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Crown Dependencies Join Forces On Money Laundering With New "Know Your Customer" Principles

Lisa Ugur, Tax-news.com, London

20 December 2000


The Jersey Financial Services Commission (FSC) has this week published a consultation document, entitled Overriding Principles For A Revised Know Your Customer Framework, which is essentially a joint initiative from financial regulators in Jersey, Guernsey and the Isle of Man to bolster their existing anti-money laundering regulations.

As in a number of other offshore financial centres, changes have been deemed necessary following evaluations by outside bodies. In the case of the Crown Dependencies, the FSC states quite clearly that the action of the Crown Dependencies hinges on the Financial Action Task Force-style evaluation carried out in 1999, under the aegis of the Offshore Group of Banking Supervisors, and the perhaps better-known FATF report, published this year, on jurisdictions considered uncooperative in the international fight against money laundering. Although the Crown Dependencies did not appear on this infamous blacklist - the FSC says that they "emerged in a positive light" - the regulator says that in the light of these evaluations, the anti-money laundering systems of the dependencies need to take account of recent international developments.

The consultation paper states: 'Representatives of all three jurisdictions have entered into detailed discussions and, where possible, have agreed to minimise any inconsistencies in their approaches to certain specified overriding principles for a revised know your customer framework. These are to be known as the Overriding Principles, which are not an exhaustive list of issues raised by the FATF, but are major points relevant to the Anti-Money Laundering Guidance Notes that are common to all Crown Dependencies. It has also been agreed that the Islands will consult with their respective finance sectors on their Overriding Principles with a view to adopting guidance in these areas in each jurisdiction's anti-money laundering guidance notes.'

The areas to be covered by the Overriding Principles are as follows:

  • In the majority of circumstances, financial services businesses will be required to verify the identity of their customers, and if different, the principals behind their customers. No distinction is to be made between accounts opened in person and those opened remotely
  • Reliable introductions must only be accepted from regulated entities subject to anti-money laundering regulations and resident in "approved" jurisdictions. Documentary evidence of identity of the underlying customer must be held in Jersey on the accepting financial services business' file
  • A list of jurisdictions will be agreed by all three Crown Dependencies although each will have discretion to draw up from the agreed list their own list of "approved" jurisdictions
  • Financial services businesses must introduce a progressive client review programme
  • Exemptions for certain postal, telephonic and electronic business will be restricted to certain businesses in specified circumstances

The directors-general of the Financial Services Commisssions of Guernsey, Jersey and the Isle of Man said in a joint statement: 'This consultation paper demonstrates the Crown dependencies' determination to work together to defeat money laundering. Our existing defences have all been endorsed as robust and effective. This further clarification of key principles and the tightening of standards will be a useful further reinforcement of those defences.'

The Jersey FSC is inviting comments on the Consultation Document, the full text of which may be downloaded at http://www.jerseyfsc.org/kyc.pdf. Comments should be made in writing and must reach the FSC by 2 February 2001. The FSC states: 'In submitting comments to the Commission, respondents are asked to be mindful of the need for Jersey to adhere to the FATF's 40 Recommendations and to not meet any of the 25 Criteria For Defining Non-Co-operative Countries and Territories.'

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