Jersey Funds Association
Educational training session – 22 June 2010
1
Overview
• Dealing with intermediaries and
introducers
– Requirement to carry out identification
measures
– Concessions available under Articles 16 and 17
of the Money Laundering Order (“MLO”)
– Significance of jurisdictional equivalence
• Dealing with suitable certifiers
• Some areas where clarification requested
2
Dealing with intermediaries and
introducers
3
Scope of identification measures
• Article 3(2)(a) of the MLO
– Identify and verify the identity of the customer
4
Scope of identification measures
• Article 3(2)(c) of the MLO
– In respect of a customer that is not an
individual:
• Identify and verify the identity of any person
purporting to act on behalf of customer and verify
the authority of that person to do so
• Understand the ownership and control structure of
the customer and the provisions under which the
customer can enter into contracts
• Identify and verify the identity of each individual
who is the customer’s beneficial owner or controller
5
Scope of identification measures
• Article 3(2)(b)(i) and (ii) of the MLO
– Determine whether the customer is acting for a
third party and, if so:
• Identify and verify the identity of that third party
• Where third party is a legal person, understand the
ownership and control of that legal person
• Identify and verify the identity of each individual
who is the legal person’s beneficial owner or
controller
6
Scope of identification measures
• Article 3(2)(b)(i) and (ii) of the MLO
– Determine whether the customer (the trustee)
is acting for a third party and, if so:
• Identify and verify the identity of that third party
• Where third party is a trust, understand the nature
of the legal arrangement (e.g. type of trust)
• Identify and verify the identity of each person who
falls within Article 3(7)
• Where a person who falls within Article 3(7) is a
legal person, identify and verify the identity of each
individual who is the legal person’s beneficial
owner or controller
7
Identification measures concessions
• Article 17 of the MLO
– Allows a relevant person to establish a
relationship without collecting information on
the third parties for which an intermediary acts
(exemption from Article 3(2)(b))
– Concession applies only:
• to intermediaries that:
– are registered to carry on deposit-taking business,
insurance business, investment business, or fund services
business; or
– hold a fund permit or certificate
• where relevant person “thinks fit”
8
Identification measures concessions
• Article 16 of the MLO
– Allows a relevant person to rely upon
information and evidence of identity that has
already been collected and which is held by an
introducer or an intermediary)
• Rather than request that same information and
evidence again (duplication of effort)
• Evidence held may not be current
– Concession applies to following information
and evidence of identity that has already been
collected:
• Introducer – Article 3(2)(a) to (c)
• Intermediary – Article 3(2)(b)
9
Identification measures concessions
• Article 16 of the MLO
– Concessions only apply where:
• Third party carries on Schedule 2 business and is
supervised under the Proceeds of Crime
(Supervisory Bodies) (Jersey) Law 2008
• Relevant person “thinks fit”
• Third party consents to being relied upon
10
Identification measures concessions
• Article 16 of the MLO
– Concessions only apply where (cont’d):
• Relevant person obtains adequate assurance in
writing from third party
– That it has applied identification measures
– That it holds evidence of identity
– That it will provide that evidence without delay and on
request
» Section 4.10.3 of AML Handbook provides for 5 working
days
– In the case of introduced business, that each customer
introduced is an existing customer of the introducer
11
Identification measures concessions
• Application of Articles 16 and 17 of the
MLO to non-Jersey introducers and
intermediaries
– References to “person who carries on
equivalent business” – defined in Article 5
– It is business:
• that is carried on outside Jersey
• that would be Schedule 2 business if carried on in
Jersey
• that may only be carried on by a person that is
registered to do so (or otherwise authorised)
12
Identification measures concessions
• Application of Articles 16 and 17 of the
MLO to non-Jersey introducers and
intermediaries (cont’d)
• the conduct of which is subject to AML/CFT
requirements that are consistent with the FATF
Recommendations and supervised for such
compliance by an overseas regulatory authority
– Requirements and supervision set directly through legal
framework
13
Identification measures concessions
• Application of Articles 16 and 17 of the
MLO to non-Jersey introducers and
intermediaries (cont’d)
– Guidance in Section 1.7 of AML Handbook
• Basis for determining equivalence
– Generally – whether a country or territory is a member of
the FATF, FATF-Style Regional Body, Member State of the
EEA, or another Crown Dependency
14
Identification measures concessions
• Application of Articles 16 and 17 of the
MLO to non-Jersey introducers and
intermediaries
– Guidance in Section 1.7 of AML Handbook
• Basis for determining equivalence
– Specifically – whether a country or territory is “compliant” or
“largely compliant” with those FATF Recommendations that are
directly relevant to the application of available concessions:
Recommendations 5-11, 13-15, 18, 21, 23 and Special
Recommendations IV and VII
– Following sources used to determine compliance:
» Laws and instruments
» Independent assessments
» Other public information
15
Identification measures concessions
• Application of Articles 16 and 17 of the
MLO to non-Jersey introducers and
intermediaries
– Guidance in Section 1.7 of AML Handbook
• Appendix B
– List of countries and territories considered by Commission to
have set requirements for measures to be taken by their financial
institutions (“FIs”) to forestall and prevent ML and TF that are
consistent with the FATF Recommendations
– Not an exhaustive list and no conclusions should be drawn from
omission
» Relevant persons may assess countries or territories not
listed in Appendix B
16
Identification measures concessions
• Application of
Articles 16 and 17 of
the MLO to nonJersey introducers
and intermediaries
– Appendix B
– Be aware also of
Appendix D –
jurisdictions that are
covered by a statement
from an international
body
Appendix B – Equivalent countries and territories
Appendix B provides a list of countries and territories that are considered by the Commission to have set
requirements for measures to be taken by their domestic financial institutions and designated non-financial
businesses and professions to forestall and prevent money laundering and the financing of terrorism that
are consistent with those in the FATF Recommendations.
