The Sum of All the Parts

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.

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