Instruction (Number 1) for Prescribed Businesses - Corporate Governance and Internal Controls (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 prescribed businesses (legal professionals, accountants and estate agents) following enforcement action and international AML/CFT assessments that revealed weak Board oversight of AML/CFT matters.

The Commission states that Boards of prescribed businesses retain full responsibility for AML/CFT compliance even where functions are outsourced, and that Board consideration of AML/CFT issues must be formal, minuted and substantive rather than a bare note that no issues arose.

• Review 1: Review compliance with regulation 15 of the Regulations and each rule in Chapter 2 of the Handbook.
• Review 2: Review compliance with regulations 3 and 13 and Chapters 3 and 9 of the Handbook, ensuring risk assessments of business relationships or occasional transactions are performed by appropriately trained staff.
• Review 3: Review compliance with regulations 4 and 11 of the Regulations and Chapters 4 and 7 of the Handbook.
• Review 4: Review compliance with regulation 7 and section 4.9 of the Handbook to ensure business relationships are commenced prior to completion of CDD only exceptionally.
• Enhanced due diligence: Consider what practical steps are needed to meet the enhanced client due diligence requirements of regulation 5.
• Audit evidence: Where no separate audit function exists, retain documentary evidence of how the Board satisfies itself that its AML/CFT systems are effective and risk appropriate (paragraph 47, Chapter 2 of the Handbook).
• Remedial action: By close of business on 26 February 2010, take any necessary action to remedy identified deficiencies.
• Reporting failures: Advise the Commission of any material failure to comply with the Regulations or Handbook and of any serious breaches of policies, procedures or controls (paragraph 49 of the Handbook).

The Commission will review the action taken by each prescribed business through on site inspections and other supervisory means.

Key obligations

• Board must review compliance with regulation 15 and Chapter 2 of the Handbook
• Board must review compliance with regulations 3 and 13 and Chapters 3 and 9 of the Handbook, ensuring risk assessments are carried out by appropriately trained staff
• Board must review compliance with regulations 4 and 11 and Chapters 4 and 7 of the Handbook
• Board must review compliance with regulation 7 and section 4.9 of the Handbook regarding pre-CDD business relationships
• Board must consider practical steps to meet enhanced client 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
• By close of business on 26 February 2010, remedy any deficiencies identified in the review
• The Board must advise the Commission of any material failure to comply with the Regulations or Handbook and of any serious breaches of policies, procedures or controls

Applies to

prescribed businesses, legal professionals, accountants, estate agents

Deadlines

• 26 February 2010: Deadline by close of business for prescribed businesses to have taken any necessary action to remedy deficiencies identified during the required review