Anti-Money Laundering and Combating Terrorist Financing: Guernsey Stays Ahead of the GameJohn Greenfield Guernsey's ongoing success as a vibrant international financial centre is largely due to the Island's continued ability and willingness to adapt to changing market conditions in order to ensure that the jurisdiction retains its position. This flexible approach is clearly illustrated by the Island's ongoing review of its legislative and regulatory framework. In the past 12 months alone, the Guernsey Trust Law has been revised (the revisions come into effect on 17 March 2008), the Companies law is currently under review and the Island has introduced a fast-track approval process for all closed-end funds. The Island enjoys an international reputation as a well-regulated and secure environment in which to conduct business, but at the same time the jurisdiction is keen to create a practical approach to regulation without creating unnecessary, cumbersome and over-bureaucratic procedures for bringing in business. This combination of security and pragmatism is manifested in one of the more recent changes—the review of the local anti-money laundering and counter—terrorist financing regulations. During 2007, the Guernsey Financial Services Commission (GFSC) led a period of consultation with the local finance industry regarding proposed changes to these regulations. And as a result and following recommendations from the FATF, a new handbook has now been produced. Key Changes Financial businesses will now take a more risk-based approach to their procedures and controls in relation to taking on new clients. This will avoid disproportionate time and effort being spent on "low-risk" business whilst, at the same time, ensure that high-risk business and transactions (assessed as being high-risk through their complexity, geographic location, etc.) will be subject to higher levels of due diligence and scrutiny. One of the aims of this approach is to balance the cost burden placed on individual businesses and their customers with a realistic assessment of the threat of the business being used in connection with money laundering or terrorist financing. It focuses the effort where it is needed and has most impact. For many, the changes will already be best practice within their procedures. However, there is a new, explicit rule making it a clear responsibility of the Board (or equivalent for partnerships or firms) to review and discuss compliance issues at all regular meetings. They will be required to carry out risk assessments relating to the type of work undertaken (and to review these on a regular basis) and have clear written procedures to be adhered to by any staff engaged in taking on new business. Additional changes are being made to AML legislation. The first relates to unregulated businesses (such as bureaux de change). These types of businesses are currently required to report certain basic information to the GFSC. Under the new regime, they will be subject to a registration system. Perhaps even more significantly, the Guernsey parliament—The States of Guernsey—has approved changes to the existing primary AML legislation. When brought into force later this year, non-financial services businesses such as estate agents, accountants and lawyers will have to fulfil the enhanced obligations under the revised regulations even though they aren't regulated by the Commission. This will inevitably involve a considerable amount of work in some cases to get the correct procedures in place. Guernsey's regulatory regime needs to be constantly reviewed in order to maintain the Island's excellent reputation within the international financial market place. However, it is clearly recognised by Guernsey' regulator to be of equal importance that any enhancement of the regulatory environment in which we operate is made under an umbrella of pragmatic implementation in order that we continue to be a "business-friendly" jurisdiction.
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