Guernsey’s new anti-money-laundering regime requires a constant eye on compliance, says Chris Le Marchant (pictured) of Le Marchant Regulatory Risk Services.The end of 2007 saw the introduction of a whole raft of new anti-money-laundering laws, rules and regulations in Guernsey. That trend continued in 2008 as a glance at this year’s legislative timetable will show.
It is no coincidence that the IMF is going to carry out a review of the island this year. I am sure if you looked at the legislation passed in the months leading up to the last review, you would see that there was a similar raft of new regulatory laws.
This time, the anti-money-laundering/ anti-terrorist-financing regime has been revamped to give a change in emphasis, creating what has become known as the ‘risk-based approach’. For example, the new anti-money-laundering regulations state clearly that financial services businesses must carry out a ‘suitable and sufficient business risk assessment’. The GFSC’s new handbook on countering financial crime and terrorist financing gives firms some topics to consider when they produce their risk assessment.
In any event, the assessment was to be carried out ‘as soon as reasonably practicable’ after the regulations came into force, in other words soon after 15 December.
Although firms had draft copies of the regulations and handbook for some months before that date, they might have been reluctant to do much work on the new regime before it came into force.
Financial services businesses should have now completed their business risk assessment and should already be operating the risk-based approach.
The business risk assessment should be reviewed regularly – how regularly would depend on the type of business carried out, in other words, its complexity and size, its clients’ risk profile, the type of products offered and the jurisdictions in which transactions are carried out.
The stated advantage of a risk-based regime is that resources are focused on the areas of business which attract the highest. The flipside of that is that firms can apply simplified or reduced customer due-diligence requirements to low-risk customers. Where firms take advantage of this quid pro quo, the board of directors (or senior management of branches) are expected to exert full control over the risk analysis and the compliance/anti-money laundering role.
No longer is compliance a department that gets on with the job with nobody taking much notice until something goes wrong.
The board should require close and regular reporting from compliance to ensure that it is doing what is required of it under the new regime.
This emphasis on risk and corporate responsibility is supplemented by a requirement to closely monitor accounts and clients on an ongoing basis. Firms should already be doing this – there is now a whole chapter in the handbook on monitoring.
All this means that firms should not assume that the new regime is just business as usual – the emphasis and style of the new requirements are materially different and firms should take note.
Article posted on 8th September, 2008 - 2.30pm
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