Jersey recognizes the risk that the simplification of CDD measures may present, as well as the inherently higher level of risk that may be found in some customer relationships in international financial centres.

In line with the recommendation made by the IMF, the insular Jersey authorities have reviewed provisions in Articles 16 and 17 of the Money Laundering Order (SEE BELOW) which provide that, in some limited circumstances, a relevant person need not identify or verify the identity of a third party (or parties) on whose behalf a customer is acting (simplification of identification measures) where the risk of money laundering or terrorist financing is lower.

In order to apply simplified identification measures under Article 17 of the Money Laundering Order, a relevant person must first satisfy itself that its customer is:

1. A financial institution that is subject to the Core Principles and carrying on

a. deposit-taking business,

b. insurance business,

c. investment business, or

d. fund services business; or

e. A permit holder or certificate holder of a collective investment scheme; AND

f. Subject to prudential, conduct of business and AML/CFT supervision by the Commission.

Where a customer is based outside Jersey, then it will be necessary for the customer to be

2. subject to supervision in a country that applies AML/CFT requirements that are consistent with those in the FATF Recommendations.

Under Article 17 of the Money Laundering Order, a relevant person must then consider the particular case of its customer and think it “fit” to apply simplified identification measures.

Guidance on the factors to take into account when conducting such a risk assessment is set out in Section 4.10.1 of the AML/CFT Handbook and include:

3. What is known about the customer;

4. The period of time that the AML/CFT framework has been in place in the country in which the customer is based;

5. Any existing or previous relationships with the customer; and

6. The nature of business conducted by the customer, including

a. the geographic location of its customer base,
b. general nature of its customers (e.g. institutional or private), and
c. its business risk appetite.

In order to apply simplified identification measures under Article 16 of the Money Laundering Order, a relevant person must

7. first satisfy itself that its customer is a relevant person and supervised for AML/CFT purposes by the Commission.

a. Where a customer is based outside Jersey, then it will be necessary for the customer to be subject to:

i. requirements to forestall and prevent money laundering that are consistent with those in the FATF Recommendations; and
ii. supervised for compliance with those requirements.

8. Next, the relevant person must be satisfied that the product offered to its customer is a lower risk product, or product that is controlled by the customer itself presents a lower risk.

b. Guidance in this respect is provided at Section 4.10.5 of the AML/CFT Handbook and the IMF agreed that the particular products referred to appeared to be low risk

Under Article 16 of the Money Laundering Order, a relevant person must then also:

9. Consider the particular case of its customer and think it “fit” to apply simplified identification measures.

a. Guidance on the factors to take into account when conducting such a risk assessment is set out in Section 4.10.1 of the AML/CFT Handbook.

10. Obtain adequate assurance in writing from its customer that it has identified and verified the identity of its underlying customer(s), is required to keep and will keep evidence of identity for those underlying customers, and will provide a copy of that evidence without delay to the relevant person at the relevant person’s request.

For both Articles 16 and 17, the requirement to monitor a relationship with a customer is unaffected.

In order to apply simplified identification measures to an intermediary, it is proposed that a relevant person must, in addition to existing provisions, record its assessment of the risk of applying such measures to an intermediary and why it is “fit” for it to do so.  In particular, this assessment of risk of applying simplified identification measures will take into account:

11. The risk that an intermediary does not apply the necessary identification measures;

12. The risk that an intermediary

a. does not keep records, or
b. does not keep them for the necessary period; and
c. The nature of the intermediary’s business.

In addition, it is proposed to prohibit the application of simplified identification measures under the Money Laundering Order in a particular case where the intermediary:

13. Is considered to present a higher risk of money laundering or terrorist financing (on the basis of the assessment outlined above).

14. Has a relevant connection with a country that is subject to a FATF call to apply countermeasures – currently Iran and North Korea.

15. Is the “respondent” – where a relevant person provides a “correspondent” banking service to a financial institution (where Article 15(4) of the Money Laundering Order applies).

MONEY LAUNDERING (AMENDMENT No. 6) (JERSEY) ORDER 2013 has introduced concept of obliged person – The following outlines the new rules as simply as possible!!!

