JERSEYGOV publishes RED LINES to businesses and takes control of the JFSC Sound Business Practice Policy

On 27 September 2022, JERSEYGOV published its most recent National Strategy and action plan, Statement on Activities, Risk Appetite and mitigation [2022 risk statements] in this area which details how the Island will demonstrate this commitment.

THE KEY MESSAGE FROM THE 2022 RISK STATEMENTS ARE AS FOLLOWS:-

1. JERSEYGOV encourages businesses to use the NRAs as a fundamental tool when making commercial decisions about activities, products, and jurisdictions, where this is not the case.
2. The NRAs and 2022 risk statements should serve businesses as a tool to navigate the boundaries between the different levels of ML/TF risks consistently and transparently.
3. Considering all the Jersey national-level risk documents [NRAs + 2022 risk statements] will serve businesses as a well-founded compass to determine their business plans whilst applying a risk-based approach.
   1. JERSEY NRAs + 2022 risk statements - https://www.gov.je/industry/finance/financialcrime/nationalriskassesmnents/pages/index.aspx
4. The JFSC Sound Business Practice Policy responsibility will be transferred to JERSEYGOV to enable closer management of activities in line with Jersey’s national risk appetite [2022 risk statements]

THE FOLLOWING EXTRACTS HIGHLIGHT THE LATEST VIEWS ON JERSEYGOV RISK
MONEY LAUNDERING/TERRORIST FINANCING RISK FACTORS

1. Jersey Businesses are not restricted from engaging in high-risk activities, products, or jurisdictions unless
   1. any of those would be outside of the national risk appetite or
   2. reflected in the JFSC Sound Business Practice Policy.
   3. see below new red lines of restricted business in Jersey
2. However, where businesses engage in high-risk activities, products, or jurisdictions, they must be able to effectively manage the risks arising from the risk factors in line with their risk rating.
3. Businesses need to identify, assess and understand the risks properly. And this is where businesses should refer back to and build upon the findings of the NRAs as vital building blocks for their business risk assessments and which entities are obliged to undertake.
4. Once the risks are identified, assessed, and understood, businesses are expected to fully manage and mitigate the risks in line with their rating, i.e. apply a risk-based approach.
5. It is important to note that ultimately, where risks, following a complete assessment, cannot be fully managed or mitigated, businesses ought not to enter into the business relationship or, if already established, unwind the existing relationship or commercial activity.

ACTIVITIES OUTSIDE OF THE NATIONAL RISK APPETITE

1. There are activities which JERSEYGOV considers should not be taking place in or from Jersey.
2. These include:
   1. Any dealing with persons or legal entities subject to sanctions applied in Jersey or which contravene UK foreign policy
   2. Any dealing with FATF blacklisted jurisdictions
   3. Citizenship by investment schemes operated in Jersey
   4. Aggressive/Abusive Tax Avoidance – in line with previous statements made by JERSEYGOV of Jersey - Statement on abusive tax schemes ( www.gov.je/News/2014/pages/abusivetaxstatement.aspx )

JFSC SOUND BUSINESS PRACTICE POLICY (THE “SBPP”) & HIGHER RISK

1. In jersey, some activities pose reputational risks, either linked to or separate from financial crime risks. The key document setting out Jersey’s risk appetite for these activities is the SBPP.
2. The SBPP articulates which activities are considered higher risk and will warrant additional attention from the JFSC when carrying out its functions through the Registry.
3. Jersey regulated entities are also required through the codes of practice to have regard to the principles of the SBPP.
4. There is also a range of business risks outlined in the “SBPP” and heightened risks associated with activity in certain jurisdictions. The mitigation of these risks collectively protects Jersey’s reputation as a leading IFC.
5. As an IFC, Jersey provides services to non-resident businesses and investors. As such, as well as reflecting activities with heightened risks, including that of financial crime, the SBPP can outline many activities which Jersey considers to pose additional risks to Jersey’s reputation in and of itself.
   JERSEYGOV TO MANAGE THE SBPP
6. It remains the prerogative of the Minister for Treasury and Financial Services to outline such activities.
7. Responsibility for the SBPP will be transferred from the JFSC to JERSEYGOV to enable closer management of activities in line with Jersey’s national risk appetite JERSEYGOV sets.
8. JERSEYGOV, working with the JFSC, will continue to update the SBPP to include activities that constitute higher ML/TF risks based on national and international research and data, including but not limited to research by the FATF, the OECD and other reliable, independent source information.
9. The SBPP has developed over time, and in 2022/2023, it will be refreshed from a first principles perspective.
10. The future development will include restructuring the SBPP to clearly set out what is considered higher risk and link these activities more explicitly to the financial crime mitigation strategy, where appropriate.
11. It will also, for the first time, set out prohibited activities.

SBPP AND FATF INCLUSION OF HIGH-RISK ACTIVITIES

1. The current SBPP list of activities is narrow and will be expanded to include activities undertaken in countries under FATF increased monitoring (“grey-listed”)
2. Business relationships with jurisdictions under increased monitoring by the FATF will naturally involve heightened risks due to strategic deficiencies identified in the regime of the jurisdiction to counter money laundering and terrorist financing.
3. Whilst engaging in business relationships with such jurisdictions is not prohibited, the risks must be properly assessed and understood in the context of the commercial opportunity.

JERSEY NATIONAL STRATEGY FOR AML,CFT, CPF – LATEST UPDATES - SEPT 2022 - DOCUMENTS TO READ BELOW.

• National Strategy for AML,CFT,CPF
• https://www.gov.je/SiteCollectionDocuments/Crime%20and%20justice/R%20National%20Strategy%20for%20Combatting%20Money%20Laundering.pdf

• Executive Summary - National Strategy for AML,CFT,CPF
• https://www.gov.je/SiteCollectionDocuments/Crime%20and%20justice/R%20Combatting%20Money%20Laundering%20Executive%20Summary.pdf

• Statement - Activities, Risk Appetite and Mitigation
• https://www.gov.je/SiteCollectionDocuments/Crime%20and%20justice/R%20Financial%20Crime%20Risk%20Appetite.pdf

• JERSEY NRAs + 2022 risk statements
• https://www.gov.je/industry/finance/financialcrime/nationalriskassesmnents/pages/index.aspx