18 December 2003
The Commission is issuing this statement on introduced business, in order to provide financial services businesses with a clear statement of the standard which it will adopt in the revised Guidance Notes on the Prevention of Money Laundering and Countering the Financing of Terrorism, following the introduction on 20 June 2003 of the revised Forty Recommendations by the Financial Action Task Force on Money Laundering (FATF). Representatives of the finance sector in Guernsey have requested clarification of the Commission's policy on this matter.
On 5 December 2003 the Working Group on Cross-Border Banking (a joint group consisting of members of the Basel Committee on Banking Supervision and the Offshore Group of Banking Supervisors) issued a letter to bank supervisors explaining the context in which the new FATF Recommendations on introduced business can be regarded as equivalent to the earlier standard adopted by the Basel Committee.
The letter concludes that, so long as the FATF criteria are met, there is no practical difference between the standard adopted by the Basel Committee and the FATF recommendations on the application of requirements for introducers. This gives discretion to national supervisors to adopt the FATF standard in place of the administratively more onerous Basel standard if all the FATF criteria are met.
Accordingly, from the date of this statement, the Commission will adopt the standard embodied in FATF Recommendation 9 (see the appendix at the bottom of this page) with regard to the provision of information to financial services businesses in respect of introduced business. As a minimum, financial services businesses should receive written confirmation from the introducer, by way of a certificate or summary sheet(s), detailing the necessary information and the documentation held by the introducer and also take adequate steps to satisfy themselves that copies of the necessary information specified in FATF Recommendation 9, will be made available upon request without delay.
The Commission expects that financial services businesses should have a programme of testing to ensure that introducers are able to fulfil the requirement that relevant documentation can be made available upon request without delay. This will involve financial services businesses adopting ongoing procedures to ensure they have the means to obtain that information and documentation.
In order to determine that the new standard is being applied, the Commission, during its on-site visits, will seek to verify that financial services businesses have obtained the necessary information by way of a certificate or summary sheet(s) and that the requirement for copies of such identification data and other relevant documentation to be made available upon request without delay has been tested.
It should be noted that, ultimately, the responsibility for customer identification and verification will remain, as always, with the financial services business relying on the introducer.
The Commission is not issuing detailed recommendations at this stage on how the FATF standard should be applied in practice. Over the coming months the Commission will work with industry, by way of observation during on-site visits and by way of discussions, to develop such recommendations for inclusion in the revised Guidance Notes. As at present, the Guidance Notes will cover all aspects of anti-money laundering procedures and the revised version will be issued only after full consultation with industry and the other Crown Dependencies.
Guernsey Financial Services Commission
18 December 2003
NECESSARY INFORMATION TO BE OBTAINED BY WAY OF A CERTIFICATE OR SUMMARY SHEET IN RESPECT OF INTRODUCED BUSINESS
Recommendation 9 of the FATF's Forty Recommendations permits financial services businesses to use introducers to perform elements (a) - (c) of the customer due diligence process1 provided that key criteria are met, of which two2 are essential to obtaining necessary information. Under such circumstances, the ultimate responsibility for customer identification and verification remains with the financial services business using the introducer.
- The elements of the customer due diligence process referred to above are as follows:
- identify the customer and verify that customer's identity using reliable, independent source documents, data or information;
- identify the beneficial owner, and take reasonable measures to verify the identity of the beneficial owner such that the financial institution is satisfied that it knows who the beneficial owner is. For legal persons and arrangements this should include financial institutions taking reasonable measures to understand the ownership and control structure of the customer; and
- obtain information on the purpose and intended nature of the business relationship.
- The essential criteria referred to above are that:
- a financial services business using an introducer should immediately obtain the necessary information concerning elements (a) - (c) of the customer due diligence process; and
- financial services businesses should take adequate steps to satisfy themselves that copies of identification data and other relevant documentation relating to the customer due diligence requirements will be made available from the introducer upon request without delay.