## _cr1112 — IMF Assessment Report (Guernsey)

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### Executive overview
- Guernsey’s AML/CFT legal framework described as comprehensive and providing a sound basis; most shortcomings technical in nature and many addressed promptly after the onsite visit.
- Key institutional actors: Financial Intelligence Service (FIS) as the FIU; Guernsey Financial Services Commission (GFSC); Alderney Gambling Control Commission (AGCC); Attorney General’s Chambers; Financial Investigation Unit (FIU) / Financial Criminal Team; Director of Income Tax as NPO Registrar.
- Overall ratings and notable compliance outcomes (selected):
  - R.1 LC; R.2 LC; R.3 LC; R.4 C; R.5 LC; R.9 LC; R.11 C; R.15 LC; R.17 LC; R.18 C; R.26 LC; SR.III LC; SR.IX LC; SR.VI C; SR.VIII PC.
- Strategic policy: “Bailiwick of Guernsey Financial Crime Strategy” with seven strategic imperatives, endorsed by States in March 2010.

### FIU / Financial Intelligence Service — functions, performance, and statistics
- Designation and role:
  - FIS designated by law on May 17, 2010; functions as a law enforcement type FIU performing pre-investigative and intermediary roles; disseminates to domestic authorities and counterpart FIUs.
- Operational capacity and structure:
  - FIS establishment: 12 staff (senior investigation officer; detective sergeant; four customs investigators; one detective constable; two dedicated financial investigators; one financial crime analyst; two administrative staff).
  - FIU (Financial Investigation Unit) staffed by 21 personnel overall; FIU budget expenditure for 2009: £1,600,000.
- STR intake, dissemination, and destinations:
  - Total STRs by year: 2006: 555; 2007: 760; 2008: 519; 2009: 627.
  - Grounds for STRs (annual counts shown): Tax — 152, 440, 192, 263; Fraud/false accounting/forgery — 47, 48, 86, 130; Cash transaction — 84, 43, 68, 63; Total STRs — 555, 760, 519, 627.
  - Dissemination rate: ranged from 70 percent (2006) to 86 percent (2009).
  - Of STRs disseminated, some 60 percent have an overseas destination (estimated).
- Outcomes and follow-up:
  - STRs resulting in known domestic investigations/results: 2007 — 65 known results (8.6% of 760); 2008 — 83 known results (16% of 519); 2009 — 100 known results (16% of 627).
  - Estimated STRs with international outcomes (2007–2009): e.g., 2009 — 76 STRs of international interest; 18 known results (nine convictions, etc.).
- Access to information and operational limits:
  - FIS has full and direct access to local and U.K. law enforcement databases (Linkworks, ICIS, PNC); administrative, tax, company registry and some supervisory information accessible but additional financial information generally only via court order.
  - FIS may request additional material from reporting parties within 7 days under Disclosure Regulations; legal power applied infrequently.
- Assessment: FIS performs its role adequately, maintains strong relations with sector; key improvement area is converting intelligence into a larger number of domestic standalone ML investigations and prosecutions.

### Criminalization, investigations, prosecutions, and convictions
- Legal coverage:
  - ML criminalized via POCL 1999, DTL 2000; FT criminalized via Terrorism Law (TL) and Terrorism (UN Measures) (Channel Islands) Order 2001.
  - Bailiwick is party to Vienna Convention and FT Convention; Palermo Convention not extended to the Bailiwick as of assessment date.
- Mens rea and liability:
  - ML/FT offenses are intentional crimes; mens rea may be inferred from objective factual circumstances under Bailiwick/common law.
  - Criminal liability extends to legal persons; Section 49E POCL and Section 67O DTL provide corporate liability provisions.
- Case statistics and trends (2006–May 31, 2010):
  - Money laundering investigations total (2006–2009): 26 investigations total cited elsewhere and 31 investigations since 2006 in another table; annual breakdown (2006–2010): Investigations — 4, 7, 8, 7, 5; Referrals to prosecutors — 2, 2, 3, 1, 0; Prosecutions ML — 0, 2, 2, 1, 0; Convictions ML — 0, 1, 1, 0, 0.
  - Since 2006: 31 investigations for ML, 5 prosecutions, 2 convictions (both self-laundering); one autonomous ML prosecution pending at time of visit.
  - Terrorist financing investigations: very limited — only one FT investigation in 2006 (referred to U.K.), no FT prosecutions or convictions as of assessment.
- Sentencing and sanctions:
  - On conviction on indictment for ML/FT: imprisonment not exceeding 14 years and/or an unlimited fine.
  - Summary conviction: up to 12 months imprisonment (TL-related FT: up to six months) and/or a fine up to £10,000.
  - GFSC administrative penalties available up to £200,000 (assessed as not dissuasive given financial sector size).
- Assessors’ concerns:
  - Modest number of third-party ML cases by financial sector participants relative to Guernsey’s status as an international financial center.
  - Disconnect between investigations and prosecutions/ convictions raises questions about effective application of ML provisions.

