Guernsey: Anti-Money Laundering In Guernsey: Ship Shape And Squeaky Clean Ahead Of IMF Visit

Last Updated: 1 March 2010
Article by Gareth Bell

Most Read Contributor in Guernsey, September 2016

Originally published as part of the Fraud and Regulatory Enforcement feature in Financier Worldwide, February 2010.

Gareth Bell, Partner and Michael Adkins, Senior Associate at Collas Day examine Guernsey's anti-money laundering regime ahead of the IMF visit in the first half of 2010.

In the next few months, IMF staff will visit Guernsey to conduct a detailed assessment of, amongst other things, Guernsey's Anti- Money Laundering (AML) legislation. This is a particularly interesting time for the IMF to visit the island. As Guernsey and the rest of the world awake from the economic downturn, investors are starting to make more positive decisions about what to do with their money. Whilst a robust AML regime may not be at the top of every potential client's 'must have' list when deciding upon a jurisdiction, more than ever, investors are aware of the need to have confidence in their chosen jurisdiction's regulatory framework more generally, so they can be sure that the risk of anything going wrong is minimised and that if anything does go wrong, effective remedies will be available.

Compliance with international standards in respect of AML generally means compliance with other internationally promoted aspects of financial regulation. The other interesting aspect of the timing of the IMF's visit is that it comes not long after Guernsey's inter-insular rival received the results of its assessment, which was less effusive in its praise of Jersey's AML efforts than may have been expected. Accordingly, we think it is probably time for a refresher as to what AML is all about, including: (i) the nature of money laundering; (ii) the IMF and other acronyms; (iii) the key obligations under Guernsey's existing AML legislation; and (iv) proposed changes to the current AML regime on Guernsey.

Money laundering – easy as P-L-I

The big problem with money is that it really only means anything to you when you spend it – it has no intrinsic value. This simple fact causes criminals who commit crime for financial gain some serious headaches. Whilst the crimes they commit may generate a lot of money, they cannot spend it freely because to do so would draw attention to themselves and eventually to their crimes as the source of the money. So they are left with three options: (i) enjoy their money without spending it (perhaps using it as wallpaper or extra stuffing for their duvets); (ii) spend it and risk getting caught for the crime they have just gotten away with (and perhaps many more previous crimes to boot); and (iii) obscure the source of the money so that they can then spend it freely without fear of getting caught.

Those who choose the last option are engaging in money laundering. Typically, money is laundered in three stages:

Placement – First, in the 'placement' stage the launderer has to introduce the money into the economy in such a way as to preserve its value and retain control of it. This is the most dangerous stage for a money launderer as the money is directly connected to the criminal at the stage that he introduces it. To avoid suspicion the criminal might break large amounts into smaller amounts, change the form of the money (say from cash to shares, bonds or cheques), and distribute it in various geographic locations.

Layering – Unsurprisingly, the second stage in the process involves putting as much distance between the money and its source, whilst still maintaining control over it and maintaining, as nearly as possible, its original value. This is done by engaging in multiple transactions in which money shifts between bank accounts across the world, often changing currency many times and sometimes being mingled with other funds as it passes through. Sometimes, in order to provide a further 'layer' of distance between the criminal and his money, the transfer may be disguised as payments for goods or services which will never be provided. In this modern world of increased financial surveillance, it is not enough to just send the money through one or two accounts – this can in most cases easily be traced back to the criminal. Instead, before money can truly be considered 'clean', it is typically sent through numerous bank accounts in a variety of jurisdictions, at least some of which will not have IMF compliant AML regimes. Luckily for the dishonest, the speed of modern commerce assists this by enabling millions of pounds to be shifted to an account on the other side of the world in seconds.

Integration – Now that the money is 'clean', the criminal can then spend the money as they wish. In particular, if they invest the money any profits generated will themselves be clean, legitimate funds.


Secure cross-border transactions are crucial to any successful money launderer. Unsurprisingly, therefore, in order to combat money laundering it was necessary for global co-operation to ensure that these cross-border transactions were recorded, that the information in relation to such transactions was shared and that assistance would be provided in the enforcement and prosecution of another State's domestic criminal laws.

Accordingly, in 1989, the Financial Action Task Force (FATF) was established by participating nations to develop a series of 'recommendations' to national governments in relation to the domestic legislation that it should enact in order to help create an effective AML network. These initial recommendations (later supplemented by a further nine 'special recommendations') became the foundation of participating nations' AML laws and the measuring stick against which those laws were assessed.

However, Guernsey, and many other international (or offshore) financial centres (IFCs) are not members of the FATF, and accordingly are not directly subject to review against the FATF recommendations. Instead, Guernsey and many other IFCs participated in a voluntary program conducted jointly by the International

Monetary Fund (IMF) and the World Bank, to allow the IMF to conduct an assessment of each jurisdiction's operations as a financial centre, and in particular in relation to its compliance with the FATF's money laundering recommendations.

As discussed in detail below, Guernsey has substantially implemented the '40+9' recommendations, and as such these have been specifically endorsed by the Guernsey Financial Services Commission (GFSC).

Guernesiaise AML

Consequently, Guernsey has had AML legislation for some time now, although the overall rigour of the laws was substantially increased in 2007 following an earlier IMF assessment in 2003. In fact, there are now some 15 separate pieces of legislation that are, in whole or in part, reflective of Guernsey's enthusiastic adoption of AML principles.

Some of the more important legislation is concerned with (i) disclosure of information

– providing for mandatory disclosure of specified information in certain circumstances and providing consequent protection from prosecution for 'whistleblowers'; (ii) proceeds of crime – creating certain offences for handling or concealing the proceeds of criminal conduct and providing authorities with necessary investigation powers; and (iii) transfer of funds – mandating record keeping requirement for Guernsey businesses receiving incoming payments.

In practice, the combination of this legislation means that Guernsey financial services businesses must, on an ongoing basis: (i) know (usually down to the level of natural persons) who their 'client' is (including the beneficiaries, settlors and protectors of a trust); (ii) know and record who is remitting money to accounts held by them; and (iii) report any suspicions to the authorities.

More changes

Whilst the Guernsey AML framework is generally regarded as robust, the GFSC are proposing a raft of further changes to close some remaining loopholes, adapt to changing criminal practices and, it is understood, steal a march on Jersey by adopting some of the recommendations made by the IMF after its recent review of Jersey's AML laws. Amongst the more significant proposed changes are: (i) bringing postage stamp and gold bullion dealers into the AML reporting framework; (ii) bringing all accountants (including insolvency practitioners, auditors and tax advisers) within the AML reporting framework, to the extent that they were not already there, albeit subject to the less stringent obligations already imposed on lawyers, estate agents etc.; and (iii) making it easier to prosecute proceeds of crime offences, including 'tipping off' offences, by watering down the 'mental' element required to be proved by the authorities.

Final thoughts

As with any new legislation, it will be important for all regulated businesses (now including stamp dealers) to quickly get up to speed with the new and/or altered scope of their AML obligations. The GFSC has published a user friendly guide simplifying the AML legislation and regulated entities' obligations, for new entrants to the regulatory field.

However, it is also timely for currently regulated businesses to review their manuals and procedures, and particularly to make sure that they are actually being followed in practice. Not only should such reviews make sure the business is on target to comply with the new stuff, but also to make sure that they continue to comply with the old stuff – because with the spotlight of the IMF on the Bailiwick, the GFSC is sure to be taking no prisoners when it comes to making sure everything is ship shape and squeaky clean.

For more information about Guernsey's finance industry please visit

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.