Jersey Financial Services Commission

Transcription

1 Jersey Financial Services Commission STEP seminar AML/CFT update Andrew Le Brun Hamish Armstrong Financial Crime Policy

2 Introduction Overview MONEYVAL - Where are we now? Electronic CDD ( E-CDD ) - Guidance on the use of E-CDD Beneficial ownership and control - Application of the three-tier test

3 MONEYVAL

4 MONEYVAL Council of Europe body Peer review organisation Fourth round mutual evaluation ( MER ) January 2015: onsite and key findings report Before 24 March 2015: changes to legislation, Codes and guidance June and July 2015: pre-meetings to discuss first draft of MER End of October 2015: second draft of MER December 2015: plenary discussion

5 MONEYVAL Fourth round MER September 2015: plenary discussion of Guernsey MER Fifth round MER April/May 2016: Isle of Man 2019: Guernsey 2021: Jersey National risk assessment

6 Key findings? Accumulation of risk over-arching ML/TF risks Properly reflected in business risk assessments and customer risk assessments? Exemptions from Schedule 2 of Proceeds of Crime Law Too many? High risk? Individuals acting as director for less than 6 companies Definition of beneficial ownership and control Too great a focus on control through ownership

7 Key findings? Application of identification measures to customers who are trustees Sight of trust deed in entirety? Sight of letter of wishes? Application of simplified identification measures Still too generous? Discretion to refrain entirely from application of certain measures in defined circumstances Application to T&CSPs and lawyers outside Jersey? Request information on beneficial ownership and control of corporate trustees?

8 Key findings? Application of enhanced CDD measures Too much flexibility: when and what? Reliance on obliged persons Apply outside Channel Islands? Use of alternatives e.g. Sections and of AML/CFT Handbooks Supervision of use of exemptions, simplified measures, enhanced measures and reliance Looking in the right areas?

9 Key findings? Transparency of legal persons and legal arrangements Insufficient measures to ensure beneficial ownership information is available for: Persons and arrangements that are not administered by a licensed T&CSP; and Collective investment funds that apply simplified identification measures to investors Awareness of terrorist financing risks Patchy?

10 Key findings? Money laundering and other offences Limited number of cases involving third party money laundering Failure to report

11 E-CDD

12 Use of smart phone and tablet applications Innovative technology New ways of collecting information and obtaining evidence of individuals identities Requirement to find out identity Article 3(4) of Money Laundering Order Obtaining evidence on basis of documents, data or information from reliable source, that is reasonably capable of verifying that an individual to be identified is who the person is said to be - Sight of passport, national identity card or driving licence - Use of suitable certifier - Independent data sources

13 Use of smart phone and tablet applications Other requirements Article 11 of Money Laundering Order Policies and procedures for identification and assessment of risks that arise from use of new or developing technology for new or existing products AML/CFT Code Assess, record and monitor risk where any element of CDD process is outsourced Senior management responsibility Clarity of what application does and does not do

14 Use of smart phone and tablet applications Guidance Risks that arise when documents not physically presented to relevant person or suitable certifier Documents tampered with or forged Images of individual or documents tampered with before or during transmission Documents or images captured are stolen or use unauthorised

15 Use of smart phone and tablet applications Guidance Measures that might be taken to mitigate such risks Documents tampered with or forged Use very high level of clarity and resolution Access biometric and other data coded on document Compare against document templates Examine security features (e.g. watermarks, holograms, micro-text, etc.) Examination by trained analysts/examiners

16 Use of smart phone and tablet applications Guidance Measures that might be taken to mitigate such risks Images or documents tampered with before or during transmission The application itself controls the copying of the document, photography, and transmission process A highly secure connection is used to transmit documents and images Application security is regularly tested in order to guard against hacking or other security breaches

17 Use of smart phone and tablet applications Guidance Measures that might be taken to mitigate such risks Documents or images captured are stolen or use unauthorised A "selfie" is biometrically matched to identity document A video or stream of photographs is taken A code or password is sent to the customer to display in photograph Use of a location matching

18 Use of smart phone and tablet applications Risk Assessment is key What will you use the application for? What are the risks? What are your mitigants? (may be features of the application or others) Guidance may be relevant in other circumstances Speak to Financial Crime Policy team

19 Beneficial ownership and control

20 Beneficial ownership and control Money Laundering Order Article 2 definition Article 3(7) definition (legal arrangements) AML/CFT Handbooks Section 4 explanation of who is to be considered the beneficial owner and controller of a customer Section 13 explanation of who is to be considered the customer of a trust and company service provider

21 Beneficial ownership and control Money Laundering Order Article 2 no change Article 3(7) new reference to other person exercising ultimate effective control AML/CFT Handbooks Sections 4 and 13 New three-tiered approach where: (i) customer is a legal person; or (ii) legal person in ownership structure New references to dummy settlors for trusts and other person exercising ultimate effective control for all legal arrangements Definitions for beneficiary and object of power to be added

22 Beneficial ownership and control ML/CFT Handbooks Based on revised FATF R.10 and recent guidance on transparency and beneficial ownership Identify individuals with a material controlling ownership interest (25% benchmark) or who exercise control via other ownership interests If none, or if these individuals aren t really exercising control, identify individuals who exercise control by other means If still none, identify senior managing officials

23 Fourth ML Directive Definition of beneficial ownership Corporate entities: three tiers Control through ownership; control through other means; and natural persons holding position of senior managing official Trusts: settlor, trustee, protector, beneficiaries (when determined ) and any other natural person exercising ultimate effective control

24 Jersey Financial Services Commission Q&A Thank you for listening Please contact us if you have any questions/comments

25 Jersey Financial Services Commission STEP seminar AML/CFT update Andrew Le Brun Hamish Armstrong Financial Crime Policy

26 Example 1: customer is a trustee Identify: Settlor (direct and indirect) Protector Beneficiary with vested right definition to be added Other beneficiaries and objects of a power definitions to be added Other person exercising effective control

27 Example 1: customer is a trustee Where any person identified is not an individual, identify: Individuals with a material controlling ownership interest in the capital of the person (through direct or indirect holdings of interests or voting rights) or who exert control through other ownership means Where doubt as to whether the individuals exercising control through ownership are beneficial owners, or there are none - any individual exercising control over the person through other means

28 Example 1: customer is a trustee Where any person identified is not an individual, identify: Where none - individuals who exercise control of the person through positions held (who have strategic decision-taking powers or executive control via senior management positions)

29 Example 2: customer is a company Identify: Individuals holding a material controlling ownership interest in the capital of the company (through direct or indirect holdings of interests or voting rights) or who exert control through other ownership interests, e.g. Shareholders agreements Power to appoint senior management Holding convertible stock or any outstanding debt that is convertible into voting rights

30 Example 2: customer is a company Identify: To the extent that there is doubt as to whether the individuals exercising control through ownership are beneficial owners, or where no individual exerts control through ownership - individuals who exercise control through other means, e.g. Personal connections Participate in financing Close and intimate family relationships, historical or contractual associations Default on certain payments

31 Example 2: customer is a company Identify: Where no individual is otherwise identified under tiers 1 or 2 - individuals who exercise control through positions held (who have and exercise strategic decision-taking powers or have and exercise executive control through senior management positions, e.g. directors) NB: in any case where a person in an ownership structure is not an individual, apply the three-tiered approach to find an individual(s) controlling the company