Revisions to Money Laundering Order and AML/CFT Handbooks

Transcription

1 Revisions to Money Laundering Order and AML/CFT Handbooks Andrew Le Brun Hamish Armstrong Financial crime policy 1 Contents Background / Re-cap Key Points Drivers for change Money Laundering (Jersey) Order 2008 AML/CFT Handbooks Other developments Questions 2 Background / Re-cap MONEYVAL Council of Europe body Peer review organisation Replaces International Monetary Fund Progress report - December 2013 Fourth round mutual evaluation January 2015 Closing meeting / preliminary findings Two month window to consider changes to legislation, AML/CFT Codes and guidance Plenary discussion/decision expected September

2 Key Points MONEYVAL ASSESSSORS: Focus on non face-to-face Focus on reliance and simplified due diligence Focus on beneficial ownership Focus on exemptions 4 Drivers for change MONEYVAL FOCUS: Beneficial ownership Esp. control element ASSOCIATED ISSUES: Beneficial ownership direct/indirect third parties Life assurance policies Sanctions regime 5 Money Laundering (Jersey) Order 2008 (1) Article 3(2)(b): identification measures where the customer is acting for a third party Currently: determining whether the customer is acting for a third party and, if so identifying that third party. Potentially narrower than international standard, ( person on whose behalf a transaction is being conducted ). 6 2

3 Money Laundering (Jersey) Order 2008 (2) Customer (acting on behalf of ) Level 1 Third party A Third party B 7 Money Laundering (Jersey) Order 2008 (3) Customer (acting on behalf of ) Level 1 A (acting on behalf of ) Third party B Level 2 Third party C 8 Money Laundering (Jersey) Order 2008 (4) Article 3(2)(b): identification measures where the customer is acting for a third party Proposal: determining whether the customer is acting (directly or indirectly) for a third party and, if so identifying that third party. 9 3

4 Money Laundering (Jersey) Order 2008 (5) Article 11(3)(e): policies, procedures and training to prevent and detect money laundering Currently: determining whether a business relationship or transaction, or proposed business relationship or transaction, is with a person connected with a country or territory that is subject to measures for purposes connected with the prevention and detection of money laundering, such measures being imposed by one or more countries or sanctioned by the European Union or the United Nations. 10 Money Laundering (Jersey) Order 2008 (6) Article 11(3)(e): policies, procedures and training to prevent and detect money laundering Proposal: determining whether is with a person: - connected with a country or territory that is subject to measures such measures being imposed under legislation having effect in Jersey [e.g. Money Laundering and Weapons Development (Directions) (Jersey) Law 2012] - connected with an organisation subject to measures [e.g. Part 2 of Terrorism (Jersey) Law 2002] - who is themselves subject to such measures [e.g. Terrorist Asset-Freezing (Jersey) Law 2011] 11 AML/CFT Handbooks (1) Beneficiary of a life assurance policy Paragraph 23 of Section 3.3 of the AML/CFT Handbook sets out a number of stages in the identification process. Stage 1.2 states that a relevant person must find out the identity of: The customer; Any beneficial owners and controllers of the customer; Any third party (or parties) including a legal arrangement on whose behalf the customer acts (and beneficial owners and controllers of the third party (or parties)); and Others listed in Article 3(2) of the Money Laundering Order 12 4

5 AML/CFT Handbooks (2) Beneficiary of a life assurance policy Proposal: - to provide further guidance on what is meant by any third party (or parties) on whose behalf the customer acts by including a footnote to the third bullet point of stage 1.2 which reads: For the avoidance of doubt, this will include any person who is a named beneficiary of a life assurance policy entered into by the customer. NB: Beneficiaries of life assurance policies are specifically referred to in the international standard. 13 AML/CFT Handbooks (3) Regulated trust and company service provider Sections and of the AML/CFT Handbook contain guidance on obtaining copy documentation from a regulated trust and company service provider in order to meet obligations under Article 13 of the Money Laundering Order. Proposal: to provide further guidance so that regulated trust and company service provider is defined as a trust and company service provider that is regulated by the Commission, the Guernsey Financial Services Commission or the Isle of Man Financial Supervision Commission. 14 AML/CFT Handbooks (4) Section 4 of the AML/CFT Handbook - explains who is to be considered the beneficial owner and controller of a customer - lists what evidence of identity might be obtained in order to comply with Article 13 of the Money Laundering Order - includes guidance on the timing of obtaining evidence of identity and on what to do where it is not possible to complete identification measures Guidance focusses primarily on ownership of a material interest and not on other elements of control. Potential issue - Former Recommendations 5, 33 and

6 AML/CFT Handbooks (5) Proposal - Incorporates guidance in the revised FATF methodology on beneficial ownership (Recommendation 10) and recent guidance on transparency and beneficial ownership - Introduces a 3 tier approach: Firstly are there any 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 are there any individuals who exercise control by other means? If still none identify/verify the senior managing official. 16 AML/CFT Handbooks (6) Proposal Apply this approach to specific customer types Trust (BOs still listed) Limited partnership Company Foundation (BOs still listed) Partnership that is a legal person - Examples given for each (feedback welcome!) 17 AML/CFT Handbooks (7) Beneficial owners of a trust (legal arrangement) Where a settlor*, protector, beneficiary, object of a power, etc.. is not an individual, beneficial owners or controllers are: 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. 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). 18 6

