JERSEY – as of 10TH Sept 2024, 'LOW-RISK DIRECTOR' is defined in law, and exemptions are applied.

As of September 10th, 2024, the 'LOW-RISK DIRECTOR’S' concept in Jersey has been clearly defined under the Proceeds of Crime (Low-Risk Financial Services Business) (Jersey) Order 2024 [Low-Risk Order]. For this Low-Risk Order, a low-risk director is a natural person acting as a director of a third party provided the activity does not involve certain trust company business activities [CLASS G] as specified in the Proceeds of Crime (Jersey) Law 1999. In the Proceeds of Crime (Jersey) Law 1999, third-party directors are classified as "relevant persons" who are subject to the same anti-money laundering (AML) and counter-terrorism financing (CFT) law[s], order[s], and rule[s] as other Jersey financial services businesses (albeit with a few exceptions – see comments below).

To understand who meets the test of being a third-party director, you should read the Jersey Financial Services Commission (JFSC) guidance on the interpretation of Article 36 of the Proceeds of Crime (Jersey) Law 1999. This guidance is like a roadmap (the Article 36 guide), designed to support and guide individuals in understanding the role of a third-party director.

In “the Article 36 guide”, a few clues of who is in and who is out can be seen, as follows [non-exhaustive]:-

1. YES - A director who is holding themselves out as providing director services will be conducting a business
2. YES - an individual WHO acts as a director for a company but is not an employee or shareholder [see below] of that company.
3. NO - directorships of private companies where the director is a controlling beneficial owner.
4. NO - directorships of companies beneficially owned by family members.
5. NO - Where a person acts as the director on the board, the role is in an honorary, recreational, or charitable capacity for which they receive no remuneration. For example, serving on the board of the local bowls club company or serving on the board of a corporate trustee to a charity, such as a museum, theatre, or social project, would be out of scope (in the absence of additional 'as a business' indicators).

If the third-party director meets the above test[s], the director must register with the JFSC under the Supervisory Bodies Law and be subject to Article 36(1) of the Proceeds of Crime Law and its “Schedule 2.”  Schedule 2 specifies the activities and operations that constitute a financial services business for this law when conducted as a business.  Where a person who meets the above test fails to register as a Schedule 2 business, in that case, they may be found to be in contravention of Article 10 of the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 (Supervisory Bodies Law), which is an offence carrying liability to imprisonment for a maximum term of 7 years and a fine.

If registered and therefore supervised under Article 36, the Third-party directors must:-

1. Comply with the Proceeds of Crime Law 1999, Money Laundering Order (and the JFSC’s Handbook for the prevention and detection of money laundering, the countering of terrorist financing, and the countering of proliferation financing (JFSC Handbook), which includes the requirements for maintaining adequate systems and controls to prevent money laundering and terrorist financing.Ensure continuous compliance with the above legal and regulatory requirements,  

However, in complying with the above, being a LOW-RISK director affords some Exemptions from the Money Laundering (Jersey) Order 2008, the exemptions being:-

1. Articles 7, 8, 9, 10, 11, and 11A of this order do not apply to low-risk financial services businesses,  

Although Articles 7, 8, 9, 10, 11, and 11A of the order do not apply to low-risk financial services businesses, other articles still apply, and therefore still “AML” work to do. I posted a news item on this recently [click here]. The AML work includes:-

1. Customer due diligence, including identification and verification, profiling, risk assessment and monitoring.
2. Suspicious activity reporting
3. Training

Conclusion and summary:-

• The concept of 'LOW-RISK DIRECTORS' in Jersey has been defined under the Proceeds of Crime (Low-Risk Financial Services Business) (Jersey) Order 2024, which came into effect on September 10th, 2024
• Under this Order, a natural person acting as a company director is considered a low-risk financial services business, provided it does not involve certain trust company business activities.
• The LOW-RISK designation exempts these directors from specific anti-money laundering (AML) obligations [albeit not all obligations, leaving many obligations to fulfil) outlined in the Money Laundering (Jersey) Order 2008.

For more information, please contact.

Mathew Beale - Chartered FCSI

Principal & Director - Comsure Compliance Limited, Comsure Technology Limited, Comsure Mauritius (the "Comsure Group of Companies")

No 1 Bond Street Chambers, St Helier, Jersey, Channel Islands, JE2 3NP

Basement Floor, Conidae House, Anse Courtois, Pailles, Mauritius

T (Jersey) +44 1534 733-588 /+44 7797 747-490

mathewbeale@comsuregroup.com

END

SOURCE:  

1. Proceeds of Crime (Low-Risk Financial Services Business) (Jersey) Order...
   • https://www.jerseylaw.je/laws/enacted/PDFs/RO-050-2024.pdf
2. Proceeds of Crime (Low-Risk Financial Services Business) (Jersey) Order...
   • https://www.jerseylaw.je/laws/current/Pages/08.780.67.aspx
3. Guidelines on interpretation - Jersey Financial Services Commission.
   • https://www.jerseyfsc.org/media/6448/guidelines-on-interpretation-of-article-36.pdf.
4. Proceeds of Crime (Jersey) Law 1999 - Official Consolidated Version - This is an official version of consolidated legislation compiled and issued under the authority of the Legislation (Jersey) Law 2021.- Showing the law from 27 February 2024 to Current
   • https://www.jerseylaw.je/laws/current/Pages/08.780.aspx
5. Money Laundering (Jersey) Order 2008 - Official Consolidated Version - This is an official version of consolidated legislation compiled and issued under the authority of the Legislation (Jersey) Law 2021. showing the law from 10 September 2024 to current –
   • https://www.jerseylaw.je/laws/current/Pages/08.780.30.aspx
6. AML/CFT/CPF Handbook - Jersey Financial Services Commission.
   • https://www.jerseyfsc.org/industry/financial-crime/amlcftcpf-handbooks/amlcftcpf-handbook/ .
7. Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008
   • https://www.jerseylaw.je/laws/current/Pages/08.785.aspx