News and Insights

Moneyval, the monitoring body of the Council of Europe entrusted with assessing how well countries comply with international standards aimed at combatting money laundering and terrorist financing has now released Jersey’s long-awaited fifth round report. The Report assesses Jersey’s compliance with the Financial Action Task Force (“FATF”) 40 Recommendations and the level of effectiveness of Jersey’s AML/CFT systems. 
  
The overall conclusion from the Report is positive, praised by Minister Ian Gorst as a reflection that the “finance industry is sound and well governed”. Jersey ranks within the top ten of all jurisdictions. But what does the Report mean for Jersey going forward? 

One particular strength highlighted by the Report was risk understanding. Jersey was found to have a strong understanding of the specific money laundering and terrorist financing risks faced by the island. Being informed by various sources in both the public and private sectors proved the Island has a “thorough and in-depth analysis” of risks. Furthermore, Jersey was praised for having a comprehensive legal framework with regard to seizures and confiscation, both in domestic and international criminal cases. Criminal proceeds alone recovered by Jersey during the reporting period was € 311 million. A considerable figure that confirms the Island’s commitment to seizing and repatriating the proceeds of criminal conduct.
 
However, the Report did not give ‘A’ grades across the board. One notable criticism was the need for more supervision (IO3),scoring only ‘moderate’ in terms of effectiveness. Major improvement is said to be required across a number of sectors that do not fall into the realm of traditional financial institutions. Many Designated Non-Financial Businesses and Professions, with the exception of law firms, have been subject to a comparatively lower degree of supervision than that of their financial counterparts. Furthermore, virtual asset service providers with the full range of AML/CFT obligations are yet to be supervised. 
 
The Report also makes key suggestions as to how Jersey should improve its financial intelligence and money laundering investigations (IO6 & IO7). The first of these ‘priority actions’  is that the finance industry should continue to increase its use of FIU (Financial Intelligence Unit) analytical reports to identify money laundering activities. Criticism was also made of the lack of fraud prosecutions and the minimal level of civil penalties imposed by the JFSC. Industry can expect greater focus on these areas going forward.

But how are these changes to be implemented and what does this mean for our clients? The answers from the Panels were clear: the full extent is not yet known. David Eacott, Executive Director of Supervision at the JFSC, stated that the comments were “not un-expected” and that conversations between the JFSC and ‘industry leaders’ were to be held in order to establish a “collective approach”.

The Director of Financial Crime Strategy noted that the “Tsunami of change is behind us, we are now in the lazy river, albeit with a few rapids”. 

With the Report now issued, the next steps by the JFSC, Law Officers’ Department and the States of Jersey Police will be very interesting indeed.