7 AML/CFT Handbooks (8) Beneficial owners of a limited partnership (legal arrangement) limited partners holding a material controlling ownership interest in the capital of the partnership (through direct or indirect holdings of interests or voting rights) or any other person exercising control through other ownership means, e.g. partnership agreements, power to appoint senior management, or any outstanding debt that is convertible into voting rights. 19 AML/CFT Handbooks (9) Beneficial owners of a limited partnership (legal arrangement) To the extent that there is doubt as to whether the persons exercising control through ownership are beneficial owners, or where no person exerts control through ownership, - those who exercise control through other means, e.g. those who exert control through personal connections, by participating in financing, because of close and intimate family relationships, historical or contractual associations or as a result of default on certain payments. 20 AML/CFT Handbooks (10) Beneficial owners of a limited partnership (legal arrangement) Where none those who exercise control through positions held (who have and exercise strategic decisiontaking powers or have and exercise executive control through senior management positions, e.g. general partner or limited partner that participates in management. NB: In any case where a partner, etc. is not an individual, apply the 3 tier approach to find an individual(s) controlling the partnership. 21 7

8 AML/CFT Handbooks (11) Beneficial owners of a company persons 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, or through holding convertible stock or any outstanding debt that is convertible into voting rights. 22 AML/CFT Handbooks (12) Beneficial owners of a company To the extent that there is doubt as to whether the persons exercising control through ownership are beneficial owners, or where no person exerts control through ownership - persons who exercise control through other means, e.g. those who exert control through personal connections, by participating in financing, because of close and intimate family relationships, historical or contractual associations or as a result of default on certain payments. 23 AML/CFT Handbooks (13) Beneficial owners of a company Where no person is otherwise identified under this section - persons 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 above is not an individual, apply the 3 tier approach to find an individual(s) controlling the company. 24 8

9 AML/CFT Handbooks (14) Beneficial owners of a foundation Where a founder, guardian, beneficiary, etc.. is not an individual, beneficial owners or controllers are: 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. Where none - individuals who exercise control of the person through positions held (who are responsible for strategic decision-taking or exercising executive control through senior management positions). 25 AML/CFT Handbooks (15) Beneficial owners of a partnership (legal person) Limited partners with a material controlling ownership interest in the capital of the partnership (through direct or indirect holdings of interests or voting rights) or any other person exercising control through other ownership means, e.g. partnership agreements, power to appoint senior management, or any outstanding debt that is convertible into voting rights. 26 AML/CFT Handbooks (16) Beneficial owners of a partnership (legal person) To the extent that there is doubt as to whether the persons exercising control through ownership are beneficial owners, or where no person exerts control through ownership, - those who exercise control through other means, e.g. those who exert control through personal connections, by participating in financing, because of close and intimate family relationships, historical or contractual associations or as a result of default on certain payments. 27 9

10 AML/CFT Handbooks (17) Beneficial owners of a partnership (legal person) Where no person is otherwise identified under this section, - persons 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. general partner or limited partner that participates in management). NB: In any case where a person above is not an individual, apply the 3 tier approach to find an individual(s) controlling the partnership. 28 AML/CFT Handbooks (18) Section 13 of the AML/CFT Handbook: - contains sector-specific guidance to assist with the application of customer identification measures where a relevant person establishes a business relationship or carries out a one-off transaction in the course of carrying on trust company business. Two issues raised by MONEYVAL assessors: guidance does not address the issue of potential dummy settlors guidance does not fully address a situation where settlor, protector etc.. is a legal person 29 AML/CFT Handbooks (19) Proposals Apply identification measures to: the settlor including any person subsequently settling funds into the trust (except if deceased) and any person who directly or indirectly provides trust property or makes a testamentary disposition on trust or to the trust. any co-trustee; any protector; any beneficiary with a vested right; any other beneficiary or person who is the object of a power and that has been identified as presenting a higher risk; and any other person exercising ultimate effective control over the trust. 3 tier approach, as in Section 4, to limited partnership

11 AML/CFT Handbooks (20) Transitional/ existing customers? Not retrospective; no remediation project required But: apply identification measures where doubts about veracity or adequacy, etc. So: if regular review of relationship highlights that documents, data or information are inadequate (e.g. not all BOs identified), apply identification measures again. 31 Other developments (1) Legal Developments Foundations (Jersey) Law 2009 Proceeds of Crime (Jersey) Law 1999 Terrorism (Jersey) Law 2002 Terrorist Asset-Freezing (Jersey) Law 2011 Proceeds of Crime (Financial Intelligence) (Jersey) Regulations 201- Money Laundering (Jersey) Order Other developments (2) Guidance / Supervisory approach Industry survey Use of reliance, simplified DD measures Review of exemptions to scope of AML/CFT supervision Feedback Paper AML 4 and 6 Funds Guidance (AML 5) 33 11

12 Questions? 34 12