Response Paper: Consultation on amendments under the Financial Services Commission (Jersey) Law 1998 regarding the civil financial penalties regime (2021-12-03)

Summary

This is the Jersey Government's response paper following its 2021 consultation on amending the Financial Services Commission (Jersey) Law 1998 and the Financial Services Commission (Financial Penalties) (Jersey) Order 2015. It sets out Government's final policy positions on each consultation question and confirms which proposed extensions to the JFSC's civil financial penalties regime will proceed to legislative drafting, ahead of a planned States Assembly debate in early 2022.

• MLO contraventions: The JFSC's power to impose civil financial penalties will be extended to cover significant and material contraventions of the Money Laundering (Jersey) Order 2008, not just breaches of AML/CFT Codes of Practice.
• DNFBPs in scope: The definition of registered persons will be amended to bring Designated Non-Financial Businesses and Professions (casinos, real estate agents, accountants, lawyers) within the civil penalties regime.
• Senior management and key persons: Directors, key persons, and individuals performing a JFSC-designated senior management function (including money laundering reporting officers) will become subject to civil penalties; the JFSC will separately consult on a notice designating senior management functions.
• Unregistered persons: The JFSC will gain power to impose a civil penalty on a person who ought to have been registered but was not, based on the codes that would have applied had they been registered.
• Removal of penalty caps: Existing caps on civil penalties for registered persons (but not natural persons) will be removed across all Bands to improve proportionality and dissuasiveness.
• Penalty calculation basis: Government has decided (contrary to the original consultation proposal) that penalties will continue to be calculated on the turnover of the contravening entity alone, not aggregated turnover with associated persons, except for Trust Company Business (TCB) entities, where turnover across all members of the affiliation will be used.
• Associated Person definition dropped: Because aggregate turnover of associated persons will not generally be used, the proposed definition of Associated Person in the FP Order is no longer required (except for the TCB exception).
• Lookback window changes: Government will propose removing the three year time limit for issuing a notice of intent against entities, while introducing a six year time limit for individuals, amending Article 21D(2A) of the FSC Law.

These are confirmed policy positions, not yet enacted law; Government intends to revise the draft Amendments accordingly and lodge them for debate by the States Assembly in early 2022. Firms and DNFBPs should anticipate these changes taking effect once the amended legislation is passed, and monitor for the JFSC's forthcoming consultation on its senior management function designation notice.

Key obligations

• Once enacted, registered persons and DNFBPs will need to ensure compliance with the MLO itself (not just AML/CFT Codes), as significant and material MLO contraventions will attract civil financial penalties
• Once enacted, DNFBPs (casinos, real estate agents, accountants, lawyers) will become registered persons subject to the JFSC civil financial penalties regime
• Once enacted, directors, key persons, money laundering reporting officers and JFSC-designated senior management function holders will be personally exposed to civil financial penalties for AML/CFT contraventions
• Once enacted, persons who ought to have been registered but were not will be liable to civil penalties as if they had been registered
• Firms should monitor the JFSC's website for its forthcoming notice designating senior management functions and respond to the associated public consultation when published

Applies to

registered persons, financial institutions, Designated Non-Financial Businesses and Professions (DNFBPs), casinos, real estate agents, accountants, lawyers, Trust Company Business (TCB) providers, directors and senior management, money laundering reporting officers and compliance officers

Deadlines

• beginning of 2022: Government intends to lodge the revised Amendments to the FSC Law and FP Order for debate by the States Assembly