Guernsey

The Sum of All the Parts

Sara Barclay AML/CTF, Compliance, Due diligence, Guernsey , , , , , ,

Compliance monkeyThe Guernsey Anti-Money Laundering and Countering Terrorist Financing (“AML/CTF”) framework has continually developed to take in to account good practice, external pressures, requests and recommendations of onshore governments, quangos and international organisations  to ensure that financial crime in all its guises is effectively tackled. The Commission have sought to and I would say that they have largely achieved a cohesive framework that effectively mitigates against the use by criminals of Guernsey as an international finance centre while not over burdening the Financial Service Business operating here.

This cohesive framework has been achieved over the course of the years by open dialogue with local industry bodies, licensees and working effectively and productively with those outside of Guernsey to achieve a proportionate approach for  the products and services that are provided to clients wishing to utilise the jurisdiction. Most notably in 2013 the AML/CTF framework in Guernsey changed extensively and this resulted in general insurance products being removed, but did it remove all the products and services that can classified as General Insurance?

With regard to the Insurance sector in Guernsey, a legal entity can be licensed for general business or for long-term business. Long term business is defined in the Insurance Business (Bailiwick of Guernsey) Law, 2002 as contracts on human life, human longevity, marriage and birth, linked long-term, permanent health, capital redemption, pension fund management and credit life assurance. Due to the nature and the requirements of some clients, an insurance licensee with a general business categorisation may want to offer some of these products to their clients to supplement the range of products and services they currently or can offer their clients, but without the need to be licensed for long-term business.  Section 2(4) of the Insurance Business (Bailiwick of Guernsey) Law, 2002 does allow for an Insurance licensee to elect that a contract for a term of not more than 18 months that may be regarded as a long-term business contract and can be deemed to be general business.

This would appear to allow a general insurer to fit such products into their licence requirements e.g. general insurance, without the requirements to adhere to the Guernsey AML/CTF framework as per the changes that were made to the Commission’s AML/CTF Handbook (” Commission’s Handbook”), in 2013.  It should be noted that the treatment of these products, though allowed to be done in certain circumstances by an Insurance licensee does not change the definition of those products in the Insurance Business (Bailiwick of Guernsey) Law, 2002.

In the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Regulations, 2007 at schedule 1 it states that a Financial Services Businesses for the purposes of the Regulations are detailed in part 1 of the schedule, except where they are incidental or are other activities as listed at Part 2 of the Schedule. Part 1 of the schedule includes the carrying on of “Long Term Business as defined by the Insurance Business (Bailiwick of Guernsey) Law, 2002 as being a Financial Services Business for the purposes of the Regulation and the Commission’s Handbook, it does not include any change in the treatment of an Insurance product by an Insurance Licensee. The Commission’s Handbook at section 4.8 specifically deals with the treatment of life or other investment linked insurance policies and as such these appear to directly fall in to the Guernsey AML/CTF regime. Effectively this is saying that if a product falls under the long-term definition stated in the Insurance Business (Bailiwick of Guernsey) Law, 2002 though a Licensee it may regard it as being General business they remain subject to the AML/CTF Regulations. Thus a licensee must adhere to the requirements of the Commission’s Handbook and AML/CTF framework when dealing with such products.

The sum of all these parts would indicate that an Insurance licensee effecting or carrying out life or other long-term products regardless of how a Licensee may be able to classify these products as general business under the Insurance Business (Bailiwick of Guernsey) Law, 2002, they would still fall under the AML/CTF regulations and Commission’s Handbook by way of the requirements of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Regulations, 2007 held at schedule 1. An Insurance Licensee regardless of how it treats such products under its licence would be required to have in place an effective AML/CTF framework.  A licensee must be able to evidence the suitability of its AML/CTF framework and compliance with the AML/CTF requirements pertaining to its business to the Commission.

An Insurance licensee must ensure that at all times they meet the requirements for the minimum criteria for licensing, schedule 4 of the Insurance Business (Bailiwick of Guernsey) Law, 2002. This includes a requirement to meet and adhere to any rules, codes, guidance, principles and instructions issued from time to time under any other enactment as may be applicable to the business, and this would also be inclusive of the Guernsey AML/CTF framework.

Questions, Coffee and Ghosts.

Sara Barclay Guernsey , ,

imagesAre we now being regulated by international organisations and their regulators rather that our own regulators?  Is our regulatory framework becoming a secondary consideration to the regulatory frameworks and group policies of international organisations that finance our community?  Is this leading to the stagnation of Guernsey as a whole where compliance cost rise to meet these external influences rather than our own bespoke regulatory framework? Is our competing and partaking in business in the international or developing world inhibited? Are the policies of the international regulatory community focused on large organisations, with a one size fits all attitude to the detriment of our smaller bespoke financial service providers? Even looking outside of our Financial Service Industry have international organisations, regulators and governments lost contact with local industry and people making them unproductive, uncompetitive and restricted?

Our businesses whether in finance or outside must adhere in some degree, to the requirements of committees and boardrooms far flung from our Island, and the whims of persons who lack connection understanding or appreciation of our island economy and value. Are these institutions aware of our idiosyncrasies as they strive to achieve a mythical norm presented by scoring sheets, algorithms and public opinion of their home countries? Has the international community lost the ability or the want to differentiate between the size nature and complexity of their own and other communities, businesses and financial centres?

A thought struck me while handing over my Guernsey one pound notes for my coffee today, if we print money why can’t we loan money? Why can’t we create a bank of the Bailiwick or other funding enterprises, regulated to our own standards that are acceptable international standards and set up for the needs, development and innovation of our local businesses?  Could we run a bank for the good and development of our community and its financial and non-financial businesses, lessening compliance expense faced by our businesses by focusing achieving the requirements of our regulations? Are we not best placed to understand, develop, innovate and realise the hopes and dreams of our Island community? Could we provide this as yet another string to our bow allowing us to partake and compete effectively in the international community? Rather than fit in to a box could we provide the bespoke solution tailored to our needs and requirements?

WilliamLeLacheurLooking into the last of my coffee as the rain began my mind was taken back to the ocean that I love so much, and yes we are but a drop in the ocean. The ocean has allowed us to raise some of the earliest taxes known, an anchor tax no less for the benefit of our Island and the development of our harbour in the 1400’s.  The ocean was mastered by our forefathers, and none other than William Le Lacheur who imported coffee and went on to influence economic and spiritual development in South America, as I walked through the Arcade I recalled how it was financed by Guernsey ingenuity and innovation.  I headed home past the Thomas De La Rue Public House, named after a Guernsey man who went from humble beginnings to founding De La Rue, who having adapted over the centuries and who have continually innovated while still printing bank notes today. These are but a few of the great historical figures that this Island has had and I could not help but wonder what these ghosts would suggest the same today, what would they think of my thoughts, would they see the potential of such ideas or a necessary to bring the development and innovation required to make the reality of tomorrow?

The ocean is vast and bountiful with a diversity of species and opportunities leading to competition and equilibrium, the loss of the equilibrium leads to the destruction of these unique habitats and species. Could the ripples of this idea radiate out to the benefit of our Island both domestically and internationally or will we be bound by the strangling nets of direct and/or indirect extra-territorial international regulation and policy? We need to look and focus on tomorrow while reflecting on the lessons of yesterday to achieve the dynamic solutions and adapt to the changing world as our forefathers did.