There are many tools in Guernsey’s Anti-Money Laundering and Combatting Terrorist Financing framework (“AML/CTF”) that can be used to allow customers to access the financial services and products as efficiently and effectively as possible. One of the most interesting and often wrongly utilised of these tools is the intermediary route and I would like to try to de-mystify this tool for you.
An Intermediary is a Financial Service Business (“FSB”) who enters in to a business relationship with you on behalf of its client or clients. The FSB must meet the provisions as stipulated in The Handbook for Financial Services Business on Countering Financial Crime and Terrorist Financing (“the Handbook”) at chapter 6. For example the FSB must be either an Appendix C business or a wholly owned subsidiary vehicle of an Appendix C Business, a wholly owned pension trustee subsidiary vehicle of an Appendix C Business and Lawyers or Estate Agents operating in Guernsey for the purposes of purchasing Guernsey real estate, though the funds must have been received by a bank operating in an Appendix C jurisdiction or Guernsey Bank.
Not all FSB’s who are Appendix C businesses can be an Intermediary and it relates to the products and services that are sought and the type of FSB who requires these products and services, these are listed in the Handbook and chapter 6. It must be stressed for Fiduciaries that they can only be Intermediaries if they are licensed under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law 2000.
Where you have deemed that the FSB meets the requirements of the Handbook and is an Intermediary you can obtain reduced Customer Due Diligence. The Intermediary must confirm to you in writing that it has appropriate risk grading processes to differentiate between high and low risk clients, that it has effective policies and procedure to identify and verify Politically Exposed Person’s and obtain enhanced due diligence. The Intermediary must provide you with sufficient rationale in order that you can understand the purpose and the nature of the proposed business relationship and most importantly that Intermediary will only operate the account. You must assess that the Intermediary can undertake these obligations and requirements throughout the course of the business relationship.
When assessing an intermediary relationship I believe the key is who is authorised to provide you with instructions. If it is the underlying customer or customers who can provide you with instructions you have an introducer relationship and not an intermediary relationship. Where this is the case you must cease to treat the intermediary as such and obtain the required due diligence on the underlying customer or customers.
The current framework in Guernsey does not allow for Prescribed Businesses such as Guernsey Advocates to utilise the intermediary route, is this right? Advocates when conducting or preparing for transactions generally do so for other Appendix C Law firms, who must comply with international standards in AML/CTF. The Guernsey Advocates are generally acting on instructions from an Appendix C Law firm in preparing for transactions that are occurring outside Guernsey but involve Guernsey legal bodies, such as the issue of shares for a Guernsey entity listed on the AIM market or the purchase of a property held in a Guernsey legal body. The Appendix C law firm’s customer may not even be aware that a Guernsey Advocate firm is or has been engaged to assist or prepare for the transaction. I would contend that there is an argument that this route be opened up for Advocates to allow for the efficient and cost-effective provision of legal services to the international community and assist with promoting Guernsey as a destination for business and also for the use of Guernsey legal bodies.