This is not intended to be an exhaustive list of such countries and territories, and no conclusions should be
drawn from the omission of a particular country or territory from the list. (See section 1.7).
Australia
Italy
Austria
Japan
Belgium
Latvia
Bulgaria
Liechtenstein
Canada
Lithuania
Cayman Islands
Luxembourg
Cyprus
Malta
Czech Republic
Netherlands (excluding Netherlands
Antilles and Aruba)
Denmark
New Zealand
Estonia
Norway
Finland
Portugal
France
Romania
Germany
Singapore
Gibraltar
Slovakia
Greece
Slovenia
Guernsey
South Africa
Hong Kong
Spain
Hungary
Sweden
Iceland
Switzerland
Ireland
United Kingdom
Isle of Man
United States
17
Identification measures concessions
• Article 17 of the MLO - significance of
jurisdictional equivalence
– Simplifies identification measures
– Similar concessions available in “competitor”
jurisdictions
18
Identification measures concessions
• Article 16 of the MLO – significance of
jurisdictional equivalence
– Simplifies identification measures
• Information on customer is collected just once
• Evidence of identity need not be collected afresh
• “Paper chase” may be avoided
– Evidence passed by an intermediary or introducer must be
confirmed by the third party as being a true copy of either
an original or copy document held on its file
19
Identification measures concessions
• Article 16 of the MLO – significance of
jurisdictional equivalence
– May avoid requirement to apply enhanced
measures where customer has not been
physically present for identification measures
• On basis that customer is known to introducer
– Similar concessions available in “competitor”
jurisdictions
20
Identification measures concessions
• Articles 16 and 17 of the MLO - significance
of jurisdictional equivalence?
– Focus is on AML/CFT measures applied at FIs,
rather than a wider compliance with FATF
Recommendations
– Concessions are limited to identification
measures
• Not Article 3(2)(d) – obtaining information on the
purpose and intended nature of a business
relationship
21
• Not ongoing monitoring
Identification measures concessions
• Articles 16 and 17 of the MLO - significance
of jurisdictional equivalence?
– Not universally used - some FIs do not place
reliance on third parties outside the Crown
Dependencies
22
Dealing with suitable certifiers
23
Identification measures –
non-face to face
• Use of suitable certifier relevant where:
– Relevant person applying identification
measures itself
• Not where reliance is placed on measures that have
already been carried out by an introducer under
Article 16 of the MLO
24
Identification measures –
non-face to face
• Use of suitable certifier relevant where:
– Customer or individuals connected to customer
not physically present for identification
purposes
• Article 15 of the Money Laundering Order requires
specific and adequate measures to compensate for
higher risk of money laundering where customer is
not physically present
• 4.8 of AML Handbook requires additional check to
reduce risk of identity fraud where individual to be
identified under Article 3 of the MLO is not
physically present
25
Identification measures –
non-face to face
• Use of suitable certifier not mandated
– Other checks to reduce risk listed in 4.8 of AML
Handbook, e.g.
• Use of further verification sources
• Funds to be drawn from an account in the
customer’s name at a bank in an “equivalent”
jurisdiction
• “Welcome call”
– Other checks may be appropriate
26
Identification measures –
non-face to face
• Suitable certification
– Some basic rules set:
• Certifier must see evidence of identity
• Certifier must confirm that the copy of the evidence
to be provided to the relevant person is a complete
and accurate copy of the evidence seen
• Where evidence contains a photograph, the certifier
must confirm that the photograph contained in a
document bears a true likeness to the individual
requesting certification
27
Identification measures –
non-face to face
• Suitable certification
– Some basic rules set (cont’d):
• Certifier must sign and date the copy of the
evidence
• Certifier must provide contact information
• “Know your certifier” – in any case where:
– Certifier is located in higher risk jurisdiction
– Things don’t look right
28
Identification measures –
non-face to face
• Where rules not followed – then not
suitable certification
• Derivatives may be acceptable, where a
relevant person is satisfied that:
– Evidence held is reasonably capable of
verifying that the person to be identified is who
the person is said to be and satisfies the person
responsible for the identification that the
evidence does establish that fact
– Enhanced identification measures applied or
additional check performed to reduce the risk
of identity fraud
29
Other areas
30
Other areas
• JFA
– Dealing with politically exposed persons
(“PEPs”)
– Definition for “regulated market”
– Secondary market issues
• Association of Investment Companies
– Secondary market issues
31
Other areas
• PEPs
– Effect on risk rating of customer where:
• The customer is a fund that has a small number of
investors that are PEPs (holding only very small
interests)
• The customer (a legal person) is an investor in a
fund and has one or more PEP directors (acting in a
public role rather than person capacity)
– Range of enhanced customer due diligence measures to reflect
the actual level of risk
32
Other areas
• PEPs
– Application of enhanced measures in the case
of a relationship that has previously been
subject to simplified measures
• PEP identified as board member of a listed company
33
Other areas
• Regulated market
– Same meaning as in MiFID
– In the case of EEA markets:
• http://mifiddatabase.cesr.eu/
– In the case of non-EEA markets:
• Article 6(1) to (4) of the Market Abuse Directive
• Articles 3, 5, 7, 8, 10, 14 and 16 of the Prospectus
Directive
• Articles 4 to 6, 14, 16 to 19 and 30 of the
Transparency Directive
34
Questions
35
Jersey Funds Association
Educational training session – 22 June 2010
36