Herald Trust Company Limited and affiliated members (2014-04-14)

Summary

This is a public statement issued by the Jersey Financial Services Commission (JFSC) under Article 25 of the Financial Services (Jersey) Law 1998, disclosing regulatory findings against Herald Trust Company Limited and its affiliated group of companies (collectively 'Herald Jersey'), which were authorised to conduct trust company business.

Following an onsite examination in 2011, a reporting professional's Competent Persons Report, and a separate 2012 investigation into Herald Jersey's administration of a customer entity linked to possible fraud, the Commission identified serious AML/CFT and governance failures and breaches of the Codes of Practice for Trust Company Business.

Findings and breaches

• AML/CFT weaknesses: Out of date CDD, insufficient evidence of source of funds and wealth, inadequate enhanced due diligence on PEPs and high risk clients, and poor oversight of registered office only business and powers of attorney.
• Investigation findings: Herald Jersey failed to properly understand or control the customer entity's activities, over relied on beneficial owners' instructions, allowed payments and loans without adequate verification, kept inadequate records, and halted client work over unpaid fees, jeopardising investments.
• Code breaches: Breaches of Principle 2 (highest regard for customers' interests, including skill, care, diligence, conflicts of interest and periodic reviews) and Principle 3 (effective organisation and control, corporate governance, and risk management systems).
• Remediation already undertaken: Herald Jersey replaced certain directors, appointed new local directors and a Non Executive Chairperson, reviewed and strengthened its processes and controls, conducted 'cradle to grave' file reviews, and implemented a remediation programme being monitored by the Commission.

The statement is retrospective and describes findings and corrective action already taken by Herald Jersey; it does not itself create new ongoing obligations for other regulated entities, though it illustrates the standards of customer due diligence, source of funds verification, and governance the Commission expects of trust company business licensees under the Codes.

Applies to

trust company business licensees, Herald Trust Company Limited and affiliated members