Instruction (Number 1) for Financial Services Businesses (2009-11-11)

Summary

This is a 2009 Instruction issued by the Guernsey Financial Services Commission under the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999. It reinforces corporate governance and internal control expectations for AML/CFT compliance, following enforcement action against multiple financial services businesses for poor standards in this area.

The Instruction places responsibility squarely on the Board of each financial services business, stating that Boards cannot delegate or outsource away their statutory responsibility for AML/CFT compliance, and that Board consideration of AML/CFT matters must be formal, minuted and substantive rather than a mere note that no issues arose.

• Regulation 15 and Chapter 2: Boards must review compliance with regulation 15 of the Regulations and each rule in Chapter 2 of the Handbook.
• Risk assessments: Review compliance with regulations 3 and 13 and Chapters 3 and 11 of the Handbook, ensuring risk assessments of business relationships or occasional transactions are carried out by appropriately trained staff.
• Regulations 4 and 11: Review compliance with regulations 4 and 11 of the Regulations and Chapters 4 and 9 of the Handbook.
• Delayed CDD: Review compliance with regulation 7 and section 4.13 of the Handbook to ensure business relationships are only commenced before completion of CDD in exceptional circumstances.
• Enhanced due diligence: Consider what practical steps are needed to meet the enhanced customer due diligence requirements of regulation 5.
• Audit function evidence: Where no separate audit function is maintained, retain documentary evidence of how the Board satisfies itself that AML/CFT systems are effective and risk-appropriate, per paragraph 27 of Chapter 2 of the Handbook.
• Remediation deadline: Take any necessary action to remedy identified deficiencies by close of business on 26 February 2010.
• Reporting material failures: Advise the Commission of any material failure to comply with the Regulations or Handbook rules, and of any serious breaches of policies, procedures or controls, per paragraph 29 of the Handbook.

The Commission states it will review the action taken by each business through on-site inspections and other means, and signals it intends to issue new corporate governance requirements in the following year.

Key obligations

• Boards must ensure their consideration of AML/CFT matters is formal, minuted and comprehensive rather than a mere note that no issues arose.
• Boards must review compliance with regulation 15 of the Regulations and Chapter 2 of the Handbook.
• Boards must review compliance with regulations 3 and 13 and Chapters 3 and 11 of the Handbook to ensure risk assessments are carried out by appropriately trained staff.
• Boards must review compliance with regulations 4 and 11 of the Regulations and Chapters 4 and 9 of the Handbook.
• Boards must review compliance with regulation 7 and section 4.13 of the Handbook to ensure business relationships are commenced prior to completion of CDD only exceptionally.
• Boards must consider what practical steps are needed to meet enhanced customer due diligence requirements under regulation 5.
• Where no separate audit function is maintained, the business must retain documentary evidence of how the Board satisfies itself that AML/CFT systems are effective and appropriate to risk.
• Businesses must take any necessary action to remedy identified deficiencies by close of business on 26 February 2010.
• Boards must ensure the Commission is advised of any material failure to comply with the Regulations or Handbook, and of any serious breaches of policies, procedures or controls.

Applies to

financial services businesses

Deadlines

• 26 February 2010: Deadline by close of business for financial services businesses to have taken any necessary action to remedy identified AML/CFT deficiencies.