JFSC findings [29 March 2021] following JPF Designated Service Provider (DSP) thematic review

Introduction

1. In April 2017, the Jersey Financial Services Commission (JFSC) issued the Jersey Private Fund Guide (JPF Guide).
   • https://www.jerseyfsc.org/industry/guidance-and-policy/jersey-private-fund-guide/
2. Further guidance on the JPF Return was published in June 2020[2].
   • https://www.jerseyfsc.org/industry/guidance-and-policy/jersey-private-funds-annual-returns/

AML/CFT requirements

3. Central to the regulatory and Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) requirements of the JPF Guide is the role of a Designated Service Provider (DSP).
   • The DSP is a full substance Registered Person holding specified business classes under the Financial Services (Jersey) Law 1998 (FSJL).
4. Paragraph 6 of part G of the JPF Guide sets out the DSP’s responsibility for some duties in relation to the relevant JPF[1]. These duties include:
   • Making all reasonable enquiry, to ensure that the JPF meets all of the eligibility criteria referred to under part D of the JPF Guide, both on its establishment and, continuingly;
   • Ensuring that all necessary due diligence on the JPF and its promoter is carried out and ensuring the promoter of the JPF has put in place appropriate measures to ensure that all service providers to the JPF are fit and proper and can fulfil the tasks in a responsible, professional and suitable manner;
   • Ensuring compliance with all necessary Jersey AML/CFT requirements applicable to the JPF;
   • Completing and submitting the JPF application form and declaring in its capacity as DSP to the JPF and having made all reasonable enquiry that the information provided in the JPF application form “is complete, true and accurate” to the best of the DSP’s knowledge and belief;
   • Completing and filing a notice of material changes and notifying of specific incidences of non-compliance; and
   • Completing and filing a JPF Annual Compliance Return (the JPF Return), including declarations made by the DSP regarding the JPF’s ongoing compliance.

Testing the above - 29 March 2021

5. The JFSC identified several areas of concern following a thematic examination of the Designated Service Provider (DSP) role regarding Jersey Private Funds (JPFs).
6. Read the report –
   • https://www.jerseyfsc.org/industry/visits-and-examinations/jersey-private-fund-thematic-review-2021/
   • https://www.jerseyfsc.org/media/4301/jpf-thematic-examination-feedback-2021.pdf

JFSC findings [29 March 2021] following JPF Designated Service Provider (DSP) thematic review report

7. In this report, the JFSC say
   • There were instances where the JPF annual compliance return was filed confirming that JPFs were compliant with all necessary Jersey AML/CFT requirements when THIS WAS NOT the case.
   • The JFSC  also found that in some cases, the DSPs DIDN’T HAVE EFFECTIVE SYSTEMS AND CONTROLS in place to be able to give the required declarations.
8. In total, there were 23 findings identified across the six DSPs. These findings related to:
   • Internal systems and controls
   • The JPF annual compliance return
   • Director services
   • Customer due diligence
   • Conflicts
   • Compliance reporting.
9. The DSPs acknowledged their deficiencies and, in most cases, had already started remediation.

As with all examinations,

10. examined businesses were required to produce and submit to the JFSC a remediation plan designed to address the findings identified.

The JFSC  

11. will take these plans into consideration when deliberating the appropriate next steps.
12. Has already committed to undertaking a review of the JPF Guide; the results of this thematic examination will inform this work.

Jersey Private Fund thematic review webinar

13. On 20 April, the JFSC is hosting a webinar where the JFSC  will discuss these findings in more detail.
14. You can find out more about the session and sign up here.

https://www.jerseyfsc.org/news-and-events/webinar-jersey-private-fund-thematic-review/