Financial Crime Handbook Consultation

The Commission is undertaking a short consultation on changes proposed to rules and guidance in the Handbook on Countering Financial Crime and Terrorist Financing (version issued on 29 November 2019) to take into account the Bailiwick of Guernsey’s National Risk Assessment (“NRA”) on money laundering (“ML”) and the financing of terrorism (“FT”) which was published in January 2020.  It is anticipated that these proposed changes will assist firms in identifying high risk countries and territories for both ML and FT purposes.  The following is a summary of the main proposed changes to the Handbook: -

1. The creation of an Appendix H to the Handbook, which will list those countries and territories which the FATF has identified with significant strategic deficiencies in their regimes to counter ML, FT and financing of proliferation for which it has called for the application of countermeasures.  In accordance with Paragraph 5(1)(c)(i) of Schedule 3, a firm shall apply ECDD measures to a business relationship or occasional transaction where the customer or beneficial owner has a relevant connection with a country or territory that has been identified by the FATF as a country for such measures are appropriate.  This is currently communicated to firms by way of a Business from Sensitive Sources Notice (“BSSN”) – section A.  Going forward it is proposed that the FATF’s “call for action” will be communicated to firms by way of updates to Appendix H rather than by way of a BSSN.  As a result this has necessitated minor changes to rules and guidance in Chapters 3, 8 and 11.
2. The creation of an Appendix I to the Handbook, which will list a number of countries and territories that are identified by reliable and independent external sources as presenting a higher risk.  This includes government departments such as the UK HM Treasury and US Treasury and NGOs widely used by the finance industry such as Transparency International. Appendix I will also include those countries subject to an FATF “call for action” and countries “under increased monitoring” by the FATF.   Going forward it is proposed that the FATF countries “under increased monitoring” will be communicated to firms by way of updates to Appendix I rather than by way of a BSSN – section B.  As a result this has necessitated minor changes to rules and guidance in Chapters 3, 8 and 11.
3. The Commission has and will retain the ability to issue instructions to firms designating countries or territories where it considers ECDD measures should be applied.  This is currently communicated to firms by way of a BSSN – section C.  Excepting the Cape Verde islands and Senegal the existing countries in section C are detailed in the proposed Appendix I and therefore the Commission proposes to repeal Instruction (Number 1/2020). This means that it will no longer be mandatory to apply ECDD measures to a business relationship or occasional transaction with a relevant connection to a country or territory currently on Part C but will be at the discretion of the firm based upon risk.
4. The NRA process is an iterative one, which will involve the exercise being repeated over time, therefore the Commission proposes a new rule requiring firms to take into account the findings of any updated NRA and reflect the firm’s assessment of whether the risks identified in any updated NRA are relevant, or potentially relevant, to the firm, and where they are, identify the measures for mitigating those risks.
5. Guidance on how firms should apply the NRA to their business risk assessments and customer risk assessments, including additional guidance on FT risk factors in line with the findings of the NRA.*
6. The reintroduction of insurance products as a qualifying product and service for an intermediary to be considered the customer of the firm. In particular, where the firm is licensed under The Insurance Business (Bailiwick of Guernsey) Law, 2002 as amended and offers insurance products within the scope of its licence as part of its relationship with another regulated financial services business (“FSB”), the firm can treat that regulated FSB as its customer.

All proposed changes to the rules and guidance are tracked in the following chapters of the Handbook, available below:

Chapter 1

Chapter 3

Chapter 8

Chapter 9

Chapter 11

Appendix H

Appendix I

The Commission is inviting comments on sections 3.7 to 3.9; 3.14 to 3.17; 8.7; 9.8 and 11.5 of the Handbook, which should be submitted to [email protected], by no later than 5pm on 22 May 2020.

 *Firms remain required under rules amended last November to take account of the NRA in their business risk assessments and policies and procedures when they next fall due for review after 2020.