Introduction of the Money Laundering (Jersey) Order 200-.

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A decision made (28/01/2008) regarding: Introduction of the Money Laundering (Jersey) Order 200-

Decision Reference: MD-TR-2008-0010
Decision Summary Title:	Draft Money Laundering (Jersey) Order 200-		Date of Decision Summary:	28 January 2008
Decision Summary Author:	Andrew Le Brun		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:
Written Report Title:	Draft Money Laundering (Jersey) Order 200-		Date of Written Report:	23 January 2008
Written Report Author:	Andrew Le Brun		Written Report : Public or Exempt?	Public
Subject: Introduction of the Money Laundering (Jersey) Order 200-
Decision(s): The Minister made the Money Laundering (Jersey) Order 2008 and agreed that it should come into force on 4 February 2008 (7 days after it is made).
Reason(s) for Decision: To implement FATF Recommendations 5 to 11, 13, 15, 21, and 22. To ensure that obligations that are imposed on financial services business to prevent and detect money laundering take account of changes in money laundering methods and techniques. To protect and enhance the reputation and integrity of Jersey in commercial and financial matters.
Resource Implications: There are no financial or manpower implications for the States.
Action required: To notify the Publications Editor, States Greffe, immediately the Order is made; and to liaise with the Greffier of the States to ensure that the making of the Order is notified to the States.
Signature:		Position: Senator T A Le Sueur, Minister for Treasury and Resources
Date Signed: 28th January 2008		Date of Decision: 28th January 2008

Introduction of the Money Laundering (Jersey) Order 200-.

REPORT

Draft Money Laundering (Jersey) Order 200-

Money laundering is defined in Article 1(1) of the Proceeds of Crime (Jersey) Law 1999 (“Proceeds of Crime Law”). In its widest sense, money laundering occurs whenever there is any form of relationship or arrangement involving property that represents the proceeds of a crime for which a person is liable on conviction to imprisonment for a term of one or more years. The definition of money laundering also covers offences that are committed under Articles 15 to 18 of the Terrorism (Jersey) Law 2002, which includes what is commonly referred to as “terrorist financing”.

Methods and techniques used in money laundering have changed in response to developing countermeasures and have become increasingly sophisticated. In response to this, in 2003 the Financial Action Task Force on Money Laundering (the “FATF”) revised the Forty Recommendations that it first published in 1990, which formed the basis for the Money Laundering (Jersey) Order 1999 (the “1999 Order”). The 1999 Order came into force on 1 July 1999 and has been applied since that time to any business that is a “financial services business” that is defined in Schedule 2 to the Proceeds of Crime Law. A set of Guidance Notes was issued at the same time to assist financial services businesses with implementation of the 1999 Order.

The draft Money Laundering (Jersey) Order 200- (“draft Order”) will replace the 1999 Order and will address the vast majority of the provisions that are set out in the revised FATF Recommendations that are relevant to financial services businesses, which are referred to throughout the draft Order as “relevant persons”.

In particular, the draft Order provides for:

The application of “customer due diligence” procedures - that cover “identification procedures” and “ongoing identification procedures”. The latter involves the scrutiny of transactions and keeping information that is requested and held on a customer up to date. This is in line with FATF Recommendation 5. Only “identification procedures” are explicitly provided for in the 1999 Order.

The application of a risk-based approach to customer due diligence procedures, that permits reduced or simplified measures to be applied in the case of “lower” risk customers and requires enhanced measures to be applied in the case of “higher” risk customers, including customers that are “politically exposed persons”. This is in line with FATF Recommendations 5 to 7. There is no clear reference to risk in the 1999 Order.

Any individual who owns or controls a customer to be identified, and reasonable measures to be taken to verify the identity of such individuals. This is in line with FATF Recommendation 5. There is no similar obligation in the 1999 Order.

