Consultation on AML/CFT scope exemptions (December 2021)

Summary

This is a joint JFSC and Government of Jersey consultation paper proposing to overhaul the scope exemptions currently available under Jersey's AML/CFT regime so that they align with the 2012 FATF Recommendations. It sets out draft legislative amendments (a Draft Proceeds of Crime (Miscellaneous Amendments) (Jersey) Law) that would recast Schedule 2 of the Proceeds of Crime (Jersey) Law 1999 to mirror FATF's financial institution, DNFBP and VASP definitions, and includes an appendix mapping every current scope exemption to its proposed future status.

• Core proposal: Recast Schedule 2 so AML/CFT scope mirrors FATF's FI, DNFBP and VASP definitions, disconnecting AML/CFT obligations from conduct and prudential regulation.
• Exemptions narrowed: Scope exemptions will only be retained where risk assessment shows they meet the strict FATF criteria (proven low risk and limited/justified circumstances, or occasional/very limited activity).
• Minimum notification: Even activities that keep an exemption will, at minimum, be subject to a notification obligation to the JFSC so usage can be monitored and periodically reviewed.
• Transitional period: Government anticipates a six month transitional period for businesses newly brought into scope to prepare to register or notify under the SBJL.
• Commencement approach: The amending law is proposed to come into force by Appointed Day Act rather than a fixed date, to allow a phased transition.
• Phased implementation: This paper covers Phase 1 (primary law/overall approach); Phase 2 secondary legislation and further consultation on implementation, including transitional provisions, is expected in 2022.

Businesses that currently rely on an AML/CFT scope exemption are encouraged to review that reliance now, since many exemptions (particularly those tied to conduct/prudential exemptions such as certain TCB, deposit-taking, and connected-company arrangements) are proposed to be withdrawn or narrowed, potentially triggering new registration or notification duties with the JFSC. Appendix B lists each existing exemption and its proposed future treatment; Appendix A contains the draft law text.

Key obligations

• Businesses currently using an AML/CFT scope exemption should review that reliance and assess the impact if the exemption is withdrawn or narrowed
• Where a scope exemption is proposed to continue, the business will still need to comply with a notification obligation to the JFSC once implemented
• Businesses expected to lose an exemption should plan to put in place AML/CFT systems, procedures and controls consistent with the AML/CFT Handbook ahead of the anticipated six month transitional period
• Interested parties wishing to comment must submit responses to the JFSC or, for an industry-coordinated response, to Jersey Finance Limited, by 17 January 2022

Applies to

Financial institutions, Designated Non-Financial Businesses and Professions (DNFBPs), Virtual Asset Service Providers (VASPs), Trust Company Business (TCB) providers, including Private TCBs, Fund Services Business (FSB) providers, including Professional Investor Regulated Schemes (PIRS), Banking business, Insurance business, Investment business, Connected companies/persons relying on intra-group exemptions

Deadlines

• 17 January 2022: Deadline for submitting comments on the consultation paper to the JFSC or to Jersey Finance Limited for the coordinated industry response.
• six months (anticipated, from commencement): Anticipated transitional period during which businesses losing a scope exemption would need to prepare to register with the JFSC, notify under the SBJL, or notify reliance on a remaining scope exemption.
• 2022 (further consultation): Further consultation on secondary legislation and detailed transitional provisions is expected to continue during 2022.