Stage 1 –

Definitions

“Obliged person” has the meaning in Article 16(1);

“Regulated business” means a FINANCIAL SERVICES BUSINESS in respect of which a person –

1. is registered under the Banking Business (Jersey) Law 19917;
2. holds a permit or is a certificate holder under the Collective Investment Funds (Jersey) Law 19888;
3. is registered under the Financial Services (Jersey) Law 19989; or
4. is authorized by a permit under the Insurance Business (Jersey) Law 1996;

“Regulated person” means a person carrying on a regulated business;

“Relevant person” means –

1. a person carrying on a FINANCIAL SERVICES BUSINESS in or from within Jersey; or
2. either –
3. a Jersey body corporate, or
4. other legal person registered in Jersey, carrying on a financial services business in any part of the world;

Stage 2 –

Reliance on obliged persons – Article 1

1. Relevant person may place reliance on certain obliged persons to have applied identification measures and to keep evidence of identit
2. In order to meet relevant person’s obligations under Articles 13 and 15 to apply identification measure
3. Obliged persons must be:
1. Regulated and overseen by the Commission for AML/CFT compliance; or
2. “Equivalent business”

Reliance is subject to six conditions and testing

Conditions

1. One: obliged person consents to being relied upon
2. Two: identification measures applied by obliged person have been in the course of established business relationship or one-off transaction
3. Three: obliged person provides adequate assurance in writing that:
1. It has applied full (and specified) identification measures
2. It is required to keep, and does keep, evidence of identity
4. Four: information found out on customer by obliged person is immediately obtained by relevant person
5. Five: obliged person provides adequate assurance in writing that evidence of identity will be:
1. Kept until provided to relevant person, or is notified that no longer required
2. Provided on request and without delay
6. Six: relevant person assesses risk and makes written record of reason why it is appropriate to place reliance, having regard to:
1. ML/TF risk of placing reliance
2. Risk that evidence of identity is not provided
1. [Note – assurances may be provided through terms of business]

Stage 3

1. Application of simplified measures Article 17
1. A Relevant person need not find out identity of a third party on whose behalf a customer acts, or obtain evidence of identity, where customer is:
2. Regulated and overseen by the Commission for AML/CFT compliance (“equivalent business”)
3. Wholly-owned by such person and fulfils conditions set out in Article 17(2)
2. Application of the above concession is dependent upon the status of relevant person and its customer through 5 five specific circumstances (5 cases) AS FOLLOWS –

5 Cases (shown in articles 17 (3)(5)(6)(7)&(8))

1. Case One: relevant person’s customer carries on
1. deposit-taking,
2. insurance business,
3. funds services business,
4. investment business, or
5. holds a fund permit or certificate  (or carries on equivalent business)
   (IT MUST BE NOTED TCB IS NOT LISTED)
2.  Case Two: relevant person’s customer acts in course of, or in respect of,
1. unregulated or “COBO-only” fund (or carries on equivalent business) – where little risk of money laundering
3. Case Three: relevant person carries on
1. deposit-taking and its customer carries on trust company business (or equivalent business) – where little risk of money laundering
4. Case Four: relevant person carries on
1. deposit-taking and its customer is a lawyer carrying on business that is regulated for AML/CFT purposes – where little risk of money laundering
5. Case Five: relevant person is a
1. lawyer or accountant and its customer carries on trust company business (or equivalent business) – where little risk of money laundering

stage 4

Application of the above concession is subject to conditions (and testing for some cases)

Conditions (all cases)

1. One: relevant person assesses risk and makes written record of reason why it is appropriate to apply simplified measures, having regard to:
1. ML/TF risk of applying simplified measures
2. Customer’s business

Conditions (cases two to five only)

1. Two: customer provides adequate assurance in writing that it has applied specified identification measures
2. Three: customer provides adequate assurance in writing that:
1. Information on identity found out  will be provided on request and without delay
2. Evidence of identity obtained under identification measures will be kept and provided on request and without delay
3. [Note – assurances may be provided through terms of business]

Testing (cases two to five only):

1. Appropriate policies and procedures in place to apply necessary identification measures
2. Identity is found out
3. Information on identity found out and evidence of identity is kept
4. Information on identity found out and evidence of identity is provided without delay on request
5. Have regard to secrecy legislation

Exclusions to the above

1. Money laundering is suspected
2. Customer presents higher money laundering risk
3. Risk that customer does not apply necessary identification measures
4. Risk that customer does not keep records, or does not keep them for necessary period
5. Customer has connection to country that is subject to FATF call to apply countermeasures

Article 18 – Exclusions

1. In addition to existing restrictions, simplified identification measures can no longer be applied to a customer who has a connection to country that is subject to FATF call to apply countermeasures.
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