Guernsey: The Value Of Outsourcing Regulatory Reporting

Last Updated: 23 October 2017
Article by Andrew Niles

The ever-adaptable Channel Islands are beginning to bring their financial services expertise to bear on one of the industry's real growth areas: regulatory and compliance services. Andrew Niles of Intertrust takes a look at a regulation-led business environment and explains how the islands are looking to capitalise on the opportunity presented by a more transparent financial ecosystem.

Over the past 10 years the role of compliance officer has changed significantly within organisations worldwide. Once seen as enforcers responsible for ensuring that processes, pieces of work and systems adhered to national standards and internal rules; the compliance officer acted as the gatekeeper who controlled what went out of the door.

The compliance officer in 2017 is more of a caretaker; they protect the business from bad practice and ensure that it's populated with proactive, responsible practitioners so that their organisation is not subject to heavy sanctions and potentially fatal reputational damage.

This role change has been precipitated by a huge global increase in reporting and the automatic exchange of information; it's never been more important to be compliant. The EU's General Data Protection Regulations ("GDPR") is just the latest example of a multi-national set of standards and its scope is such that any business that has interaction with the EU will be covered by the regulation.

GDPR is certainly the hot topic at the moment, but the first wave of international regulations – know your customer (KYC) and anti-money laundering (AML) procedures most notably – still need to be adhered to. These sit alongside the more high-profile information exchange agreements, the Foreign Account Tax Compliance Act (FATCA) and the OECD's Common Reporting Standard (CRS).

So the landscape is a complex one that places a burden upon organisations, albeit a burden that is ultimately necessary and beneficial.

The reasons for complying with international regulations are obvious – compliance indicates willingness to adhere to established rules, demonstrates legitimacy and social responsibility. For Channel Island businesses, it debunks misconceptions about the legality of offshore structures.

The islands were early adopters of FATCA, CRS and GDPR and they are therefore the perfect jurisdictions to host outsourced regulatory reporting services, which is an increasingly viable option in the face of global regulatory demands. 

Why outsource regulatory reporting?

The most obvious reason to outsource compliance led tasks or processes is the same reason that a business would outsource any function – efficiency. The demands on compliance have accelerated at such a rate over the past few years that it has been difficult for small and mid-size firms to keep up.

The options for addressing the greater compliance needs for firms of this size are fairly limited – they can expand their internal compliance team, which is often not an option for simple budgetary reasons, or they can employ external help to spread the workload. This latter option is proving increasingly popular as the regulatory burden grows greater.

Outsourcing not only has the advantage of reducing the workload on a business's own staff, it also means that firms are able to benefit from external professional expertise. Large teams of experts are employed to perform the compliance function and companies offering outsourced regulatory compliance services will also be fully accredited for each individual piece of regulation.

For example, we work globally with more than 50,000 individuals and entities on regulatory matters – including FATCA, CRS and GDPR. We also carry out anti-money laundering checks on functions such as client on-boarding, due diligence on investors and remediating books of business to ensure compliance with current standards.

Our offering encompasses regulatory compliance services which are scalable and applied to funds, corporate services and complex private wealth structures. Scalability is important as many of our clients are exactly the kind of firms noted above - mid-tier firms for whom developing an in-house team would be inefficient. The reality for these firms is that they simply need a provider who can perform global, scaled compliance functions for them.

The global nature of regulation necessitates an international perspective and work ethic. We work with clients from around the world to meet their compliance needs and the global footprint of our client base is a further endorsement for the Channel Islands as a jurisdiction; we work out of the islands for clients from the Far East, the US and Europe on their fund-based businesses.

The Channel Islands at the heart of compliance

The Channel Islands are the home of our regulatory compliance services; as a company that reports in up to 28 jurisdictions around the world we have seen the need to streamline and bring efficiencies to compliance services; workflows and processes that have been developed right here in the islands.

Many of our clients are comfortable with outsourcing the administrative processes within their compliance work to us because they know that we operate from robust jurisdictions that represent the gold standard in global reporting.

Our streamlined services have been rolled out to Intertrust's hubs around the world to ensure consistency and quality; international businesses demand the highest accreditations and we have those, hence our desire to share that expertise and knowledge and offer a global solution to what is often a global requirement.

The islands' reputations for robust regulation, combined with a broader 'open-for-business' attitude, a convenient geographical location and time zone and a mature financial services sector, makes them strong jurisdictions in which to do business.

Easing the burden through technology

The financial services world is an increasingly modernised one and digital technologies have played a part in facilitating reporting and complying with regulation; making life easier for the client and for the service provider.

We have two systems, developed in-house, that we and clients can use to expedite the reporting process. The first is a secure, cloud-based client on-boarding system which is easy to use and is used here in the Channel Islands and in Intertrust's offices around the world, as well as by select clients.

The second system is an app called CDDQuick which enables us to perform due diligence on a client more quickly and easily than ever before. Both the Guernsey and Jersey Financial Services Commissions now allow the provision of electronic data and we wanted to take advantage of this and pass the convenience factor onto our clients, so we developed our very own app.

CDDQuick is installed on a portable device and simply scans documents such as passports, utility bills and driving licences and then interacts automatically with our systems to provide that information immediately. This saves time for us, the client and the regulator and is the kind of system that we see playing a big part in the future of compliance.

Compliance in the global business landscape

Compliance is more important now than ever and its reach extends to touch upon many of the trends that characterise the global business landscape.  The sector has embraced its increased significance and devised new innovations to ease the regulatory burden; cybersecurity is an ongoing concern that has shaped regulation and the ways we report. The whole industry requires consistency and integrity to demonstrate legitimacy and adherence to international standards.

All of this can be a burden on organisations but outsourcing is a viable option and the Channel Islands are the perfect place to find regulatory caretakers who are trained, accredited and experienced.

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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