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The countdown begins

On 1 March 2019, the GFSC issued the new Handbook on Countering Financial Crime and Terrorist Financing (the “Handbook”), to assist firms comply with the Bailiwick’s legislation concerning money laundering, terrorist financing, financial crime and related offences.

The new Handbook is effective 31 March 2019 and applies to all ‘specified businesses’, including financial services businesses and prescribed businesses.

As part of the changes introduced by the new Handbook, the GFSC has set the following key deadlines for organisations:

  • Mar/Apr 2019: Money Laundering Compliance Officer (MLCO) appointed by 31 March 2019 and Commission advised by 14 April 2019
  • May 2019: Nominated firm for Collective Investment Scheme Investor CDD to notify the Commission by 31 May 2019
  • July 2019: Business Risk Assessment (BRA), which addresses both the money laundering and terrorist financing risks of the entity, reviewed & approved by the Board by 31 July 2019*
  • Oct 2019: Policies, procedures and controls reviewed and approved by 31 October 2019*
  • Dec 2020: All high risk existing customers reviewed by 31 December 2020
  • Dec 2021: All other customers reviewed by 31 December 2021

*Dates will be subject to change, as deadlines are +4 and +7 months respectively from the date of the National Risk Assessment’s publication, which has been delayed from original date of 31 March 2019

New Requirements

This year entities in scope will have to consider a number of new requirements for their business, including;

Appointment of MLCO

A Money Laundering Compliance Officer, must be appointed. This individual, who must be resident in the British Islands, is responsible for oversight of the AML/CFT framework and the organisation’s compliance with the Handbook. 

Increased focus on the Risk-Based Approach

An explicit requirement has been added for organisations to separately consider their terrorist financing risk in their Business Risk Assessment.

In doing so, organisations must consider their risk appetite and the risks and vulnerabilities as detailed in the National Risk Assessment, which is due to be published in Q1 2019.

Enhanced Measures

Enhanced measures, particular to higher risk factors, must now be applied to:

  1. Customers who are not resident in the Bailiwick;
  2. The provision of private banking services;
  3. A customer which is a legal person or legal arrangement used for personal asset holding purposes; or
  4. A customer which is:-
  • A legal person with nominee shareholders; or
  • Owned by a legal person with nominee shareholders.

Politically Exposed Persons

The Handbook’s definition of PEPs, now includes ‘domestic PEPs’. There is no mandatory application of enhanced CDD for domestic PEPs, however, organisations must consider whether the individual is considered high risk and document their decision accordingly.

The Handbook provides guidance for declassifying foreign, international organisation and domestic PEPs.

Beneficial Ownership

The Handbook implements the three-step test of beneficial ownership to consider control, not only through controlling ownership interest, but also through other means of control or positions held in the organisation.

  • Businesses must identify each natural person with a material controlling ownership interest in the capital of the company (through direct or indirect holdings of interests or voting rights) or who exerts control of the company through other ownership means.
  • To the extent that there is doubt as to whether the person exercising control through ownership are beneficial owners, or where no natural person exerts control through ownership, the Business must identify any other natural person exercising control over the company through other means.
  • Where no individual is otherwise identified under Step 1 or 2, natural persons who exercise control of the company through positions held (who have and exercise strategic decision taking powers or have and exercise executive control through senior management positions) must be identified.

Collective Investment Schemes

The Handbook implements measures to limit the use of intermediary relationships in regards to CDD for Collective Investment Schemes.

How Can We Help?

The Advisory team at KPMG in the Channel Islands are available to assist with mapping your policies to the new Handbook or other ad hoc advice regarding the operationalising of the new requirements. 

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