Back Matter

Annex 1. Authorities’ Response to the Assessment

The Bailiwick authorities are fully committed to meeting the standards set by the FATF Forty Recommendations on Money Laundering and the Nine Special Recommendations. This commitment is reflected in the report, which identifies that the Bailiwick of Guernsey has a comprehensive AML/CFT legal framework and that this framework provides a sound basis for an effective AML/CFT regime. As evidenced by the effectiveness of the AML/CFT Advisory Committee, there is comprehensive co-ordination and co-operation between the AML/CFT authorities in the Bailiwick. The Bailiwick will continue to place a very high priority on cooperation, co-ordination and information exchange with authorities both locally and in other jurisdictions.

The Bailiwick has an on-going programme to review and enhance AML/CFT legislation, regulation, rules and guidance; monitor effectiveness of compliance with the AML/CFT regime; and address identified shortcomings. The recommendations made by the IMF have been, and will continue to be, taken seriously. Work on addressing the shortcomings began as soon as the IMF evaluation team left the Bailiwick.

Most of the recommendations made by the assessors are technical in nature, with some relating to the improvement of implementation of legislation. Even since the on-site element of the IMF’s evaluation, steps taken by the Bailiwick’s AML/CFT authorities over several years have produced enhanced results.

The first prosecution for autonomous money laundering has come to trial and the defendant has been convicted on nine different counts. There has also been a further successful money laundering prosecution involving two counts of self-laundering. This trend is expected to continue, with further successful money laundering prosecutions for both self laundering and autonomous money laundering anticipated.

As identified by the assessors, the confiscation and provisional measures within the Bailiwick are robust and are used routinely in all prosecutions where they can be applied. Since the on-site element of the IMF’s evaluation a confiscation order in the sum of £268,556 has been made. This is the biggest domestic confiscation order made to date and arose from a non-drug trafficking case. In addition, following the successful prosecution for autonomous money laundering, an application will be made for a confiscation order in excess of £300,000.

Since the on-site visit, the effectiveness of the sanctions for breaching controls on cross border cash movements has also been demonstrated by the first prosecution under the cash controls legislation, which resulted in a £2,000 fine and confiscation of all the money involved (nearly £10,000) even though it was legitimately sourced.

The assessors had a concern that the then designation mechanism may have had a negative impact on the overall effectiveness of the mutual legal assistance system. The designation requirement was removed with effect from 28 July 2010.

Recommendations were made by the assessors to enhance the requirements for the freezing and confiscation of terrorist assets. These will be addressed in the legislation which is being drafted to replace the current framework. In addition, further guidance has been provided to the financial sector in respect of the freezing and confiscation of terrorist assets and the Sanctions Committee will continue to monitor its effectiveness.

Several of the assessors’ recommendations will be considered in the context of the proposed revisions to the FATF Recommendations.

Annex 2. Details of All Bodies Met During the On-Site Visit

(List of ministries, other government authorities or bodies, private sector representatives and others.)

Ministries

Attorney General’s Office

The Royal Court House

  • - Bailiff’s Chambers

State of Guernsey Income Tax

Operational, Law Enforcement and Intelligence Agencies

AML/CFT Advisory Committee

  • - AML/CFT Financial Crime Group

Attorney General’s Office

Guernsey Police

  • - Guernsey Police Fraud Department

Financial Intelligence Unit

Customs and Excise, Immigration and Nationality Service

Supervisory Bodies

Guernsey Financial Services Commission

Guernsey and Alderney Registrars of Companies

Alderney Gambling Control Commission

Financial Institutions

Credit Suisse (Guernsey) Limited

Network Securities Limited

Trident Trust Company (Guernsey) Limited

Generali International

Northern Trust International Fund Administration Services (Guernsey) Ltd

EFG Bank

Northern Trust (Guernsey) Limited

Rothschild Trust Guernsey Limited

Cenkos Channel Islands

Lloyds TSB

Designated Non Financial Businesses and Professions (DNFBP)

Grant Thornton Limited

Bruce Russell & Son

Carey Olsen

Swoffers Commercial Ltd

Tombola Alderney Ltd

Guernsey Post Limited

Professional Bodies

  • - Financial

  • Guernsey Association of Compliance Officers

  • Association of Guernsey Banks

  • GIIA (Guernsey Insurance Company Management Association)

  • - DNFBP

  • Association of Guernsey Notaries

  • Guernsey Society of Chartered and Certified Accountants

  • Guernsey Bar Council

Annex 3. List of All Laws, Regulations, and Other Material Received

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Part 2: Legislation relevant to predicate offences and offences under conventions

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1

Statement issued by The Bailiwick Anti Money Laundering and Countering the Financing of Terrorism Advisory Committee.

2

Linkworks: nominal information on subjects, case files, warnings, intelligence reports, owners/vehicles and registration markers – ICIS: idem on subjects, warnings, intelligence reports – PNC: idem on subjects, warnings, arrest/awaiting prosecution/convictions plus history, wanted/missing intelligence reference, owners/vehicles and registration markers.

