The Guernsey Financial Services Commission (GFSC) is in the process of reviewing (with a view to upgrading) the existing anti-money laundering (AML) and countering of financing of terrorism (CFT) regulations. Some of the proposed changes will also mean amendments to existing Guernsey legislation.
The principal reason for the review is because the FATF issued revised recommendations on money laundering and terrorist financing which the current Guernsey regulations do not entirely meet. Principal among these is that parts of the regulatory framework need to be legally enforceable – a route of sanction that is currently not available to the GFSC.
As has become normal practice within Guernsey, the GFSC has been working closely with all sectors of the financial services industry and a period of consultation came to an end on 11 June 2007.
The consultation paper can be viewed on the GFSC website at – www.gfsc.gg. Also available on the website is a copy of the new ‘Handbook’ which will replace the existing guidance notes that are to be found in the original "Rainbow Book’. The important point about the new ‘Handbook’ – and one that will be emphasised to the industry - is that it will contain legally enforceable rules as opposed to simply stated guidance.
Other changes seek to review and rationalise the process of taking on new clients, something that, in the early stages of the existing guidance notes, did lead to some confusion and, arguably, over-reaction.
Overall, the stated intention of the new regulations and Handbook is to ‘...require financial services businesses to adopt a more risk based approach to their policies, procedures and controls in relation to AML and CFT, taking into account its customers, products and services and the provision of those services."
The tone is extremely positive and the proposals suggest a more relaxed or simplified, regime of policies, procedures and controls for the lower risk clients and a more enhanced, stringent regime for the higher risk clients, products or transactions. This may be anything from constant review of the information held, to a monthly compliance review of all transactions undertaken.
Some of the proposed changes will already be best practice with many firms but, singled out as a new feature is the inclusion of a rule making it the explicit responsibility of the board to include a review/discussion of compliance at board meetings. The intention is to ensure that the board take their responsibilities seriously.
Finally, one proposal, which if adopted, will make client take on easier, is a re-categorisation of ‘intermediary’ and ‘introducer’ relationships. The existing ‘introducer’ relationship means that when they introduce a customer they have to provide a certificate or summary sheet on that customer, whereas for the ‘intermediary’ relationship, because they can be considered the customer, this is not necessary.
It is felt that there are a range of transactions and activities where it will be acceptable for the introducer status to be that of an intermediary.
Overall, the impression is that the new regulations represent another positive step forward to retain stringent and thorough controls, but not stifle the ability of Guernsey’s financial service industry to compete and do business.
The intention is for the new regulations to be in place and ready to go on the 1 January 2008.
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