Instruction No. 01/2014 for Fiduciary Financial Services Businesses

As licensees are aware, global standards and expectations in relation to the detection, forestalling and preventing of money laundering and terrorist financing (“ML/TF risks”) have evolved over the years to reflect the ways in which these risks can occur and the measures required to mitigate them.

It is important that compliance arrangements to detect, forestall and prevent money laundering and terrorist financing are sufficiently robust to prevent the services offered by the fiduciary sector from being misused.

The Commission has emphasised to licensed fiduciary businesses, both during on-site visits and at presentations on 9 and 10 October 2013 and again at the industry presentation on 6 December 2013, the importance of ensuring that compliance arrangements designed to mitigate the ML/TF risks to which their business could be exposed, are both appropriate and effective and are sufficiently resourced to do so.  A summary of those presentations can be found on the Commission’s website under AML/CFT Articles & Speeches and Industry Presentations - 5 & 6 December 2013.

The Commission’s review of its on-site visit findings disclosed some very good practices being adopted by some members of the fiduciary sector.  Nevertheless, some fiduciary businesses are not undertaking the necessary reviews and /or engaging appropriate resources to ensure that their compliance arrangements, and in particular business and client risk assessments, remain appropriate and effective to mitigate the ML/TF risks to which the business could be exposed.

The importance of these measures cannot be underestimated, particularly given the serious reputational damage which ML/TF risks could pose, for both the Bailiwick as an international finance centre, and for the fiduciary sector, in particular.  Most importantly failure to adopt good practices could lead to a fiduciary inadvertently facilitating money laundering or terrorist financing.

The Commission considers that the inherent vulnerabilities of the sector and the risk of this non-compliance to be sufficiently serious to warrant the issuing of the following Instruction: Instruction No. 01/2014.

This Instruction is designed to provide both the Boards, or equivalent, of licensed fiduciary businesses and the Commission with assurance that the compliance arrangements of all licensed fiduciaries are and continue to be appropriate and effective, given the size, nature and complexity of each fiduciary licensee’s business.

All licensed fiduciary businesses are required to take the actions required by the Instruction by close of business 29 August 2014.  The requested information should be sent to [email protected]/* */.

Should you have any questions regarding the Instruction, please do not hesitate to contact a member of the Financial Crime team in the Financial Crime & Authorisations Division via telephone or e-mail at [email protected]/* */.