3

Report from the Home Department of the States of Guernsey dated July 23, 2007.

4

This was prompted by the circumstance that a stamps dealer of international repute is active in Guernsey and by the potential to use stamps as investment instruments.

5

The Cash Controls Law declaration threshold of “in excess of €10,000, however, does not fully correspond with that of the EC Regulation, which sets the amount at €10,000 or more.

6

Under the Customs Law an “assigned matter” is “… any matter in relation to which the Chief Revenue Officer is for the time being required in pursuance of any enactment to perform any duties;… “.

7

Under these Regulations, cash over £50 is considered to constitute “goods” for the purposes of the Post Office Ordinance and the customs and excise laws. The term “dutiable” is removed. Sanctions for breach of the declaration requirements of the Post Office Ordinance are raised to a maximum of two years imprisonment and an unlimited fine. The Customs enquiry and restraint powers also apply.

8

Defined as conducting the specified activities in exchange for “any income, fee, emolument, or other consideration in money or money’s worth”.

9

The prescribed laws are defined in the Financial Services Commission Law to include the POCL, the regulatory laws, the DTL, the TL, the DL, and the Wire Transfer Ordinances.

10

The regulatory laws are defined in the Financial Services Commission Law to include the Banking Supervision Law, the Protection of Investors Law, the Insurance Business Law, the Insurance Managers and Insurance Intermediaries Law, the Regulation of Fiduciaries Law, and the Registered FSBs Law.

11

See, e.g., Banking Supervision Law, sections 8 and 9 and Schedule 3. Criteria 1.A.

12

E.g., the GFSC may impose conditions on or revoke a registration under Sections 9 and 10, respectively, of the Registered FSB Law.

13

Level two of the FSB Handbook presents ways of complying with the Regulations and the GFSC Rules. The FSB Handbook uses the terms “should” or “may” in these provisions to indicate ways in which the requirements of the Regulations and the GFSC Rules may be satisfied. These provisions are, therefore, not mandatory and accordingly are considered guidance rather than other enforceable means.

14

Section 9 of the Interpretation Law provides that in law and in every other enactment, the expression “person” shall, unless the contrary intention appears, include any body of persons corporate or unincorporate.

15

“Legal body” is defined in Section 4.6.1 of the FSB Handbook as “bodies corporate, foundations, partnerships, associations, or other bodies which are not natural persons or legal arrangements.” This corresponds to the FATF definition of “legal person,” which term is used in this Report

16

The “underlying principal” is defined in FSB Regulation 19 to mean, in relation to a business relationship or occasional transaction, any person who is not a beneficial owner but who (a) is a settlor, trustee, or a protector of a trust which is the customer or the beneficiaries of which are the beneficial owners, or (b) exercises ultimate effective control over the customer or exercises or is to exercise such control over the business relationship or occasional transaction.

17

This is to be distinguished from the concession in FSB Regulation 10 authorizing FSBs to rely on introducers, which also refers to Appendix C jurisdictions. The concession for introducers, as well as the Appendix C jurisdictions, is described in relation to Recommendation 9.

18

An “Appendix C business” means:

(a) a financial services business supervised by the GFSC; or

(b) a business which is carried on from (i) a country or territory listed in Appendix C to the Handbook and which would, if it were carried on in Guernsey, be a financial services business; or (ii) the U.K, Jersey, Guernsey, or the Isle of Man by a lawyer or accountant; and in either case is a business (A) which may only be carried on in that country or territory by a person regulated for that purpose under the law of that country; (B) the conduct of which is subject to requirements to prevent money laundering and terrorist financing that are consistent with those in the FATF for such a business; and (C) the conduct of which is supervised for compliance with such requirements by the GFSC or an overseas regulatory authority.

19

“Intermediary” is defined in the FSB Regulations to mean (a) a financial services business, or (b) a firm of lawyers, or estate agents, operating in Guernsey, which is considered as being the customer of a financial services business when establishing a business relationship, or undertaking an occasional transaction, in accordance with chapter 6 of the Handbook.

20

Added by amendment effective June 21, 2010.

21

Added by amendment effective June 21, 2010.

22

An “introducer” is defined in Regulation 19 to mean an FSB, lawyer or accountant who is seeking to establish or has established, on behalf of another person or legal arrangement who is its customer, a business relationship with a financial services business.

23

This concession is to be distinguished from one contained in FSB Regulation 6, which permits FSBs in more limited circumstances to establish relationships with intermediaries on behalf of undisclosed third parties. This is discussed under criteria 5.9.

24

Supra note__.

25

The concession in Paragraph 2(b) of FSB Regulation 10, permitting reliance on introducers that are members of the same group, is not restricted to jurisdictions listed in Appendix C. In the case of a third party who the FSB determines is subject to adequate requirements to prevent money laundering pursuant to the amendment described in the preceding paragraph, the FSB would have to make its own determination as to whether the country meets the necessary conditions.

