1 Introduction

Jersey’s legislative and regulatory strategy to counter money laundering and the financing
of terrorism is overseen by the Chief Minister’s Department, and is assisted by the Strategy
Group, which consists of representatives from a number of relevant agencies including the
Law Officers’ Department, the JCIS, the JFCU (incorporating Jersey’s financial intelligence
unit), and the JFSC.

This document aims to raise awareness of money laundering methods and techniques
relevant to Jersey. Methods and techniques deployed by money launderers and trends
identified through typologies are valuable sources of information for the purposes of
conducting risk assessments, designing systems and controls (and policies and procedures),
calibrating on-going monitoring, and providing training to employees. Where typologies
relate to non-resident customers, they need to be understood in the context of the threats
and vulnerabilities specific to Jersey in terms of both its status as an international financial
centre and the structure of its finance services industry.

This document draws on raw statistical data and information obtained through the SAR
regime, AML/CFT supervision, and successful money laundering prosecutions, which have
provided by members of the Strategy Group. Data and information provided has been
collated and analysed, typologies and trends identified, and then presented as practical
guidance for relevant persons.

This paper is intended to assist relevant persons with the prevention and detection of money
laundering and, in particular, to assist relevant persons with the identification of customers
who may be engaged in criminal activities, and to further improve the quality of SARs.
The presentation of typologies necessarily highlights the potential misuse of services and
products offered by Jersey’s financial services industry and abuse of legal persons or
legal arrangements established in Jersey or elsewhere. However, it is important to bear in
mind that the vast majority of these products and services and legal persons and legal
arrangements are used for legitimate purposes and, like elsewhere, current intelligence
suggests only a small minority are used to launder the proceeds of criminal activity or
finance terrorism.

1.1 Money laundering offence

Under the UN Convention against Organised Crime1, each State Party is required to adopt
such legislative and other measures as may be necessary to establish as criminal money
laundering offences, when committed intentionally:

1. (i) the conversion or transfer of property, knowing that such property is the proceeds
   of crime, for the purpose of concealing or disguising the illicit origin of the property
   or of helping any person who is involved in the commission of the predicate offence
   to evade the legal consequences of his or her action;
   (ii) the concealment or disguise of the true nature, source, location, disposition,
   movement or ownership of or rights with respect to property, knowing that such
   property is the proceeds of crime;
2. subject to the basic concepts of its legal system:
   (i) the acquisition, possession or use of property, knowing, at the time of receipt, that
   such property is the proceeds of crime;
   (ii) participation in, association with or conspiracy to commit, attempts to commit
   and aiding, abetting, facilitating and counselling the commission of any of the
   offences established in accordance with this article.

As can be seen from the above, money laundering in its widest sense occurs whenever there
are funds that represent the proceeds of a criminal activity and includes any act or
attempted act to conceal or disguise the identity of illegally obtained proceeds so that they
appear to have originated from legitimate sources. This traditional view of money
laundering is that it occurs in three stages: placement, layering and integration.
Placement involves physically placing illegally obtained money into the financial system or
the retail economy.

Layering is the process by which illegally obtained money is separated from its source
through a series of financial transactions that makes it difficult to trace the origin.

The final stage of the process, integration, involves the conversion of illicit funds into a
seemingly legitimate form which may include the purchase of real estate and other assets.
The typologies presented later in this paper highlight the use of relevant persons and Jersey
legal persons and legal arrangements at the placement and layering stages.

1.2 International financial centre

Jersey’s financial services industry is a major component of the Island’s economy. The
nature of the business carried out by the financial services industry brings with it inherent
money laundering and financing of terrorism risks, which derive from the characteristics of
sophisticated products and services offered to international customers. The industry is
dominated by banking, fund administration and T&CSPs.

Most customers are non-resident and additional preventative measures to address the risk
that such customers present are in place. Nevertheless, given the number of such nonresident
customers, money laundering and financing of terrorism risks remain. Figures
published by the JFSC show the proportion of bank deposits by Jersey residents in March
2014 is 7.1 per cent of the overall total2. There is no similar geographical analysis of fund
investors as with banking deposits, but the JFSC’s estimate is that the majority of investors in
Jersey administered and managed funds are non-resident.

The resident/non-resident distinction is a familiar challenge in international financial
centres, both onshore and offshore, which attract global investors and is reflected in the
typologies included in this report.

1.3 Domestic predicate offences

Besides the money laundering and financing of terrorism risks arising from the international
nature of the financial service industry, locally committed ‘street crimes’ resulting in
laundering of criminal proceeds in Jersey through domestic products and services also
feature in typologies included in this report.

1.4 Financing of terrorism

SARs in respect of which financing of terrorism has been suspected tend to be based on an
relevant person’s commercial database search results, news and Google Alerts using key
words associated with its customers, or defensive SARs, whereby the relevant person files a
SAR following law enforcement contact requesting information. As a result, SARs in respect
of financing of terrorism do not establish ‘classic’ typologies.

1 Similar money laundering offences are described in the Convention on Laundering, Search,
Seizure and Confiscation of the Proceeds from Crime. INTRODUCTION
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2 Statistics published on the JFSC website (March 2014)
https://www.jerseyfsc.org/banking_business/statistics/quarterlyanalysis.asp INTRODUCTION
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