Reporting Suspicion - Thematic Review 2020 (2021-07-15)

Summary

This is a thematic review report published by the Guernsey Financial Services Commission summarising the findings of a 2020 review into how firms report suspicion of money laundering (ML) and financing of terrorism (FT). It is not a new rule, but it restates existing legal requirements, highlights good and poor practice observed across twenty nine firms, and sets out areas where boards and MLROs should strengthen their policies, procedures and controls.

• Scope reviewed: Twenty nine firms across banking, fiduciary, investment, insurance, prescribed business and non regulated financial services sectors were examined via document review and onsite interviews.
• Board oversight: Most firms had an MLRO and nominated officer with adequate seniority, but policies often lacked a full framework for how suspicions are handled, reported, recorded and escalated to the board.
• MLRO/MLCO capability: Individuals in MLRO and MLCO roles must have appropriate knowledge, skill, experience and independence, and sufficient resources and support from the board.
• Management information: Boards should receive periodic, good quality management information on suspicious activity reports (including predicate offence types) without encroaching on the MLRO's independent decision making, particularly where a relationship is subject to no consent from the Financial Intelligence Service.
• Timeliness and quality of SARs: Internal and external suspicious activity reports must be made promptly and with sufficient detail; the review found variable practice on timeliness and record keeping.
• FIS information requests: Firms must respond to formal FIS requests for additional information (under the Disclosure Regulations) within the deadline stated in the request; failure to comply can constitute an offence.
• Tipping off: Firms must ensure staff do not disclose to customers or connected parties that an internal or external SAR has been or will be made, as this is a criminal offence under the Reporting Laws.

The Commission states it will consider how firms have incorporated the report's findings, including the case studies and Areas for Improvement, as part of its ongoing supervision. Firms are expected to compare their own practices against the report and update policies, procedures and controls where gaps are identified.

Key obligations

• Appoint a suitably senior, qualified, experienced and independent MLRO and nominated officer to receive and assess internal suspicious activity reports.
• Establish and maintain appropriate and effective procedures and controls to ensure compliance with disclosure requirements under the Reporting Laws (Schedule 3, Paragraph 12(1)(h)).
• Ensure the MLRO reports directly to, and has regular contact with, the board, and is given sufficient resources and staff support.
• Appoint an MLCO responsible for monitoring compliance with AML/CFT policies, procedures and controls, including reporting of suspicion (Paragraph 15(1)(a) to Schedule 3).
• Ensure boards receive periodic, adequate management information on suspicious activity reporting without compromising the MLRO's independent decision-making.
• Submit external suspicious activity reports to the Financial Intelligence Service in a timely manner once a suspicion is determined.
• Respond to formal FIS requests for additional information (under the Disclosure Regulations) within the stated deadline.
• Prevent staff from disclosing to customers or others that an internal or external SAR has been or will be made, to avoid the offence of tipping off.
• Report internal and external SAR statistics annually to the Commission via the Financial Crime Risk Return.

Applies to

banks, fiduciaries, investment firms, insurance firms, prescribed businesses, non-regulated financial services businesses, MLROs, MLCOs, boards of directors

Deadlines

• 1 July to 30 June: Annual Financial Crime Risk Return period during which firms report internal and external SAR statistics to the Commission.