Prescribed Businesses FAQs
If a person carries out prescribed business on an occasional or very limited basis, is it exempt from complying with the AML/CFT Regulations?
Businesses undertaking prescribed business as defined in Schedule 2 to 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. To be excluded, your firm must meet all of the criteria below (which appear in regulation 16(5) of the Criminal Justice (Proceeds of Crime) (Legal Professionals, Accountants and Estate Agents) (Bailiwick of Guernsey) Regulations, 2008):
1. the total turnover of the firm in respect of the prescribed business activities does not exceed £50,000 per annum,
2. the firm –
- if it is an estate agent, does not hold deposits, or
- if it is a prescribed business other than an estate agent, does not carry out occasional transactions, that is to say any transactions involving more than £10,000 carried out by the prescribed 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,
3. the services of the firm are provided only to customers resident in the Bailiwick, and
4. the funds received by the firm are drawn on a bank operating from or within the Bailiwick.
If your firm satisfies all of the above criteria you do not need to register with the Commission and you are not subject to the requirements of the AML/CFT Regulations.
Does a person who wishes to conduct prescribed business in or from within the Bailiwick need the Commission’s prior approval?
Unless a person who wishes to carry on prescribed business can benefit from the exemption provisions in the law (see the above FAQ) they must register with the Commission and meet the requirements of the AML/CFT Regulations and the rules in the Handbook.
What powers does the Commission have over prescribed businesses?
In common with the regulatory laws under which the Commission regulates other financial services businesses, the Prescribed Businesses (Bailiwick of Guernsey) Law, 2009 provides the Commission with a range of powers and sanctions that it can use - in appropriate circumstances - in connection with the AML/CFT supervision of persons that carry on prescribed business.
Legal Professionals FAQs
These FAQs have been created to assist legal professionals in determining whether or not a particular service they offer is within the scope of the Criminal Justice (Proceeds of Crime) (Legal Professionals, Accountants and Estate Agents) (Bailiwick of Guernsey) Regulations, 2008 (the Regulations) and the Guernsey Financial Services Commission (GFSC) Handbook for Legal Professionals, Accountants and Estate Agents on Countering Financial Crime and Terrorist Financing (the Handbook). It is informed by documents produced by the Financial Action Task Force (FATF) entitled “Risk Based Approach Guidance for Legal Professionals” (the FATF guidance) and “Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals”
Where is the definition of the type of legal work covered by the Regulations?
The Regulations apply to prescribed businesses, which are defined by reference to the list of relevant businesses at Schedule 2 of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999. Paragraph 5 sets out certain forms of legal services, subject to an exemption for legal professionals employed by public authorities or by undertakings which do not by way of business provide legal services to third parties. The Handbook replicates the language of paragraph 5.
What type of legal work is covered?
Paragraph 5 of Schedule 2 covers the business of lawyers, notaries and other independent legal professionals when they prepare for or carry out transactions for a client in relation to any of the following activities (listed activities):
- the acquisition or disposal of an interest in or in respect of real property;
- the management of client money, securities or other assets;
- the management of bank, savings or securities accounts;
- the organisation of contributions for the creation, operation, or management of companies; and
- the creation, operation or management of legal persons or arrangements, and the acquisition or disposal of business entities.
Other forms of legal services such as
- provision of legal advice that is unconnected to a transaction for the purposes of the listed activities
- participation in litigation or alternative dispute resolution
- drawing up of wills
are therefore outside the scope of the Regulations and the Handbook.
What is meant by preparing for or carrying out a transaction?
This is ultimately a question of statutory interpretation, but it may properly be informed by consideration of the FATF guidance as the legislation replicates the FATF language and its purpose is to ensure the Bailiwick’s compliance with the FATF standards. As explained in the FATF guidance, while several legal professionals may be involved in a transaction related to a listed activity, not all will be preparing for or carrying out the overall transaction. The guidance further explains that this may be the case in relation to legal professionals who are only providing advice or services peripheral to the transaction.
Whether any particular activity constitutes preparing for or carrying out a transaction for a client and so is subject to the obligations in the Regulations and Handbook must be determined on a case by case basis. Examples of services which are connected to a transaction but which of themselves are unlikely to constitute preparing for it or carrying it out include the provision of legal advice on
- the validity of a proposed transaction under Bailiwick law
- the regulatory framework applicable to financial services in the Bailiwick
- the status and capacity of a Guernsey company, trust or other legal arrangement
- the enforceability of contractual obligations under Bailiwick law
- the wording of contractual arrangements or underlying documents between a client and a third party.
It is important to be aware that these are possible examples only and should not be treated as definitive. Where legal professionals assess that an activity does not constitute preparing for or carrying out a transaction, a record of this decision and the basis upon which it was taken should be maintained. Legal professionals should also be mindful that the nature of their engagement may change over time with the result that their activities constitute preparing for or carrying out a transaction. In that situation the customer due diligence and other requirements in the Regulations and Handbook will apply. In the event of any doubt the GFSC should be consulted in the first instance.
If more than one legal professional is preparing for or carrying out a transaction, must they all comply with all the requirements in the Regulations and the Handbook?
Yes. Neither the FATF standards, the FATF guidance nor the Bailiwick’s legal framework provide for an exemption in this situation. They also do not provide an exemption for legal professionals who are carrying out or preparing for transactions that involve financial services businesses or other entities that are subject to AML/CFT obligations.
Are the reporting obligations under the Disclosure (Bailiwick of Guernsey) Law, 2007 and the Terrorism and Crime (Bailiwick of Guernsey) Law, 2002 applicable in relation to legal services that do not constitute preparing for or carrying out a transaction?
Yes. The reporting obligations apply to knowledge, suspicion or reasonable grounds for suspicion that a person acquires in the course of any trade, profession or economic activity, irrespective of whether or not that trade, profession or economic activity is covered by the AML/CFT regulatory framework.