Handbook on Countering Financial Crime and Terrorist Financing

The Commission has today issued, in final form, the revised Handbook on Countering Financial Crime and Terrorist Financing.

This follows the approval of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) (Amendment) Ordinance, 2018 by the States of Guernsey during December 2018.  The revisions to the rules and guidance in the Handbook, together with the revised legislation, bring the Bailiwick’s framework for combatting money laundering and terrorist financing into line with international standards issued in 2012 by the Financial Action Task Force, as well as addressing recommendations made by MONEYVAL following its mutual evaluation of Guernsey, the report of which was issued in January 2016.

A small number of revisions have been made in response to feedback on the final draft version of the Handbook which was published on 12 November 2018.

The key changes since the 12 November 2018 version are set out below:

• Section 2.8.1. – Money Laundering Compliance Officer (“MLCO”) – The wording has been revised to confirm that the MLCO is responsible for the firm’s compliance with its policies, procedures and controls, but that ultimate responsibility for the firm’s compliance with the statutory and regulatory requirements within the Bailiwick’s framework remains with the Board.  The MLCO’s role is therefore one of monitoring the firm’s compliance with its internal controls and reporting to the Board on the outcome of this monitoring.
• Section 5.3. – Verification of the Identity of Natural Persons – The requirement to verify multiple nationalities has been removed.  Firms are still required to collect information on the identity of an individual, including if the individual holds more than one nationality, but verification should focus on verifying the individual’s primary nationality.
• Section 7.10. – Trusts and Other Legal Arrangements – The requirement to identify and verify the identity of beneficiaries of trusts has been enhanced to capture persons who may not be named within trust documents, but who the trustee considers are likely to benefit from the trust, for example, because they have been named in a letter of wishes.
• Section 9.6. – Appendix C Businesses – Additional clarity has been added to this Section in respect of the circumstances when the Appendix C business provisions cannot be used, specifically where an Appendix C business (other than a Guernsey licensed fiduciary) is acting as trustee to a trust.
• Section 9.9. – Pooled Bank Accounts – An additional provision has been added to distinguish between the holding of customer funds on a client account by a fiduciary on a short-term basis, for example, before a trust or company bank account has been established, and the holding of funds in a pooled account for the purposes of providing treasury/cash management services.
• Section 11.3. – Monitoring Transactions & Activity Obligations - Rule 277 of the FSB Handbook and Rule 213 of the PB Handbook requiring a firm to consider the possibility for legal persons and legal arrangements to be used as vehicles for money laundering and terrorist financing have been reinstated.
• Appendix E – List of Domestic PEPs - The list now includes senior government posts following the restructuring of Guernsey’s civil service.

The rules and guidance in the Handbook were formally made by the Commission on 1 March 2019.

A clean version of the Handbook, together with a tracked version reflecting the changes made from the final draft version published on 12 November 2018, can be accessed via a new Handbook page of the Financial Crime Division’s section of the website:

https://www.gfsc.gg/commission/financial-crime/handbook-on-countering-financial-crime-and-terrorist-financing

The revised Handbook, including the rules and guidance contained therein, comes into effect on 31 March 2019 and will replace the FSB and PB Handbooks presently in force as of that date.

Firms should be aware that in accordance with Paragraph 3(9) of Schedule 3, from 31 March they must continue to maintain the policies, procedures and controls they were required to establish and maintain under the FSB and PB Regulations until such time as their internal frameworks have been revised to take account of the requirements of Schedule 3.