Managed Trust Company Relationships (November 2021)

Summary

This is a guidance note from the Guernsey Financial Services Commission explaining its regulatory expectations for managed trust company arrangements, where one licensed fiduciary (the managing fiduciary) provides management, staff and policies to a separately licensed fiduciary (the managed trust company) so that the latter meets minimum licensing criteria under the Fiduciaries Law. It sets out expectations on control, AML/CFT compliance, resourcing, outsourcing, termination and supervision.

• Control and management: The managing fiduciary must hold a majority of board seats and retain real executive control; the whole managing fiduciary board is responsible for services it provides, and new managed trust companies will not be licensed where individual owners hold executive roles.
• Documentation: Management and administration arrangements, including provision of the majority of directors, should be set out in a management agreement; parties should approach the Commission early when structuring such relationships.
• AML/CFT compliance: Managed trust companies must comply with the Fiduciaries Law, Schedule 3 to the Proceeds of Crime Law, and the Handbook on Countering Financial Crime and Terrorist Financing, and must demonstrate periodic reviews under Paragraph 15 of Schedule 3.
• MLRO/MLCO and records: The managing fiduciary's MLRO and MLCO are expected to also act for the managed trust company, and all records relating to the managed trust company must be kept by the managing fiduciary within the Bailiwick of Guernsey.
• Staffing and outsourcing: A managed trust company should not directly employ its own staff (e.g. MLRO, MLCO) unless the Commission agrees otherwise, and proposals to outsource administrative services must be advised to the Commission along with oversight arrangements.
• Termination and supervision: The Commission must be notified when notice to terminate the management agreement is given, and managed trust companies remain subject to the standard licensing and supervisory framework, including PRISM risk-based supervision, onsite visits, and capital and insurance requirements.

Managing fiduciaries are also expected to conduct due diligence on the principals behind a proposed managed trust company, covering business viability, operating model and risks, before entering such arrangements.

Key obligations

• Managing fiduciary must retain a majority of directors on the managed trust company's board and exercise real executive control over its operations.
• Managed trust companies must comply with the Fiduciaries Law, Schedule 3 to the Proceeds of Crime Law, and the Commission's Handbook Rules on countering financial crime and terrorist financing.
• Managed trust companies must be able to demonstrate compliance with Paragraph 15 of Schedule 3 regarding periodic reviews of AML/CFT compliance.
• Management and administration services provided by the managing fiduciary should be documented in a management agreement between the parties.
• The managing fiduciary's MLRO and MLCO are expected to be appointed as the managed trust company's MLRO and MLCO.
• All records relating to the managed trust company's business must be maintained by the managing fiduciary within the Bailiwick of Guernsey.
• A managed trust company should not directly employ its own staff (such as MLRO or MLCO) unless the Commission has agreed otherwise.
• The Commission must be advised of any proposals to outsource administrative services, together with arrangements for oversight of outsourced functions.
• The Commission must be notified where notice to terminate the management agreement has been given by either party.
• Managed trust companies must be adequately capitalised and maintain sufficient insurance cover meeting the Fiduciary Rules and Guidance 2021.
• Managing fiduciaries are expected to carry out due diligence on the principals behind a proposed managed trust company before entering the relationship.

Applies to

managed trust companies, managing fiduciaries, fiduciary licensees