Except in some limited circumstances, identification procedures to be applied prior to establishing a relationship or conducting a one-off transaction for a customer. In addition, identification procedures will apply subsequent to a relationship’s establishment, where there is suspicion of money laundering. This is in line with FATF Recommendation 5. There is no obligation in the 1999 Order to conduct identification procedures where there is suspicion of money laundering.

Termination of a relationship with a customer where it is not possible to apply identification procedures. This is in line with FATF Recommendation 5.

A relevant person to place reliance on another person (“other person”) that is also subject to obligations to prevent and detect money laundering, and which is overseen for compliance with those obligations, to undertake elements of the relevant person’s identification procedures. This is in line with FATF Recommendations 5 and 9. The 1999 Order includes such a provision for what is referred to as “intermediary” business, but not for “introduced” business. Both of these terms are defined in the draft Order.

Documents, data or information that are collected as part of customer due diligence procedures to be retained for a period of at least 5 years after a relationship has been terminated. This is in line with FATF Recommendation 10.

Customer due diligence, record-keeping, and reporting procedures to be applied at any branch or subsidiary of a relevant person that is outside Jersey. This is in line with FATF Recommendation 22. The 1999 Order applies only to financial services business that is conducted in Jersey.

Customer due diligence procedures to be applied to “existing customers” at appropriate times. An existing customer is a customer that a relevant person has a relationship with at the time that the draft Order comes into force. This is in line with FATF Recommendation 5.

The appointment of a compliance officer whose function is to monitor whether the enactments in Jersey relating to money laundering are being complied with in the conduct of the relevant person’s financial services business. This is in line with FATF Recommendation 15. The draft Order also provides for a relevant person to notify the Commission of the name of the individual that is its compliance officer (as well as its money laundering reporting officer).

Training and measures to raise the awareness of money laundering amongst employees - in line with existing requirements in the 1999 Order. This is in line with FATF Recommendation 15.

The draft Order will be supported by a Handbook for the Prevention and Detection of Money Laundering and Terrorist Financing (“Handbook”) - which is applicable to relevant persons that are supervised by the Jersey Financial Services Commission (“Commission”) under regulatory legislation. The Handbook sets out how the Commission will expect relevant persons to comply with obligations that are established in the draft Order (“regulatory requirements”), and also provides guidance on how both statutory and regulatory requirements may be met. The Handbook will be published at the same time as the draft Order comes into force and will replace the current Guidance Notes. A final draft of the Handbook was published by the Commission in July 2007 after an extensive period of consultation.

Member States of the European Union were required under the Third Money Laundering Directive to apply the revised FATF Recommendations by 15 December 2007. The United Kingdom has done so through the Money Laundering Regulations 2007. Guernsey has also implemented the revised FATF Recommendations, and the Isle of Man is shortly to do so.

The International Monetary Fund will visit Jersey in October 2008. The purpose of this visit is to assess the Island against international standards, including the revised FATF Recommendations. The application of the revised FATF Recommendations is also necessary if other jurisdictions are to assess the regime in place in Jersey as “equivalent”. For example, the Third Money Laundering Directive provides for Member States to apply simplified customer due diligence procedures where a customer is from a jurisdiction that has applied the revised FATF Recommendations.

Other changes to legislation to prevent and detect money laundering and terrorist financing are in hand. In February 2008, the States are expected to extend the definition of “financial services business” to cover: the business of providing services by independent legal professionals; the business of providing external accountancy services, advice about the tax affairs of another person, audit services, and insolvency services; estate agency services; services provided by high value dealers; and operators of casino business. At the time that the schedule is revised, it will be necessary to make a small number of amendments to the draft Order.

In November 2007, the States agreed to make a number of amendments to the Proceeds of Crime Law, including an amendment to Article 37 which will provide for the draft Order to address a number of other measures that are set out in the revised FATF Recommendations, which it currently may not cover. These include adequate screening procedures to ensure high standards when hiring employees, and providing the Minister with a power to prevent relevant persons from dealing with customers in particular jurisdictions. Accordingly, a further amendment to the draft Order will follow in due course.

Financial/ manpower implications

There are no financial or manpower implications for the States.