when determining the extent of their customer due diligence measures (e.g. Know Your Customer procedures). The approach will avoid disproportionate demands on low risk customers. On the other hand, high risk customers, products and transactions will be subject to enhanced due diligence and monitoring. These measures are expected to come into effect at the end of the year.

Additional steps are also being taken with regard to AML/CFT. The first relates to unregulated businesses such as bureaux de change and non-bank lenders. Currently, they are subject to a legal framework under which they must notify basic information to the Commission. New legislation, expected to come into force next year, will make them subject to a registration system. Secondly, an amendment to the main existing primary legislation for AML/CFT has been agreed by Guernseys parliament The States of Guernsey. When it has been brought into force, this law will establish an enabling framework for the AML/CFT supervision of non-financial services businesses such as lawyers and accountants.

In July this year The States of Guernsey agreed to the updating of the laws relating to investment business, including the amendment of the Protection of Investors Law to cover closed-ended as well as open-ended funds and the distinction between regulated and registered funds with the streamlined consent process already introduced for registered closed-ended funds in February this year.

The States of Guernsey has also now approved amendments to the Trust Law, which include abolishing the personal liability of directors in Private Trust Companies (PTCs) as a way of encouraging greater use of such entities and introduction of Purpose Trusts. Royal Assent is expected from the Privy Council at the beginning of 2008. The Island also continues to work on the introduction of Foundations.

This year the final proposals from a review of the Guernsey Companies Law should also go before the States of Guernsey. The changes will place trust companies as the gatekeepers to a more streamlined company incorporation process that from the summer of 2008 will be facilitated by a modernised, automated, Company Registry and where, for example, annual returns will be replaced by annual validations.

All these measures are part of Guernseys on-going work to ensure that as a whole its robust yet pragmatic approach to regulation provides investors with the widest spectrum of products and services, transactions are simple and quick to carry out because there is no unnecessary bureaucracy and there is a safe and secure environment for conducting business. This has been reinforced by a commitment from local politicians to work with the financial services industry to further develop Guernseys legal infrastructure and promote the Island globally as a leading international finance centre.

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

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