The Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) has released its report on the major anti-money laundering and counter-terrorist financing measures (AML/CFT) in place in Guernsey during their on-site visit between 5 and 11 October 2014.
According to the report findings, Guernsey was compliant or largely compliant with all but one of the 40 Financial Action Task Force (FATF) recommendations and the nine special recommendations; the exception being in relation to sanctions for breaches of AML laws.
MONEYVAL found that the bailiwick had substantially strengthened the AML/CFT preventive measures to which its financial institutions are subject and that the legal framework governing confiscation and provisional measures is comprehensive.
The report also concluded that the legislative structure to prosecute money laundering cases reflects the international standards and does not appear to have presented problems in practice. However, it suggests that the financial sanctions for AML/CFT breaches are not dissuasive and proportionate for legal entities. Furthermore, the report notes that the use of financial penalties for legal persons cannot act as an effective deterrent to non-compliance and cases of non-reporting of Suspicious Transaction Reports (STRs) are rarely fined or in any other way sanctioned.
In relation to the money laundering arrangements at financial institutions, the report notably points out that documentary evidence with respect to the source of funds and wealth for high risk customers was requested rather infrequently.
What are the likely practical implications?
The regulator is likely to be satisfied with the outcome of the visit and findings. Any possible action is likely to be focused on sanctions for breaches. This may translate into legal amendments to strengthen the penalty system leading to more proactive prosecution of alleged cases of non-reporting of suspicious transactions.
As for the findings in relation to the lack of documentary evidence of source of funds, any future visits by the regulator are bound to have an emphasis on this area.
What should businesses be thinking about?
Regulated business should review their AML/CFT arrangements in particular their policies and procedures on reporting STRs and documenting the source of funds in order to ensure compliance in the event of increased scrutiny from the GFSC.
How can Duff & Phelps help?
Our team of highly trained professionals allows us to offer a broad range of regulatory services; we can guide you safely through regulatory challenges and compliance requirements. From authorisations and ongoing compliance arrangements, to mitigating risks such as anti-money laundering through appropriate governance, systems and controls; preparing for regulator visits or investigations; or oversight and risk management services for regulated funds, our team can assist.