JFSC Financial crime examinations [FCEU] feedback published

Established in 2019, the JFSC Financial Crime Examination Unit is a dedicated team coordinating and delivering examinations with a focus on systems and controls to prevent, detect and report money laundering, the financing of terrorism and other financial crimes.

The JFSC has completed the first series of industry examinations with six financial services businesses across different industry sectors including:

• Deposit-taking business,
• Investment Business,
• Fund Services Business and
• Trust Company Business.

The JFSC has published the JFSC key findings from the examinations and noted points of good practice in the report. READ THE REPORT - https://www.jerseyfsc.org/industry/on-site-visits/financial-crime-examination-feedback/

READ THE SUMMARY – CONCLUSION – BELOW

Out of a total of 6 financial services businesses (14 Relevant Persons) involved in the examinations, all resulted in findings.

Of the sample of Relevant Persons examined by the FCEU (representing the following licence types: Deposit-taking Business, Investment Business, Funds Services Business and Trust Company Business), there were 43 findings relating to the relevant areas detailed within this paper.

These findings were in respect of the Order and the Statutory Requirements and AML/CFT Code(s) of Practice detailed in the Handbook.

Whilst all 6 of the financial services businesses examined had implemented a suite of systems and controls (including policies and procedures) to prevent and detect financial crime in line with the obligations of the Order and requirements of the Handbook, there were a considerable number of findings, which meant that those systems and controls were not considered by the JFSC to be adequate and fully effective in many instances.

In general, FCEU examiners noted high levels of awareness of both financial crime related risks and the consequences of non-compliance with policies and procedures amongst employees of Relevant Persons.

However, Relevant Persons often had difficulty in demonstrating involvement of senior management (including the Principal Persons) in the development, scrutiny and use of its BRA.

A robust corporate governance framework, of which risk management is an integral part, is important to ensure that a Relevant Person is adequately directed and controlled.

The board/senior management have substantial responsibilities for the prevention and detection of money laundering and financing of terrorism, and whilst they are assisted in fulfilling these responsibilities by appointed MLCOs and MLROs, they must ensure adequate oversight of these roles, in order to demonstrate adherence to the regulatory framework.

These responsibilities should be clearly documented within the job descriptions of Principal Persons, Key Persons and in the terms of reference of key risk management forums.

The board/senior management of a Relevant Person must be able to demonstrate that it has considered its financial crime risks “in the round” and has subjected its assessment of such risks to adequate challenge and scrutiny.

In addition, a robust corporate governance framework will enable the board/senior management to demonstrate that there is appropriate management of its risks, that its systems and controls (including policies and procedures) are effective and that the board/senior management are taking timely action when deficiencies or other matters are brought to their attention.

Adequate policies and procedures are key to the implementation of effective systems and controls surrounding the prevention and detection of money laundering and the financing of terrorism. It is imperative that procedures are tailored to the business, mapped against the Jersey regulatory requirements, adequately maintained, and effectively adhered to.

In order to avoid barriers to adherence, it is also important that procedures are clear and easy for Relevant Person’s employees to understand, use and drive a risk-based approach to the prevention and detection of money laundering and the financing of terrorism.

It is also important for Relevant Persons to develop an effective, tailored and risk based monitoring plan to ensure that such systems and controls are complied with and remain effective over time.

Employees must know:

• Where to locate a Relevant Person’s procedure for making an internal Suspicious Activity Report
• How to make a report and
• The identity of the MLRO or DMLRO.

Such reporting procedures must be clear and easy for employees to follow, whilst enabling the employee, the MLRO/DMLRO and the Relevant Person to all meet their statutory and regulatory obligations.

Another important control over the prevention and detection of money laundering and the financing of terrorism is to have employees who are:

• Alert to money laundering and financing of terrorism risks and
• Well trained in the recognition of notable transactions or activity which may indicate money laundering or financing of terrorism activity. Training is to be tailored to the business and reflect the relevant Jersey regulatory requirements. Testing must then be conducted to monitor whether the training provided is effective, and relevant action taken if necessary.

All Relevant Persons involved in the examination have received direct feedback and where findings have been identified, they are subject to a formal remediation plan having been submitted to and agreed by the JFSC, setting out actions to be taken and timescales to complete them.

None of findings detailed in this paper resulted in further action being taken by the JFSC, as the deficiencies were not considered to be sufficiently serious in isolation at each Relevant Person examined.

However, that may not have been the case had the deficiencies highlighted serious failings of the Relevant Person’s systems and controls to prevent and detect financial crime, or been deliberate, or occurred over a long period of time without being addressed by senior management.

The above information relating to the findings of Financial Crime Examinations has been published by the JFSC with the aim of enabling Relevant Persons to review examination findings and use the information to assist in the enhancement of their own systems and controls to prevent and detect financial crime. 

It is expected that the board/senior management of Relevant Persons who were not involved in the examinations also review this paper and consider their own arrangements to ensure strict adherence to the regulatory requirements.

Each Relevant Person in Jersey must recognise the role that it must play in protecting itself, and its employees, from involvement in money laundering and the financing of terrorism, and also in protecting the Island’s reputation of probity.

READ THE REPORT - https://www.jerseyfsc.org/industry/on-site-visits/financial-crime-examination-feedback/