The GFSC have issued a consultation which will impact on many Directors, including those operating outside of the financial services regulatory environment, and require their consideration. This communication is intended to provide those that may not have been aware of the consultation with an overview of the impact of the proposals set out in the consultation here.
This consultation is a response to a MONEYVAL recommendation raised in the 2015 report issued for Guernsey which stated that the Bailiwick “should take measures to ensure effective compliance with the AML/CFT requirements in respect of persons acting as a director (for less than six companies) without a personal fiduciary licence but who are subject to the AML/CFT requirements through effective supervision of these directors". Such Directors will be referred to throughout this text as "Individual Directors".
We would like to make you aware of:
- the proposed changes to AML/CFT obligations and new registration and supervision regime for all Individual Directors;
- the opportunity to contribute to the IOD response to the consultation which closes on 16th January 2023. Comments should be received by 13th January please email your comments to: [email protected].
By way of background anyone acting as a director by way of business, in or from within the Bailiwick, of any company whether established in or under the laws of the Bailiwick or elsewhere is subject to the Fiduciaries Law. Many Directors have relied upon the six directorship exemption which means they are not required to hold a personal fiduciary licence, but all such individuals have none the less been subject to the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 (“Proceeds of Crime Law”) which requires them to meet a number of obligations set out in Schedule 3 of the Proceeds of Crime Law and the Commission’s Handbook on Countering Financial Crime and Terrorist Financing.
For the avoidance of doubt Directors benefitting from the exemptions set out at the bottom of this communication are neither subject to the Fiduciaries Law nor the AML/CFT obligations detailed above.
Under the consultation issued on 8th December 2022 a number of changes are proposed as follows:
AML/CFT Obligations for those Directors utilising the six directorship exemption.
As it stands any Director providing director services in or from within the Bailiwick utilising the above exemption is currently required to meet a range of AML/CFT obligations, including corporate governance, risk assessment, identification and other due diligence measures, monitoring of transactions and activity, the reporting of suspicion, employee screening, training, and record keeping. This means that Individual Directors must, among other things, undertake due diligence on the beneficial owners of the companies on which boards they serve. For clarity, Individual Directors are not required to undertake due diligence on the customers of the companies for which they act as director.
Under the proposed amendments the AML/CFT obligations for Individual Directors will be clarified so that it is unambiguous that a simplified and tailored framework is applicable to them. This will mean that certain AML/CFT obligations will be disapplied including the requirement for Individual Directors to undertake risk assessments, maintain policies and procedures and appoint a money laundering reporting officer and a money laundering compliance officer. Individual Directors will remain obligated to apply customer due diligence measures to the beneficial owner(s) of the companies to which they act and on their fellow directors, to monitor the activities of the company, to report suspicions and to keep customer due diligence, activity and transaction records.
In summary this means that any Individual Director will benefit from a simplified set of AML/CFT obligations reducing the obligations to which they are subject under the Proceeds of Crime Law.
Although Individual Directors are subject to AML/CFT obligations, Individual Directors do not currently come under the full scope of the Commission’s supervisory powers or the supervisory powers of any authority and therefore it is not possible currently to establish any system to monitor or verify compliance by such Directors with their AML/CFT obligations. Individual Directors will be required to register with the Commission, for a fee of GBP75, as a class of prescribed business, and submit information to the Commission relating to their business activities, and this information will be used by the Commission to perform risk assessments on the Individual Director’s business activities. Certain limited exemptions to registration apply including those holding a personal fiduciary licence, Directors of a Company administered by a corporate service provider that is itself regulated or directors of charities and other non profit organisations.
In summary all Individual Directors will be required to register with the Commission for a fee of GBP75 and keep the information held by the Commission up to date. This will be the information which the Commission will use for supervisory purposes.
Supervision and Enforcement of Individual Directors
As a consequence of registration, Individual Directors will be subject to the Commission’s supervisory powers under Schedule 5 to the Proceeds of Crime Law and the Prescribed Businesses (Bailiwick of Guernsey) Law, 2008. These comprehensive supervisory powers include the power to obtain information and documents, carry on site visits and investigations, as well as a variety of enforcement powers including the power to impose conditions of registration, suspend registration, issue private reprimands, discretionary financial penalties, public statements and disqualification orders. The Enforcement Law will also be extended to permit the Commission to disapply the six directorships exemption benefit for contravention of the Proceeds of Crime Law.
In summary all relevant Individual Directors may be subject to supervision and enforcement activity by the Commission.
Exemptions from the Fiduciaries Law that do not require a fiduciary licence and as such do not require compliance with AML/CFT obligations
Acting as a director:
- of a local trading company with an established place of business in the Bailiwick provided that no services comprising a regulated activity are supplied to the company by the director (other than acting as director). This exemption includes directors of companies with an established place of business in Guernsey which are trading locally and would typically accommodate local businesses such as florists, grocers, restaurants etc…;
- of a company quoted on recognised stock exchange;
- of a company where the director or a close family member own over 50% of the share capital of the company;
- of a supervised body which includes investment licensees, authorised/registered collective investment schemes, licensed insurers and insurance managers;
- of a company which is a subsidiary of a company that fulfils the requirements in one of the preceding bullet points;
- of an entity that holds a fiduciary licence under the Fiduciaries Law. This exemption will therefore encompass individuals holding directorships in the course of their duties as an employee or official of a licensed fiduciary (e.g. acting as a director by virtue of their employment of a licensed trust and corporate service provider which provides company formation and corporate management services);
Any activity carried on under the authority of the Commission and in accordance with the conditions of a licence, registration or authorisation granted by the Commission under any of the regulatory laws including acting as a director of a prescribed business (i.e. estate agency, law or accountancy firm).
If you have any questions please do get in touch - [email protected].