Jersey Stiffens Regulation Of Money Service Businesses

by Robert Lee, Tax-News.com, London

31 July 2007

At its meeting on 19 July 2007, the States of Jersey passed legislation to regulate money service businesses - those in the business of a bureau de change, providing cheque cashing facilities or engaging in money transmission services – under the Financial Services (Jersey) Law 1998 (the Financial Services Law).

The previous absence of such a regulatory regime for money service business placed the Island at variance with international standards issued by the Financial Action Task Force on Money Laundering (FATF). The aim of the legislation is to provide a mechanism for the oversight of money service businesses that will meet international standards but in a way that will avoid placing undue bureaucracy on industry and unrealistic demands on the Commission’s resources.

The legislation will result in the disclosure to the Commission of the identity of all persons who carry on money service business. All money service businesses will become subject to oversight (to varying degrees), as required by FATF recommendations. In the case of persons with turnover in excess of a prescribed threshold of GBP300,000, this oversight will involve a pre-authorisation “fit and proper” assessment and proactive ongoing supervision by the Commission. Such persons will also be subject to the Financial Services Law in its entirety and will be expected to adhere to the Codes of Practice issued by the Commission for the purpose of establishing sound principles for the conduct of money service business.

In the case of other persons whose turnover falls below the prescribed threshold, oversight will involve the notification to the Commission of the carrying on of money service business and the use, by the Commission, of investigatory powers as and when needed.

The combined effect of these requirements on most persons carrying on, or proposing to carry on, money service business is expected to be minimal. This is because the GBP300,000 turnover limit should result in only the largest providers of money service business in Jersey having to seek the authorisation of the Commission to carry on money service business. Consequently, in the majority of cases, a person will be able to lawfully carry on money service business after simply notifying the Commission of its intention to do so, although it will be required to keep records sufficient to determine that its turnover is below the prescribed threshold.

A six-month period has been set from 26 July 2007 in which to provide the Commission with a notification or an application as appropriate. The legislation contains transitional provisions so that persons who have made an application by 26 January 2008 (the closing date for applications) may lawfully continue such business pending consideration of their application by the Commission.

The oversight regime provided for by the legislation will be funded by fees levied by the Commission on persons who will be required to register under the Financial Services Law to carry on money service business. Persons who benefit from the turnover exemption and who are simply required to notify the Commission that they intend to carry on money service business will not be charged any fee.

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