Jersey Financial Services Commission

Transcription

1 Jersey Financial Services Commission The Commission s Examination Findings and to date Anita Matthews, Acting Deputy Director Joanne Doyle, Senior Examiner

2 Introduction Overview Regulatory Update Examinations - Themes and methodologies for 2014 and 2015 Cases studies (2015 findings) Outreach Looking ahead

3 On-sites and AML

4 Key Persons Theme 29 (/40) Examinations of corporate TCBs Enforcement action: A Trust Co Ltd and a further significant ongoing case Continued focus (as in 2013) on the roles of the CO, MLCO and MLRO SARs procedures, record keeping and reporting The BRA & Strategy off the peg

5 On-site Examination round-up 2014 CDD and EDD failure to act on Ongoing monitoring Plus ça change. Compliance resources Procedures Documentation

6 AML & CMO Thematic On-site Examinations 35 Examinations of corporate TCBs Enforcement action - both new and ongoing cases AML/CFT continuing trends identified from the PEMS database Risk based approach Moneyval inspection January 2015 CMO Control of Customer Money Financial Services (Trust Company Business (Assets Customer Money))(Jersey) Order 2000

7 AML & CMO Thematic Scope Key Focus Areas SAQ BRA & Strategy AML reporting to the Board Staff training & awareness CMP and periodic review PEP register and subsequent review of a sample of PEP customers for EDD Sanctions screening methods

8 2015 AML & CMO Thematic Scope Key Focus continued: Outsourcing, placing reliance upon third party service providers and operations in overseas branches Control of customer assets: Sample testing of transactions selected from pooled and office accounts; and Interviews and discussions held on-site with CO and other relevant staff.

9 Case Studies

10 Case Study TCB A PEP Findings PEP risk identified, but not recorded on the PEP register PEP risk discounted due to presence of another service provider in an equivalent jurisdiction Lower risk PEPS not included on, or removed from, the PEP register

11 TCB A PEP Finding UBO IOM Intermediary PEP ICC1 Service Agreement for Crew salaries ICC 2 Service Agreement for Crew salaries Funds

12 Case Study TCB A PEPs Key learning points: In this scenario, the business did not consider the four limbs of the MLO That is to say where an individual is a PEP and (i) is a beneficial owner or controller of a customer; or (ii) is a third party on whose behalf a customer acts; or (iii) is a beneficial owner or controller of a third party in (ii); or (iv) is a person acting or purporting to act on behalf of the customer.

13 Case Study A PEPs Obtain reliable information on the source of wealth of PEP (total net worth) Establish source of funds in the business relationship Review information held at least annually Look at external open source information Examine risk factors e.g. country prone to corruption Lower monitoring thresholds Obtain senior management approval

14 Case Study TCB A Business Risk Assessment & Strategy - Consider the risks in placing reliance on obliged persons and in the application of simplified measures Set out business position in relation to obtaining tax advice for legacy customers Establish clear policies (i.e. strategies) to mitigate the risks identified

15 Case Study TCB B Governance Recommendation Set out organisational factors in BRA & Strategy, particularly where a number of legacy businesses have merged with the affiliation Conduct an analysis of the AML/CFT and other business risks faced as a result of the acquisition of books of customers

16 Case Study TCB B MLRO & SAR Review Board or other independent monitoring of timeliness and evaluation of SAR records Review of Internal SARs vs External SARs Review of effectiveness of end-to-end procedures governing SAR process For example - use of internal SAR reporting form, subsequent MLRO evaluation and follow up action

17 Case Study TCB B Treasury and related services Acting in the interest of customers Set clear controls for documenting the rationale for placing customer monies with an inhouse or group treasury function or other preferred FX service provider Ensure the disclosure of any retrocession fees earned or shared is made in the customer terms and/or other relevant literature

18 Case Study TCB C Finding Governance of participating members based overseas had fallen out of compliance with the licencing policy, i.e. mind and management must remain in Jersey The delegation of administration agreement had become outdated

19 Case Study TCB C (continued) Recommendation Conduct an analysis of the activities of the overseas subsidiaries to establish whether activities are in/out of the scope of the FSJ Law (Article 2) Consider revoking those licence categories held where not required

20 Case Study TCB C (continued) Further Recommendations Review of custodial and banking services provided by the banking group to TCB customers Also of the third party provision of investment monitoring performance for TCB customers

21 Case Study TCB C (continued) Finding: Placement of customer money within the banking group locally - the corresponding connected group entity had incorrectly relied upon the exemption in the Financial Services (Trust Company Business) (Exemptions) (Jersey) Order 2000 Key learning point This exemption would not apply where money is placed on behalf of customers and where the connected company is contracting directly with the customer entity

22 Case Study TCB C (continued) Best practice / conclusion Implement a cohesive framework for the review of key legal documentation in line with FSJ Law

23 Case Study TCB D MTC Corporate Governance recommendation Establish a concise framework for the delegation of administrative functions to an overseas branch in the BRA Ensure core requirements of the Handbook are met by the overseas branch operations, such as customer profiling for transaction monitoring purposes Ensure that documentation clearly delineates responsibility for delegated functions Include oversight and monitoring of delegated functions as part of the compliance monitoring program Ensure all staff are aware of their reporting obligations under the POCJ, MLO and Handbook

24 Case Study TCB D (MTC) Best Practice Take into account the considerations set out in the Commission s Outsourcing policy Take care to ensure that fiduciary duties and decision making are not delegated Give due consideration (and document) the wider implications for training of staff (locally and overseas)

25 Case Study Registered Office Conduct of Business Finding Registered office only customer Requests for financial statements (including schedule of underlying property investments made) EDD for the shareholders and directors incomplete Review of financial statements revealed charitable donations to a UK registered charitable trust Further open source internet searches indicated wider links within Europe and to the Middle East Worldcheck revealed links to high risk political organisations in the Middle East

26 Case Study Registered Office Key learning point: Ensure information and EDD is checked and updated regularly Conduct regular (at least annual) searches and screening of open source information of principals and connected persons Where requests for information are not met in a timely fashion, escalate the issues to the Risk and Compliance Committee and/or the Board With a view to documenting the consideration of: Exiting the customer; and The reporting obligations under Article 14(8) of the MLO. Finally, ensure reporting procedures are clear and in line with the current requirements of the MLO and the Handbook

27 Outreach and looking ahead

28 Outreach during 2015 To better understand you, we must be a listening regulator. Knowledge of business opportunities and of business pressures and constraints are the foundation stones of effective regulation, and that knowledge can only be gained by working hard to obtain a thorough understanding of the industry - by listening. Future business The Commission's role Trust company ownership

29 Looking Ahead 2015 Business Plan Change Programme Initial changes in e-enablement (i) Data and information submission (nature and mechanisms) (ii) Electronic payment of fees Further changes to come. Full details in communications programme, which will begin shortly

30 Jersey Financial Services Commission Q&A Thank you for listening Please contact us if you have any questions/comments