26

Although there are separate WTOs in respect of Guernsey, Alderney, and Sark, and the text of the Guernsey WTO is referred to in this section, the WTOs in respect of Alderney and Sark are virtually identical in terms.

27

For batch file transfers where the PSP of the payer is situated outside the British Islands, the complete information on the payer is required, but only in the batch file and not in the individual transfers bundled therein.

28

The description of the system for reporting suspicious transactions in Section 3.7 is integrally linked with the description of the FIU in Section 2.5 and the two texts need not be duplicative. Ideally, the topic should be comprehensively described and analyzed in one of the two sections and referenced or summarized in the other.

29

The DL and the TL each use the term “nominated officer” to refer to the person nominated by the financial services business to receive disclosures of possible suspicions from employees of the business and to report to the FIS. FSB Regulation 12 and the FSB Handbook use the term “money laundering reporting officer” to refer to the person appointed by a financial services business to have responsibility for compliance with AML/CFT requirements and to receive disclosures of possible suspicions, and use the term “nominated officer” to refer to the person who will receive disclosures in the absence of the money laundering reporting officer.

30

Each provision defines “good faith” to mean that the person making the disclosure knows or suspects, or has reasonable grounds for knowing or suspecting, that the person in respect of whom the disclosure is made is engaged in money laundering.

31

“Shell bank” is defined in the FSB Regulations to mean a bank that has no physical presence in the country or territory in which it is incorporated and licensed and which is not a member of a group of bodies corporate which is subject to effective consolidated supervision. “Physical presence” is in turn defined to mean a bank that has no physical presence in the country or territory in which it is incorporated and licensed and which is not a member of a group of bodies corporate which is subject to consolidated supervision, and “consolidated supervision” is defined to mean supervision by a regulatory authority of all aspects of the business of a group of bodies corporate carried on worldwide, to ensure compliance with (i) the FATF Recommendations; and (ii) other international requirements, and in accordance with the Core Principles of Effective Banking Supervision issued the Basle Committee on Banking Supervision as revised or reissued from time to time.

32

See, e.g., Banking Supervision Law Section 8 and Schedule 3 Criterion 3.

33

For example, Section 6A of Schedule 3 of the Banking Supervision Law requires an institution to supply such information as the GFSC may require to assess compliance with the minimum criteria for licensing, and Sections 1A and 3 of Schedule 3 include compliance with all AML/CFT requirements

34

For example, Banking Supervision Law Sections 26-29.

35

The prescribed laws are defined in the Financial Services Commission Law to include the POCL, the regulatory laws, the DTL, the TL, the DL, and the Wire Transfer Ordinances.

36

Section 9(8) of the Banking Supervision Law, Section 5 of the Protection of Investors Law, Section 12 of the Insurance Business Law, Section 7 of the Insurance Managers and Insurance Intermediaries Law, and Section 8 of the Registered FSBs Law. E.g., Section 9(8) of the Banking Supervision Law authorizes the GFSC to have regard to any matter that it may consider under Sections 6 or 8, which include the rules, etc. issued under the POCL in criteria 1A. of Schedule 3.

37

Section 8 of the Banking Supervision Law, Section 6 of the Protection of Investors Law, Section 14 of the Insurance Business Law, and Section 9 of the Insurance Managers and Insurance Intermediaries Law. For example, Section 8 of the Banking Supervision Law authorizes revocation of a license if, e.g., any of the criteria of Schedule 3 are not fulfilled. Criteria 1A of Schedule 3 requires that a bank at all times act in accordance with “any rules, codes, guidance, principles, and instructions issued … under any enactment as may be applicable…”.

38

Under section 49E of the POCL, where an offense is committed by a company under regulations made under that law (including the FSB Regulations) can be imposed on a director or other manager, partner or shareholder, if such offense was committed with the consent, connivance, or as a result of the negligence, of such person.

39

See, e.g., Section 8 of the Banking Supervision Law..

40

See, e.g., the Banking Supervision Law, Section 6, Schedule 3, Criteria 3.

41

Sections 45 (9) (b), 48(10), 48F and 48L of the Proceeds of Crime Law, Sections 63(9) (b), 67(10), 67F and 67L of the Drug Trafficking Law,

Schedule 5 section 5(4)(b), Schedule 6 section 1(3) and Schedule 7 Section 5 (2) of the Terrorism Law,

Sections 23 (2), 33, 39 45(5) 47(5) and 52(4) of the Civil Forfeiture Law

Schedule 1, Para 5 of the International Cooperation Law applying the Bankers Books Law

Section 2 of the Fraud Investigation Law

Section 41M of the Protection of Investors Law

Section 11(5) of the Insider Dealing Law

Section 21 and 21E of the Financial Services Commission Law.

42

FIM: Financial Intelligence Messages. This refers to outgoing requests to counterpart FIUs or other foreign law enforcement agencies.

43

These factors are only required to be set out when the rating is less than Compliant.