The Commission have released their latest Business from Sensitive Sources Instruction, no 01/2016 (“the Instruction”) for Financial Services Businesses and Prescribed Businesses replacing the previous instruction 04/2015 that was issued back in November 2015. The upshot is that Myanmar, Loa PDR and Vanuatu are now included in Part B of the Instruction which lists countries and territories with improving Global AML/CTF Compliance, while Algeria, Angola and Panama have been removed altogether from the Instruction. For Financial Services Businesses and Prescribed Businesses, it would appear to be that they can now apply a risked based approach to relationships or transaction through or from Myanmar, Loa PDR and Vanuatu, and as much is said in the Commission’s statement on their Instruction, but is that really the case?
A quick look at Chapter 3 of the Handbook and rule 58 sets out the Commissions requirement for designating high risk Business Relationships or Occasional Transactions. These characteristics are those identified in section 1 (a) to (c) of Regulation 5 of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Regulations, 2007, as amended (“the Regulations”) and also those connected with Parts A or Part C of the Business from Sensitive Sources issued by the Commission. At first glance it would therefore appear that Business Relationships or Occasional Transactions with Myanmar, Loa PDR and Vanuatu do not necessarily need to be high risk as they are on Part B of the instruction.
What is important to realise is that section 5 (1) (c) (i) of the Regulation states that customers established in or situated in a country or territory that does not apply or insufficiently applies the Financial Action Task Force (“FATF”) recommendations on Money Laundering must be designated as high risk. As part B of the Instruction relates to countries or territories who are improving but not meeting the FATF requirements on Money Laundering it would indicate to me that Myanmar, Loa PDR and Vanuatu, still require to designated as high risk in order that a Financial Service Business or a Prescribe Business can meet their obligations under the Regulations.
If this is not confusing enough for any Director, Compliance/ Risk Officer or Money Laundering Reporting Officer, please also be aware of your banking arrangements and relationships. Though this Instruction on the face of things allows you to apply a risk based approach which may or may not be in line with the requirements of the Regulations, your Bankers may not deem these jurisdictions to be anything other than high risk. You may have decided as a business to apply a risk based approach but if this is not in line with your Bankers you may find yourself in bother.
The only advice I can give is make sure that your risk designation of a client meets the requirements of the regulations and that of your Bankers.