The Financial Services (Extension) (Jersey) Law, designed to protect consumers and crack down on money laundering, came into effect yesterday and under its provisions, as many as a tenth of trust and other companies providing offshore services could disappear over the next four months. There are about 300 such firms in Jersey and it is estimated that they have as much as £115 billion of assets in trust.

A press release from the Jersey Financial Services Commission (FSC) called the Financial Services (Extension) (Jersey) Law a "ground-breaking new law" and said "No other jurisdiction in the world yet has such a fully comprehensive regulatory regime for this financial sector, which remains unregulated in London and other major financial centres."

The FSC said the new law will 'impose rigorous standards of professionalism, ethics and solvency on the Island's 300 (approx) Trust and Company Service providers who create trusts and act as trustees as well as incorporating and acting as administrators for thousands for companies and. acting as directors of those companies. Their services can be used by companies for debt securitisation or captive insurance as well as by individuals for wealth management.'

Richard Pratt, FSC Director General, commented: 'Jersey firms undertake more trust administration than most other offshore jurisdictions. The majority of businesses in this sector already impose high standards but this law will enable us to ensure that they all do. This is a financial area that is seen as potentially vulnerable to money laundering, and although it is already subject to anti money laundering legislation on UK lines, this new law allows us further powers. The Commission can now visit the businesses, making sure they are fully compliant with the law's standards.'

Under the new law trust companies will need to be licensed to continue in business. The Codes of Practice reinforce the existing requirements for a business to know its customers, to establish the source of their wealth and to report any suspicions. They must also adhere to high standards of integrity, solvency and competence. For example, there will be strong protections for customer money with additional requirements for high levels of qualifications and experience.

Mr Pratt said: 'Regulating this sector can give clients additional confidence that businesses are required to meet high standards. A key additional advantage is that the Commission can check and ensure compliance with Jersey's strict anti money laundering regime.'

The FSC has set a timetable for applying the new law, which as as follows:

• November 27, 2000 - Law comes into effect. Commission opens for applications from businesses seeking to be licensed.
  
• February 2, 2001 - It becomes illegal to conduct business without a licence. This is also the closing date for applications for existing businesses seeking to continue doing business until their review completed.
  
• May 27, 2001 - All legal provisions (except professional requirements) now apply.
  
• November 4, 2005 - Professional requirements to be met in full.