Jersey’s JFSCs view on effective compliance monitoring.

The Jersey Financial Services Commission (JFSC) places significant emphasis on compliance monitoring, they say.

1. Compliance monitoring is crucial to a registered person's risk management framework.
2. Effective compliance monitoring helps ensure that compliance risks are proactively managed and that any issues are promptly reported to the JFSC.

To support the above statements, in December 2013, the JFSC issued a:-

1. The "Dear CEO" letter addresses compliance monitoring. [links below]
• Dear CEO: compliance monitoring — Jersey Financial Services Commission. https://www.jerseyfsc.org/news-and-events/dear-ceo-compliance-monitoring/
2. Guidance Note: Compliance Monitoring (Guidance Note). [links below]
• Compliance monitoring - Jersey Financial Services Commission. https://www.jerseyfsc.org/industry/guidance-and-policy/compliance-monitoring/.
3. The Jersey Financial Services Commission (JFSC) issued a feedback report on December 17, 2020, following a thematic examination of compliance monitoring practices among registered persons.
• https://www.jerseyfsc.org/industry/examinations/compliance-monitoring-examination-feedback/
• https://www.jerseyfsc.org/industry/examinations/financial-crime-examinations-feedback-from-2020-examinations/

THE FOLLOWING OFFERS A SUMMARY OF THESE DOCUMENTS.

THE "DEAR CEO" LETTER ADDRESSES COMPLIANCE MONITORING.

1. This letter highlighted the importance of compliance monitoring and best practices.

Key points from the letter include:

1. Senior Management Involvement:

1. The JFSC expects senior management, including the board, to be actively engaged in the compliance monitoring process.
2. This includes approving a compliance monitoring plan and completing any remedial actions.

1. Quality and Consistency:

1. The JFSC observed significant variations in the quality of compliance monitoring among registered persons.
2. The letter emphasised the need for consistent and high-quality compliance monitoring practices.

1. Guidance Note:

1. Along with the letter, the JFSC published a guidance note outlining an approach to compliance monitoring and providing examples of good and poor practices.
2. This guidance will help registered persons improve their compliance monitoring processes.

1. Risk Management:

1. Effective compliance monitoring should provide senior management with a clear view of the business's compliance with legislative and regulatory requirements and the effectiveness of its internal controls. It should also ensure that non-adherence issues are identified, escalated, and managed appropriately.

THE GUIDANCE NOTE: COMPLIANCE MONITORING (GUIDANCE NOTE).

1. In December 2013, the Jersey Financial Services Commission (JFSC) issued the Guidance Note: Compliance Monitoring (Guidance Note).
2. This guidance is intended to assist registered persons in enhancing their compliance monitoring frameworks, which will improve their management of compliance risks and meet regulatory expectations.

Here are some key points from the guidance:

1. Purpose:
1. The guidance outlines an approach to compliance monitoring and provides examples of good and poor practices identified during the JFSC’s on-site examinations.
2. Senior Management Involvement:
1. The JFSC expects senior management, including the board, to be actively involved in the compliance monitoring process.
2. This includes approving a Compliance Monitoring Plan (CMP) and ensuring the timely completion of remedial actions.
3. Risk-Based Approach:
1. Due to finite resources, a risk-based approach to compliance monitoring is recommended.
2. This involves focusing on areas with the highest perceived risk of non-compliance.
4. Compliance Monitoring Steps:
1. The guidance outlines a cyclical feedback process for determining a risk-based CMP, which includes:

1. Identifying relevant legislative and regulatory requirements.
2. Identifying relevant controls.

• Conducting a risk assessment.

1. Producing and approving a CMP.
2. Undertaking testing.
3. Reporting findings.

• Overseeing remedial actions.

1. Integration with Risk Management:
1. Compliance monitoring should be integral to a registered person’s risk management framework, specifically concerning compliance risk.
2. It helps demonstrate adherence to legislative and regulatory requirements and the effectiveness of internal controls.
2. Examples of Practices:
1. The guidance provides examples of excellent and poor practices observed during JFSC examinations, helping registered persons improve their compliance monitoring processes.

THE JERSEY FINANCIAL SERVICES COMMISSION (JFSC) ISSUED A FEEDBACK REPORT ON DECEMBER 17, 2020, FOLLOWING A THEMATIC EXAMINATION OF COMPLIANCE MONITORING PRACTICES AMONG REGISTERED PERSONS.

Here are some key points from the feedback:

1. Purpose of the Examination:
1. The thematic review aimed to assess the adequacy and effectiveness of compliance monitoring carried out by registered persons.
2. This included evaluating senior management's governance and oversight of the compliance function, the adequacy of compliance monitoring plans (CMPs), and the effectiveness of reporting and remedial actions.
2. Findings:
1. The examination revealed that many registered persons could not demonstrate full compliance with statutory obligations and regulatory requirements.
2. Specifically, 41 findings indicated that businesses did not meet their compliance obligations. Key issues included inadequate CMPs, senior management oversight, and ineffective remedial actions.
3. Senior Management Responsibility:
1. The JFSC emphasised that senior management, including the board of directors, is responsible for effectively managing compliance risk.
2. This includes approving CMPs and ensuring timely completion of remedial actions to address deficiencies.
4. Risk-Based Approach:
1. The feedback highlighted the importance of a risk-based approach to compliance monitoring.
2. This involves focusing resources on areas with the highest perceived risk of non-compliance.
5. Recommendations:
1. The JFSC provided recommendations to improve compliance monitoring practices. These include enhancing the quality and consistency of CMPs, increasing senior management involvement, and ensuring timely and effective remedial actions.

The entire feedback report provides detailed insights and examples of good and poor practices observed during the examination. You can read the complete document on the JFSC's website [here]

• https://www.jerseyfsc.org/industry/examinations/compliance-monitoring-examination-feedback/

Source:  

1. Compliance monitoring examination: Feedback - Jersey Financial Services .... https://www.jerseyfsc.org/industry/examinations/compliance-monitoring-examination-feedback/.
2. 2020 Financial Crime Examinations Feedback - Jersey Financial Services .... https://www.jerseyfsc.org/industry/examinations/financial-crime-examinations-feedback-from-2020-examinations/.
3. Are your Compliance Monitoring Plans Effective? https://www.bakerandpartners.com/insights/are-your-compliance-monitoring-plans-effective/.
4. JFSC Compliance Monitoring Plans (CMP) - Thematic review – KEY FINDINGS. https://www.comsuregroup.com/news/jfsc-compliance-monitoring-plans-cmp-thematic-review-key-findings/.
5. JFSC say Jersey businesses are not adhering to compliance monitoring .... https://www.comsuregroup.com/news/jfsc-say-jersey-businesses-are-not-adhering-to-compliance-monitoring-guidance/.
6. undefined. https://www.jerseyfsc.org/media/4008/e-thematic-feedback-complaince-monitoring-december-2020.pdf.
7. Compliance monitoring - Jersey Financial Services Commission. https://www.jerseyfsc.org/industry/guidance-and-policy/compliance-monitoring/.
8. Dear CEO: compliance monitoring — Jersey Financial Services Commission. https://www.jerseyfsc.org/news-and-events/dear-ceo-compliance-monitoring/
9. Compliance monitoring examination: Feedback - Jersey Financial Services .... https://www.jerseyfsc.org/industry/examinations/compliance-monitoring-examination-feedback/