Consultation on AML/CFT Obligations upon VASPs and Additional Obligations upon Licensed Trustees and Partners (June 2023)

Summary

This is a combined consultation and feedback package from the Guernsey Financial Services Commission covering proposed and finalised amendments to Schedule 3 of the Proceeds of Crime Law and the AML/CFT Handbook. It covers four linked strands: an independent audit function, enhanced business risk assessments, new rules for virtual asset service providers (VASPs), and additional obligations on licensed trustees and partners regarding beneficial ownership information.

• Independent audit function: Every firm must consider, based on risk and materiality, whether it needs an independent function to evaluate the effectiveness of its AML/CFT controls; no fixed frequency is mandated and internal or external appointees can be used if independent from policy design.
• Business risk assessments: Firms must factor into their business risk assessments the risks from the main predicate offences identified in the Bailiwick's National Risk Assessment, with expanded guidance on risk factors including sensitive industries and country risk.
• VASPs: A new Handbook chapter sets out 'travel rule' style information requirements for originators and beneficiaries of virtual asset transfers, including treatment of transfers of £1,000 or less, and general guidance for VASPs and other businesses connected to virtual assets on meeting Schedule 3 and Handbook obligations.
• Trustees and partners: Licensed trustees of relevant trusts and licensed partners of relevant partnerships/limited partnerships (excluding limited partners) must hold information on the identity of other regulated agents and service providers to the trust or partnership and disclose their own status as trustee or partner, to support beneficial ownership transparency for FATF purposes.

The Commission confirms there are no transitional provisions: the legislative and Handbook changes take effect immediately, coinciding with commencement of VASP licensing on 1 July 2023. Firms are expected to address the new risk assessment and audit requirements at their next scheduled reviews, and trustees/partners at their next periodic review or when a regulated agent/service provider changes.

Key obligations

• Every firm must assess, on a risk and materiality basis, whether it needs to establish an independent audit function to evaluate its AML/CFT controls, and address this at the Board's next consideration of AML/CFT matters
• Firms must incorporate the main predicate offences identified in the Bailiwick's National Risk Assessment into their business risk assessments at their next mandatory annual review
• Licensed VASPs must collect and transmit specified originator and beneficiary information with virtual asset transfers in line with the new 'travel rule' requirements in the Handbook
• VASPs and businesses connected to virtual assets must apply customer due diligence and enhanced due diligence measures using a risk-based approach as set out in the new VASP chapter of the Handbook
• Licensed trustees of relevant trusts and licensed partners of relevant partnerships/limited partnerships must hold identity information on other regulated agents and service providers to the trust or partnership
• Licensed trustees and partners must disclose their status as trustee or partner as required by the new Handbook provisions

Applies to

virtual asset service providers (VASPs), licensed trustees, licensed partners of partnerships and limited partnerships without legal personality, firms and specified businesses subject to the AML/CFT Handbook

Deadlines

• 3 July 2023: Deadline for responses to the 9 June 2023 consultation via the Consultation Hub
• 1 July 2023: Commencement of the licensing regime for VASPs
• 5 July 2023: States of Guernsey meeting after which the legislative changes to Schedule 3 were due to take effect
• immediately: Amendments to Schedule 3 and the Handbook rules take effect immediately, with no transitional period
• before the end of 2023: Licensees expected to have addressed the independent audit function requirement when the Board next considers AML/CFT matters
• next mandatory annual review: Licensees expected to incorporate the new business risk assessment requirement at their next annual review