GUERNSEY's new directorship rules for those using the up to "six-directorships' exemption  

The briefing

• Follows Comsure recent posting https://www.comsuregroup.com/news/guernsey-registered-directors-only-less-than-6-aml-rules/
• Provides a summary of the Comsure posting and recent changes to the supervisory framework for persons relying on the up to "six-directorships" exemption under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2020 (the Fiduciaries Law), notably the introduction of a requirement to register with the Guernsey Financial Services Commission (the Commission)

QUICK READ

• The new registration regime and supervisory framework 
  • ONLYIMPACT those individuals who rely on the six-directorships exemption [Exempt Persons] and
  • WILL NOT IMPACT persons relying wholly on the other exemptions from licensing for acting as a director under the Fiduciaries Law.
• With effect from 8 July 2023(and in the transitional period to 1 October 2023), Exempt Persons must register with the Commission.
• With this new registration regime, the Commission has
  • Found a sensible solution to closing off the concern raised by MONEYVAL that directors relying on the six-directorships exemption were falling outside of the AML/CFT net
  • Expanded the types of directorships exempt from the Fiduciaries Law's licensing requirements.
  • Addressed the CDD burden on directors, taking a proportionate approach to their checking and record-keeping obligations.

SOME DETAILS

• Acting as a director of a company in or from within the Bailiwick of Guernsey (the Bailiwick) is a regulated activity and requires a licence unless the individual is not acting 'by way of business,
  • I.e. does not receive any income, fee, emolument or other consideration in money or money's worth for Acting as a director
  • Note that there is no de minimus threshold
• The licensing requirement captures directorships of any company, anywhere,
  • Ie. not just to Bailiwick companies but foreign incorporated companies
  • It applies to any person acting as a director in or from within the Bailiwick, regardless of where the company for whom they act is established.
• Several exemptions to the licensing requirement are available under the Fiduciaries Law, including
  • Where an individual holds up to six directorships which are not otherwise exempt under the Fiduciaries Law (the six-directorships exemption).

EXEMPT PERSON OVERVIEW

• An individual relying on the six-directorships exemption (an Exempt Person)
  • Is not required to hold a personal fiduciary licence under the Fiduciaries Law,
  • They are subject to the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 (the POC Law) as a 'financial services business'.
• Accordingly, an Exempt Person must comply with
  • The AML/CFT obligations set out in Schedule 3 to the POC Law and
  • The Handbook on Countering Financial Crime and Terrorist Financing.
• In particular, an Exempt Person must
  • Undertake due diligence on the beneficial owners of the companies on whose boards they serve.
• Until now, an Exempt Person did not come under the full scope of the Commission's (or any other authority's) supervisory powers.
  • The Commission only could disapply the six-directorships exemption
    • If it considered an individual not to be "fit and proper" to be a director of a company (which would include instances where the individual has failed to comply with any of the AML/CFT obligations) or
    • Where necessary to do so in the public interest and/or due to a breach of a specified law.
• Furthermore, there has been no system for the Commission to monitor or verify compliance by an Exempt Person
  • with their AML/CFT obligations, as highlighted by MONEYVAL in its 2015 Report (which concern needs to be adequately addressed in time for the forthcoming MONEYVAL assessment in 2024).

NEW SUPERVISORY FRAMEWORK

• The new and simplified framework explicitly tailored for individuals relying on the six-directorships exemption has come into force and effect from 8 July 2023, which clarifies the scope of the AML/CFT obligations of Exempt Persons.
• The new framework disapplies certain AML/CFT obligations as irrelevant to Exempt Persons, such as
  • The requirement to undertake risk assessments,
  • Maintain policies and procedures and
  • Appoint a money laundering reporting officer and a money laundering compliance officer.
• However, Exempt Persons will remain obliged to:
  • Apply customer due diligence measures to
    • The beneficial owner(s) of the companies to which they act and
    • Their fellow directors
  • Monitor the activities of those companies
  • Report suspicions and
  • Keep customer due diligence, activity and transaction records.
• Under the new framework, Exempt Persons will be subject to the Commission's supervisory powers, including
  • The ability to obtain information and documents and
  • To conduct site visits and investigations.
• In addition, various enforcement powers are introduced, including
  • Power to suspend the registration
  • Private reprimands,
  • Discretionary financial penalties,
  • Public statements and
  • Disqualification orders.

EXEMPTIONS

• Registration Exemptions:
  • Specific categories of individual directors will be exempt from the requirement to register, i.e.
    • Any director who holds a personal fiduciary licence,
    • Any director of a company which is administered by a licensed corporate service provider (where the CSP acts as resident agent of the company) and
    • Any director who is registered with the Guernsey Registry in the Register of Charities and other Non-Profit Organisations.
• Licensing Exemptions:
  • Alongside other new categories of exemption from licensing under the Fiduciaries Law, specific exemptions for company directors connected to registered and authorised collective investment schemes (CIS) came into force on 8 July 2023.
  • Directors of those companies are exempt from the licensing (and therefore the registration) requirement where:
    • The connected company is:
      • Administered by the designated administrator of the CIS and
      • Itself subject to AML/CFT requirements with which the designated administrator is responsible for ensuring compliance, or
        • The director of the connected company:
      • Is an individual and
      • Acts as director of, or director of, the general partner of, the CIS.
• The effect of the broadening of exemptions under the Fiduciaries Law
  • is to reduce the extent of directorship activity which relies upon the six-directorships exemption and
  • reduce the number of directors who will be required to register with the Commission.

NEW REGISTRATION RULES

1. With effect from 8 July 2023(and in the transitional period to 1 October 2023), Exempt Persons are required to register with the Commission.
   • Registration costs £75, plus an annual fee of £75, and comprises a two-stage process.
     • Firstly, an Exempt Person must complete a registration form (DRR Registration Form(https://www.gfsc.gg/sites/default/files/media/helix-file/Director%20Registration%20Regime%20Application%20Form.pdf ), which sets out their personal information and submit this by email.
     • The Exempt Person will then be advised by the Commission (expected within seven calendar days of submission of the DRR Registration Form) to complete a return (DRR Return) via the Commission's online portal.

• The DRR Return requires, among other things, details of the Exempt Person's directorships, any disqualifications, solvency and jurisdiction of residence of beneficial owners of the companies for whom they act.

2. The Commission will confirm registration once both stages of the process are complete.
   • In this case, registration is private, so registered directors' names and details are not published on the Commission's website.
3. The information must be validated periodically using the DRR Return, which will be made available for completion annually on 30 September for submission no later than 14 November.
4. Interim updates regarding an Exempt Person's directorship information are not required except where
   • The Exempt Person is no longer required to be registered under the six-directorships exemption,
   • In which case a de-registration notification (Form 236) should be completed.
5. Guidance to assist those individuals concerned in understanding the new registration requirements and their regulatory obligations has been published by the Commission on a new Director Registration Regime page,
   • https://www.gfsc.gg/industry-sectors/prescribed-businesses/director-registration-regime
6. the Commission is hosting workshops over the summer for anyone wishing to attend.