Approval of legislation to regulate money services business

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A decision made (05.06.07) to approve legislation to regulate money services business.

Subject:	Approval of legislation to regulate money services business.
Decision Reference:	MD-E-2007-0112		Exempt clause(s):
Type of Report: (oral or written)	Written		Person Giving Report (if oral):
Telephone or e-mail Meeting?			Report File ref:
Written report – Title	Proposed legislation to regulate money services business.
Written report – Author (name and job title)	Paul de Gruchy, Director, Finance Industry Development
Decision(s): 1) The Minister approved the Financial Services (Amendment of Law) (Jersey) Regulations, the Financial Services (Money Services Business) (Exemptions) (Jersey) Order and the Financial Services (Money Services Business) (Registration and Fees) (Jersey) Order; 2) To instruct the Director, Finance Industry Development to lodge the Regulations for debate by the States at the earliest opportunity – preferably no later than 17 July 2007 3) To resolve to make the Orders in accordance with their terms following the approval of the Regulations.
Reason(s) for decision: International standards set out by the Financial Action Task Force on Money Laundering (FATF) require the Island to introduce a regulatory regime for money service businesses. These are businesses such as bureau de change and those providing cheque cashing facilities. The legislation, which has been drawn up following a public consultation and discussions with members of the money services industry, will provide a framework for regulating such businesses.
Action required: Director, Finance Industry Development to request the Publications Editor at the States Greffe to lodge the Regulations for debate in the States on 17 July 2007. Minister to hold the Orders pending approval of the Regulations and if and when the Regulations are approved by the States seal the Orders and then request the Director, Finance Industry Development to notify the States Greffe, the Departmental liaison officer and the law draftsman before forwarding the Orders to the Greffe for archiving.
Signature: Senator P.F.C.Ozouf (Minister)		Date of Decision:

Approval of legislation to regulate money services business

MINISTER FOR ECONOMIC DEVELOPMENT

PROPOSED LEGISLATION TO REGULATE

MONEY SERVICES BUSINESS

1 THE ISSUE

1.1 Following a public consultation, the Jersey Financial Services Commission has finalised three pieces of legislation which will bring money servicees business (MSBs) into regulation. MSBs comprise businesses such as bureaux de change, money transfer businesses and businesses that cash cheques, and have been identified by the Financial Action Task Force (FATF) as being capable of assisting in money laundering.

1.2 The FATF has therefore recommended that FSBs be regulated. In order to give the Island the best chance of receiving a positive review from the IMF visit scheduled to take place in 2008, as well as reducing the risk of businesses in Jersey being used in money laundering exercises, it is recommended that MSBs be regulated.

1.3 It is recommended that the Minister

 approve the Financial Services (Amendment of Law) (Jersey) Regulations (the “Regulations”), the Financial Services (Money Services Business) (Exemptions) (Jersey) Order (the “Exemptions Order”) and the Financial Services (Money Services Business) (Registration and Fees) (Jersey) Order (the “Fees Order”);

 instruct the Director, Finance Industry Development to lodge the Regulations for debate by the States at the earliest opportunity – preferably no later than 17 July 2007; and

 resolve to make the Exemptions Order and the Fees Order in accordance with their terms following the approval of the Regulations.

2. BACKGROUND

2.1 The proposed new legislation is the result of the wish to ensure that Jersey supports international standards aimed at preventing money-laundering in a proportionate manner. The legislation follows a public consultation and detailed discussions with MSBs.

2.2 The legislation will require the disclosure to the Commission of the identity of all people who carry on MSBs. In addition, any MSB with an annual turnover in excess of £300,000 would be required to become a registered person with the Commission. This will effectively entail the person satisfying the Commission that it is fit and proper and to require the person to grant the Commission extensive powers to supervise such person. The threshold is such that most hotels that offer such services as part of their general offering will not fall into regulation. In addition, any MSB carrying out a transaction for more than £1,000 would be required to carry out procedures designed to ensure that their customer was properly identified.

2.3 In this way, MSBs carrying out significant volumes of work will be regulated, and in addition, any person wishing to carry out a transaction of above £1,000 at any MSB (whether regulated or not) will be required to verify his or her identity.

2.4 The Regulations will bring MSBs within the scope of regulation under the Financial Services Jersey Law, and the two Orders will set out the exemptions and fees applicable in this area. It is anticipated that the Orders would be made following the approval by the States of the Regulations.

3. OPINION AND RECOMMENDATION

3.1 In general, businesses that are not currently the subject of regulation do not welcome its imposition. In this case, however, there is general acceptance that the requirements of the FATF must be met. In addition, public consultation raised a number of issues and ultimately shaped the scope of the exemptions that are now being proposed, with the turnover threshold significantly increased from that originally proposed by the Commission, and the one-off transaction threshold reduced. The legislation balances the need to regulate with an active desire to reduce the regulatory burdens on businesses such as hotels and guest houses that may only offer money services as an ancillary service to their core offering.

3.2 It is recommended that the Minister

 instruct the Director, Finance Industry Development to lodge the Regulations for debate by the States at the earliest opportunity – preferably no later than 17 July 2007; and

 resolve to make the Exemptions Order and the Fees Order in accordance with their terms following the approval of the Regulations.

PAUL DE GRUCHY

Director, Finance Industry Development

4 June 2007

ANNEX