JERSEY DIRECTOR'S DUTIES TO PREVENT AND DETECT FINANCIAL CRIME – NOT ALL DIRECTORS ARE EQUAL!!
Jersey directors are pivotal in ensuring companies attract legitimate customers with funds and assets free from criminal proceeds (financial crime). Their responsibilities are significant and integral to the company's operational framework. It's crucial to note that any business that facilitates financial crime, whether knowingly or with suspicion of criminal connections, may face prosecution and regulatory sanctions, jeopardising Jersey's integrity and reputation. This underscores the need for caution and responsibility in the director's role.
In Jersey, and subject to specific exemptions, directors are treated as low-risk or otherwise. Those who are not low-risk hold themselves out as directors (e.g., market and solicit their services) and/or hold six or more directorships. In Jersey, these directors are called Class G directors.
CLASS G
More specifically, Class G trust company business rules are designed to regulate natural persons acting as directors under the Financial Services (Jersey) Law 1998 (FSJL) and the Proceeds of Crime (Jersey) Law 1999 (POCL).
The distinction between a low-risk director and a Class G director is significant. Low-risk directors are only registered under the POCA and subsequently subject to less regulation and supervision than Class G directors.
(For the remainder of this article, the author will focus on LOW-RISK DIRECTORS’ – if the information on class G directors is needed, please contact the author and or Comsure for more details)
LOW-RISK DIRECTORS’
The concept of ‘LOW-RISK DIRECTORS’ in Jersey is a significant regulatory designation defined under the Proceeds of Crime (Low-Risk Financial Services Business) (Jersey) Order 2024 (Low-Risk Order). This designation, which came into effect on September 10, 2024, aims to streamline regulatory requirements for certain directors while maintaining robust anti-money laundering (AML), counter-terrorism financing (CFT) and sanction measures (prevention of financial crime [PFC]).
The ‘LOW-RISK DIRECTORS’ concept in Jersey carries significant implications, even considering specific exemptions. This designation applies to a natural person who acts as a director for a third party, provided that their activities do not include particular trust company business activities as outlined in the POCL. This distinction is crucial as it determines the level of regulatory scrutiny and the specific obligations of the director. Under the POCL, third-party directors, including those classified as LOW-RISK DIRECTORS, are categorised as "relevant persons." To accurately determine whether an individual qualifies as a third-party director, it is essential to consult the Jersey Financial Services Commission (JFSC) guidance on Article 36 of POCL.
The Article 36 guide outlines specific criteria for inclusion or exclusion, such as whether a director offers services as a business or acts in a non-remunerated capacity. Schedule 2 of the POCL delineates the activities constituting a financial services business under this law. Failure to register as a Schedule 2 business may result in contravention of Article 10 of the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008, which carries severe penalties, including imprisonment for up to 7 years and substantial fines.
Once registered and supervised under Article 36, third-party directors must adhere to the provisions of the POCL, Money Laundering (Jersey) Order 2008 (MLJO), and the JFSC’s Handbook for the prevention and detection of money laundering, the countering of terrorist financing, and the countering of proliferation financing (PFC) which outlines the necessary systems and controls to mitigate risks associated with financial crime.
Continuous compliance with these legal and regulatory requirements is essential. However, it is important to note that being classified as a “LOW-RISK DIRECTOR” provides certain exemptions from specific articles of the MLJO, specifically Articles 7, 8, 9, 10, 11, and 11A. However, despite these exemptions, other MLJO articles necessitate ongoing PFC responsibilities. Also, and critically, other than the JFSC rules that align with the MLJO exemptions, there are no exemptions from the JFSC AML/CTF/CPF codes and guidelines. Therefore, “LOW-RISK DIRECTORs” still have numerous responsibilities that include but are not limited to:- conducting business risk assessments, client risk assessments, customer due diligence, suspicious activity reporting, and training.
CONCLUSION
In conclusion, it is crucial for a Jersey low-risk director to be fully aware of their responsibilities and to receive appropriate training to understand the relevant laws and regulations. This knowledge ensures they can effectively manage their duties and uphold the standards their position requires.
Moreover, if any uncertainties or concerns arise, seeking guidance from Comsure Compliance can provide the necessary support and clarity, helping to maintain compliance and avoid potential legal issues. By being proactive in their education and seeking expert advice, directors can contribute to their (and their customer's) integrity, success, status, and reputation.
Author
Mathew Beale - Chartered FCSI - Principal & Director - Comsure Compliance Limited, Comsure Technology Limited, Comsure Mauritius (the "Comsure Group of Companies")
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T (Jersey) +44 1534 733-588 /+44 7797 747-490
SOURCE:
1. Proceeds of Crime (Low-Risk Financial Services Business) (Jersey) Order...
2. Guidelines on interpretation - Jersey Financial Services Commission.
3. Proceeds of Crime (Jersey) Law 1999 - Official Consolidated Version - This is an official version of consolidated legislation compiled and issued under the authority of the Legislation (Jersey) Law 2021.- Showing the law from 27 February 2024 to Current –
4. Money Laundering (Jersey) Order 2008 - Official Consolidated Version - This is an official version of consolidated legislation compiled and issued under the authority of the Legislation (Jersey) Law 2021. showing the law from 10 September 2024 to current –
5. AML/CFT/CPF Handbook - Jersey Financial Services Commission.
6. Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008