Placing Reliance. Legislative changes. Hamish Armstrong Financial crime policy. Legislative changes (1) 26/11/2014. Legislative changes

Transcription

1 Placing Reliance Hamish Armstrong Financial crime policy 1 Legislative changes 2 Legislative changes (1) Legislative changes Money Laundering (Amendment No. 6) (Jersey) Order 2013 ( MLO Amendment 6 ) In force with effect from 18 December 2013 Money Laundering (Amendment No. 7) (Jersey) Order 2014 ( MLO Amendment 7 ) In force with effect from 27 October

2 Legislative changes(2) MONEYVAL progress report Written analysis recommended Designation of higher risk customers in legislation, e.g. Non-residents Private banking Personal asset holding vehicles Companies with nominee shareholders/bearer shares Prohibition on application of simplified measures to customers in countries that do not comply with FATF Recommendations Identification of third parties on whose behalf customer acts even when simplified measures may be applied 4 Legislative changes(3) Article 15 Revised to require enhanced CDD measures Non-residents Private banking Personal asset holding vehicles Companies with nominee shareholders/bearer shares Articles 17 and 18 Revised to prevent the application of simplified identification measures to customers resident in countries that do not apply FATF Recommendations Appendix D2 of AML/CFT Handbook Sources 1 and 2 5 Legislative changes(4) Article 17 Basic information on third parties to be collected at time that simplified measures applied Limited to those with significant interests Hold 25% or more interest in relationship Other measures for executionary relationships Further details Consultation Paper No (issued June 2014) Feedback on Consultation Paper No. 3 (issued September 2014) 6 2

3 AML/CFT Handbooks 7 AML/CFT Handbooks (1) Amendments consequential to MLO Amendment 6 and MLO Amendment 7 Other catch-up and presentational improvements Outlined in Position Paper AML 2014 (issued July 2014) 8 AML/CFT Handbooks (2) Current section Topic Proposed section Section 3 Enhanced CDD Section 7 Section 4 Reliance on obliged persons Section 5 Section 4 Enhanced CDD (higher risk customers) Section 7 Section 4 Simplified CDD Section 7 Section 9 Existing customers Section 4 9 3

4 AML/CFT Handbooks (3) Consultation Paper AML (issued August 2014) Closed Consultation Paper AML (issued September 2014) Closed Consultation Paper AML (issued October 2014) Closes on 28 November AML/CFT Handbooks (4) Consultation Paper AML (issued November 2014) Sector specific section: trust company business Closes on 5 December 2014 Consultation Paper AML (to be issued December 2014) Guidance paper: funds and fund operators One month consultation 11 AML/CFT Handbooks (5) Consultation Paper AML (issued 21 November 2014) Products and services guide: prepaid cards One month consultation 19 December

5 AML/CFT Handbooks (6) Supervision for compliance with new AML/CFT Codes From 1 January 2015 (or later as appropriate) Findings and recommendations to take account of time needed to remediate 13 Section 5 reliance on obliged persons 14 Section 5 (1) Reliance Old terminology: introducers and intermediaries New Articles 16 and 16A: obliged person and group person A relevant person may meet its obligation to apply identification measures by placing reliance on measures that have already been applied by another party ( obliged person ) to find out the identity of a mutual customer and to obtain evidence of identity 15 5

6 Section 5 (2) Reliance on obliged persons Article 16 Relevant person may place reliance on certain obliged persons to have applied identification measures and to keep evidence of identity» In order to meet relevant person s obligations under Articles 13 and 15 to apply identification measures Obliged persons must be:» Regulated and overseen by the Commission for AML/CFT compliance; or» Equivalent business Reliance is subject to six conditions and testing 16 Section 5 (3) Reliance on obliged persons Article 16 Conditions One: obliged person consents to being relied upon Two: identification measures applied by obliged person have been in the course of established business relationship or one-off transaction Three: obliged person provides adequate assurance in writing that:» It has applied full (and specified) identification measures» It is required to keep, and does keep, evidence of identity 17 Section 5 (4) Reliance on obliged persons Article 16 Conditions Four: information found out on customer by obliged person is immediately obtained by relevant person Five: obliged person provides adequate assurance in writing that evidence of identity will be:» Kept until provided to relevant person, or is notified that no longer required» Provided on request and without delay 18 6

7 Section 5 (5) Reliance on obliged persons Article 16 Conditions Six: relevant person assesses risk and makes written record of reason why it is appropriate to place reliance, having regard to:» ML/FT risk of placing reliance» Risk that evidence of identity is not provided [Note assurances may be provided through terms of business] 19 Section 5 (6) Guidance Consider: The stature and regulatory track record The adequacy of the AML/CFT framework in the country or territory in which the obliged person is based The adequacy of the AML/CFT supervisory regime to which the obliged person is subject The adequacy of identification measures applied by the obliged person 20 Section 5 (7) Adequacy of identification measures Consider: Reviewing previous experience (if any) with the obliged person Making specific enquiries, e.g. through use of a questionnaire or series of questions Reviewing relevant policies and procedures Where the obliged person is a member of a financial group, making enquiries concerning the extent to which group standards are applied to and assessed by the group s internal audit function 21 7

8 Section 5 (8) Reliance on obliged persons Test that: Appropriate policies and procedures in place to apply necessary identification measures Evidence of identity is kept Evidence of identity is provided without delay on request Have regard to secrecy legislation in such manner and at such intervals as the relevant person deems appropriate in all the circumstances CoP: If testing highlights failures, must review the appropriateness of reliance! 22 Section 5 (9) Reliance on obliged persons Article 16 Exclusions ML/FT is suspected Reliance presents higher ML/FT risks» Necessary identification measures have not been applied» Complete and accurate information found out on identity will not be disclosed» Evidence of identity will not be kept and/or disclosed Obliged party has relevant connection to enhanced risk state 23 Section 5 (10) Reliance on group persons Article 16A Relevant person may place reliance on group entity to have applied identification measures and to keep evidence of identity» In order to meet relevant person s obligations under Articles 13 and 15 to apply identification measures Group person must be:» Member of same financial group defined» Carrying on business that would be financial services business if carried on in Jersey» Applying CDD measures and keeping records in line with FATF Recommendations 24 8

9 Section 5 (11) Reliance on group persons Article 16A Group person must be: Part of group that has a programme against ML and FT; and Part of group that is supervised for AML/CFT purposes by an overseas regulatory authority Reliance is subject to same six conditions and testing 25 Section 5 (12) Reliance In order to consider what reliance might be placed on an obliged person, a relevant person will first need to determine what elements of identity must be found out and what evidence of identity is to be obtained for its customer Take account of the relevant person s risk assessment for the customer Once it has determined what identification measures it is to apply, a relevant person can then consider whether those measures have already been applied by an obliged person 26 Section 5 (13) Reliance Consider Use of information template - Appendix C (under review) Description of evidence routinely obtained by obliged person The obliged person may not have found out all of the same information as the relevant person needs, and may have obtained evidence of identity using different documents, data or information The scope to place reliance may sometimes be quite limited, and it may be necessary for a relevant person to find out more information or obtain more evidence 27 9

10 Section 5 (14) Reliance why bother? Reliance is not obligatory Starting point (default) is conducting full CDD measures yourself NB:if obtaining evidence of identity from a trustee, similar risk assessment is necessary. (see Handbook section 4.4.5) 28 Key learning points 29 Key learning points You are still responsible! Not blind reliance Customer risk assessment is key Understand what the obliged person actually does May need to top up info or evidence 30 10