I understand that, if a business carries out non-regulated financial services business on an occasional or very limited basis, it is exempt from complying with the AML/CFT regulations. What does this mean?
Businesses undertaking financial services business as defined in Schedule 1 to the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 (“the Law”) on an incidental or occasional basis may not be required to register with the Commission or to meet the AML/CFT regulations and rules in the Handbook on Countering Financial Crime and Terrorist Financing. To be excluded, your business must meet all of the criteria below (which appear in section 3 of the Law):
the total turnover of the person carrying on the financial services business in respect of financial services business does not exceed £50,000 per annum,
the financial services business does not carry out occasional transactions, that is to say, any transaction involving more than £10,000, carried out by the financial services business in question in the course of that business, where no business relationship has been proposed or established, including such transactions carried out in a single operation or two or more operations that appear to be linked,
the financial services business does not exceed 5% of the total turnover of the person carrying on the business,
the financial services business is ancillary, and directly related, to the main activity of the person carrying on the business,
- the financial services business does not facilitate or transmit money or value by any means,
the main activity of the person carrying on the financial services business is not that of a financial services business, and
the financial services business is provided only to customers of the main activity of the person carrying on the business and is not offered to the public.
Does a person who wishes to conduct non-regulated financial service business in or from within the Bailiwick need the Commission’s prior approval?
Unless a person who wishes to carry on financial services business can benefit from the exemption provisions in the law (see the FAQ on exemptions) they must register with the Commission and meet the requirements of the AML/CFT Regulations and the rules in the Handbooks.
What powers does the Commission have over non-regulated financial services businesses?
In common with the regulatory laws under which the Commission regulates other financial services businesses, the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 provide the Commission with a range of powers and sanctions that it can use in appropriate circumstances.
What is ‘money service business’?
Operating a money service business includes the following activities:
- providing money or value transmission services, currency exchange (bureau de change) and cheque cashing services;
- facilitating or transmitting money or value through an informal money or value transfer system or network;
- money broking;
- money changing.
What does "safe custody services" mean?
The Commission regards this term to have the following meaning:
"A safe custody service offers safety deposit boxes or other secure storage suitable for high-value physical items like bullion, jewellery or documents of title."
For the sake of clarity, a business solely offering the following services would not be considered by the Commission to be a safe custody service:
- the storage of goods such as luggage, household items or motor vehicles;
- the storage of non-physical property like computer data;
- the secure transportation of high value items;
- offering safe custody on an occasional or very limited basis, such as hotels providing a safe for use by guests.
What is a Business Risk Assessment?
A risk-based approach is the adoption of a risk management process for dealing with money laundering and terrorist financing. This process encompasses recognising the existence of the risk(s), undertaking an assessment of the risk(s) and developing policies, procedures and controls to manage and mitigate the identified risks.
The Board and senior management of any business are responsible for managing the business effectively. They are in the best position to evaluate all potential risks including those of ML/FT. The rules in chapter 2 of the Handbook in relation to corporate governance make it clear that the Board has effective responsibility for compliance with the Regulations and the Handbook and therefore it must take ownership of and responsibility for the Business Risk Assessment ("BRA").
Guidance on identifying and assessing the risks of how a financial services business might be involved in ML/FT taking into account its customers, products and services and the ways in which it provides those services is provided in section 3.3 of the AML/CFT Handbook.
What should it contain?
At a minimum, a BRA should reflect that appropriate steps have been taken in order to identify and assess the risk of the entity being used to launder the proceeds of crime or to finance terrorism (for customers; jurisdictions or geographic areas; and products/services/transactions/delivery channels). In addition, the BRA should reflect the identification and assessment of other relevant risks. For example, in some cases this might include outsourcing. These assessments should be documented in order to demonstrate their basis and be kept up to date.
In addition to identifying the particular areas of vulnerability to the risk of ML/FT, a BRA should contain references as to how the entity manages or mitigates the risks which it has identified. For example including a reference in the BRA that the higher risks associated with relationships with high risk jurisdictions are addressed by having suitable enhanced due diligence procedures and corresponding review and monitoring processes.
Industry sectors will have inherent and/or generic risk factors and these will need to be referenced. Additionally, individual entities will also have risk factors particular to that entity which will need to be referenced in their BRA.
What should it not contain?
The BRA should not simply be a cut and paste version of the relevant sections of the Handbook as this does not demonstrate that the Board has given serious consideration to the vulnerabilities particular to the entity.
It should not be a generic document which has simply been populated with general information as this, once again, does not demonstrate that the Board has given serious consideration to the vulnerabilities particular to the entity.
It should not contain unsubstantiated, highly generalised references to risk faced by the business. For example, a reference to all business being low risk would not be acceptable unless it was backed up with sufficient information as to how this assessment had been made.
It should not be a mix of ML/FT and prudential risk. If the firm wishes to combine the assessment of ML/FT and prudential risk in one document there needs to be a clear division between the two assessments.
Although, as identified previously, a BRA should contain references as to how the entity manages or mitigates the risks which it has identified it does not necessarily have to include the detail of how the identified risks are managed and mitigated as this may be fully addressed in the procedures and controls document(s).
Should all companies who provide lending facilities to Bailiwick residents to fund their insurance premiums be registered as Non-Regulated Financial Services Businesses?
What are the proceeds of crime?
At its most basic level money laundering is deception by attempting to make illegitimate funds appear to have been obtained through legal means – but what do we mean by illegitimate funds? In other words, what type of crime constitutes a predicate offence, i.e. the offence that has to be undertaken in order for the funds obtained by committing that offence to be considered as the proceeds of crime?
Under section 1(1) of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 all offences that are indictable under the law of the Bailiwick are considered to be predicate offences and therefore funds obtained by committing a predicate offence are considered to be the proceeds of crime.
Under Bailiwick law all offences are indictable except for some minor offences, which mainly concern public order and road traffic. Therefore, the range of predicate offences is extremely wide and includes the following:
- participation in an organised criminal group and racketeering;
- terrorism, including terrorist financing;
- trafficking in human beings and migrant smuggling;
- sexual exploitation, including sexual exploitation of children;
- illicit trafficking in narcotic drugs and psychotropic substances;
- illicit arms trafficking;
- illicit trafficking in stolen and other goods;
- corruption and bribery;
- fraud and tax evasion;
- counterfeiting and piracy of products;
- environmental crime;
- murder, grievous bodily injury;
- kidnapping, illegal restraint and hostage taking;
- robbery or theft;
- piracy; and
- insider trading and market manipulation.
What is a financial services business?
A definition of financial services business is provided in schedule 1 to the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law 2008.
What AML/CFT requirements must be met by financial services businesses?
How can I report my suspicions about money laundering or terrorist financing to the authorities?
Suspicious transaction reports (STRs) should be filed with the Financial Intelligence Service (FIS). You must complete the prescribed STR form which is available on the Disclosure Reports section of the FIS website at www.guernseyfiu.gov.gg. For advice on completing STRs, please contact the FIS.