As a jurisdiction, Jersey applies high regulatory standards whilst also remaining an innovative and competitive jurisdiction in which to do business. Endorsements from the Organisation for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF) and MONEYVAL (the Council of Europe’s monitoring body for anti-money laundering) attest to Jersey’s success as a jurisdiction which aligns itself to the highest international initiatives and standards.
Action not Reaction
However, Jersey is not content to rest on its laurels and is constantly evolving to maintain its reputation as an international finance centre of excellence. Whilst other jurisdictions struggle to keep abreast of the quickly changing international regulatory environment, Jersey – which has over 13,600 highly skilled and experienced finance professionals – has been able to adapt quickly to the pace of change.
Given the ongoing ‘flight to quality’ seen amongst investors and managers, Jersey – and its corporate services industry – is well-placed to continue to capitalise on and enjoy its position as a leading international finance centre.
A paradigm example of Jersey’s forward-looking approach can be seen in the recent amendments to Jersey’s anti-money laundering, counter-terrorist financing and counter proliferation financing regime (the AML/CFT/CPF Regime) to more closely align with the Financial Action Task Force’s latest and updated International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation (the FATF Recommendations).
Prior to the recent amendments, the AML/CFT/CPF Regime reflected certain exemptions available in respect of the prudential regulation of financial services under the Financial Services (Jersey) Law 1998 (the FSJL), the FSJL being the primary statute for prudential regulation of financial services in Jersey. This had the effect that, if a Jersey entity could rely on an exemption for the purposes of the FSJL, such exemption would also apply the purposes of the AML/CFT/CPF Regime. This did not align with the FATF Recommendations which expect financial services to be subject to AML/CFT obligations irrespective of application of prudential regulation, based on an empirical assessment of AML/CFT/CPF risk.
As a result, Jersey law has been revised to achieve a full separation between AML/CFT/CPF supervision and the conduct and prudential regulatory regime as well as to more closely align with the terminology used in the FATF Recommendations. The practical effect of the changes, which took effect on 30th January 2023, subject to a transitional period, is that many previously exempt entities are now within the scope of the AML/CFT/CPF Regime: although it should be noted that any prudential regulatory exemptions under the Financial Services (Jersey) Law 1998 (FSJL) will continue to apply in respect of the FSJL.
The COVID-19 pandemic delayed the introduction of these measures resulting in a short time frame for implementation. This has necessitated reliance on a considerable amount of guidance from the Jersey Financial Services Commission (JFSC) and it is anticipated that, as experience grows and further empirical evidence of AML/CFT/CPF risk in the jurisdiction is determined, the guidance will be refined and exemptions for lower risk activity and structures will be introduced
These changes have had – and continue to have – a profound impact on the corporate services industry in Jersey. For larger corporate service providers – which may administer hundreds if not thousands of Jersey entities which were previously out of scope – this has involved significant time, energy and investment. For smaller local institutions, the change can also pose significant challenges, including finding suitably qualified Jersey-based persons to serve as MLRO and MLCO.
The revised legislation addresses these challenges through the introduction of anti-money laundering service providers (AMLSPs).
An AMLSP can assist most in scope entities fulfil their obligations under the AML/CFT/CPF Regime by, amongst other things:
- registering the entity with the Jersey Financial Services Commission through a very streamlined process;
- providing an MLRO and MLCO for the entity; and
- the provision of other relevant services to ensure compliance with the AML/CFT/CPF Regime such as undertaking risk assessments, providing policies and procedures, assisting the application of CDD measures and monitoring.
Whilst the responsibility to comply with the AML/CFT/CPF Regime will remain with the entity itself, the appointment of an AMLSP will reduce much of the burden of ensuring compliance allowing Jersey to meet the highest international standards with minimal impact on client service.
A New Opportunity
The recent amendments to the AML/CFT/CPF Regime are the most significant development to impact Jersey’s financial services industry since the initial introduction of the FSJL in 1998. Whilst this has presented immediate challenges for corporate service providers and their clients – including spending significant time on consideration as to which entities are within scope – these changes need to be viewed in the context of the rapidly changing international regulatory environment.
In this light, the changes to the AML/CFT/CPF Regime present a very exciting opportunity for corporate service providers to provide AMLSP services to the entities they administer, as well as some they do not. Although it is perhaps too soon to fully measure the effect of the amendments to the AML/CFT/ CPF Regime, anecdotal evidence suggests that the provision of AMLSP services is a significant growth area for corporate service providers in Jersey.
Existing entities – and investors looking to establish structures in Jersey – can be assured that in opting for Jersey, they are choosing a jurisdiction that is open for business while retaining the highest regulatory standards, safe in the knowledge that, whatever comes next, we have a track record of implementing innovative measures to ensure Jersey remains a competitive and attractive place to do business.