### Confiscation, freezing, seizure, and asset actions
- Legal instruments:
  - POCL, DTL, TL, Civil Forfeiture Law (2007), International Cooperation Law provide for restraint, seizure, charging orders, confiscation, civil forfeiture, and provisional measures.
  - Civil Forfeiture Law applies to cash and bank accounts with a balance in excess of £1,000.
- Use and results (Jan. 2006–May 31, 2010):
  - Total amounts recovered Jan. 2006–May 2010: Total: £6,911,851 (Local Drug Trafficking recovered £234,520; International Drug Trafficking £3,329,400; Int’l Repatriated (Ponzi Fraud–one case) £3,115,335; Int’l Repatriated (Revenue Fraud–one case) £229,045).
  - Amounts frozen (2006–2009) total: £109,795,203 (2006 — £104,469,834; 2007 — £2,192,950; 2008 — £234,427; 2009 — £2,897,992).
  - Amounts under restraint as of May 31, 2010: Approximately £219,365,274 (Domestic Cases total £755,139; Int‘l Cases total £218,610,135).
  - Confiscation statistics (selected): 2006 — total confiscated mainly local DT amounts; 2009 — confiscated International (Drug Trafficking) £2,351,244 among totals.
  - Totals recovered (Jan 2006–May 2010) include Int’l repatriated Ponzi case £3,115,335.
- Provisional and third-party recovery:
  - POCL and DTL allow value-based confiscation and recovery of proceeds or equivalent value from defendant or third-party holdings (gifts within six years are realizable).
  - Receiver and Sheriff powers available; court may appoint receiver to realize assets.
- Observations:
  - Confiscation framework robust and broad; practice to date concentrated on drug trafficking and select fraud repatriations.
  - Assessors recommended more active use of confiscation provisions in financial-sector-related proceeds-generating crimes.

### Preventive measures — Financial Institutions (FSBs)
- Legal/regulatory framework:
  - Primary: POCL 1999; Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (FSB Regulations) 2007; GFSC FSB Handbook 2007 (rules enforceable as “other enforceable means”).
  - FSB Regulations subject to criminal sanctions (Regulation 17).
- Core CDD and recordkeeping (Regulations 4,5,7,11,14; Handbook chapters):
  - CDD required when establishing a business relationship, occasional transaction (threshold £10,000), suspicion, or doubts about existing ID.
  - Identification/verifications for individuals and legal persons with beneficial owner identification and verification requirements; ongoing monitoring required; records retained for at least five years.
  - Wire Transfer Ordinances implement elements of Regulation (EC) No. 1781/2006 with thresholds and originator information rules; transfers within the British Islands treated as domestic under EU derogation.
- Enhanced due diligence and risk areas:
  - Regulation 5 and Handbook require enhanced CDD for PEPs, correspondent relationships, customers in FATF-deficient countries and assessed high-risk relationships.
  - Assessors recommended expanding mandatory EDD list to include private banking and non-resident customers (R.5 rated LC).
- Reliance on introducers/third parties (Regulation 10; Appendix C concept):
  - Permitted where introducer is an Appendix C business or properly supervised branch/group member; introducer must provide certified copies on request.
  - Assessors noted concerns about inclusion of lawyers and accountants in Appendix C and middle-introducer concessions; recommended not to include lawyers/accountants in Guernsey, Jersey, Isle of Man, U.K. as Appendix C businesses (R.9 LC).
- Internal controls, MLRO, audit and training:
  - Boards must approve AML/CFT policies; MLRO appointment required within 14 days; training and employee screening mandated.
  - No explicit legal requirement to maintain an adequately resourced, independent audit function to test AML/CFT compliance — assessors recommended establishing such an obligation (R.15 LC).
- Supervision and sanctions:
  - GFSC adopts a risk-based supervision approach (on-site inspections, three-year rolling cycle with higher frequency for higher risk) and has powers to impose conditions, public statements, discretionary fines up to £200,000, license suspension or revocation.
  - Assessors consider discretionary financial penalties up to £200,000 not dissuasive given sector size (R.17 LC).
- Wire transfers and “travel rule”:
  - Wire Transfer Ordinances require originator information for cross-border transfers outside British Islands, retention of payer information with transfers, and procedures for missing information; GFSC Instruction No. 3 required remediation by January 29, 2010.
  - Assessment: WTO provisions consistent with criteria, but no requirement to require full originator info for transfers under EUR/USD 1,000 (c. VII.2 noted).
- Compliance ratings: R.4 C; R.5 LC; R.6 C; R.7 C; R.8 C; R.9 LC; R.10 C; SR.VII C.

### DNFBPs and E-Casinos — coverage, risks, and weaknesses
- Coverage and supervision:
  - DNFBPs covered by PB Regulations 2008 and GFSC PB Handbook 2008: lawyers, accountants, estate agents, TCSPs, bullion dealers; eCasinos supervised by AGCC via Alderney eGambling Ordinance/Regulations 1999/2009.
  - TCSPs treated as FSBs and supervised by GFSC; eCasinos supervised by AGCC.
- Key sector statistics (as of December 31, 2009):
  - TCSPs (licensed fiduciaries): 197
  - Lawyers: 19 firms registered with GFSC
  - Accountants: 7 firms registered
  - Real estate agents: 28
  - Bullion dealers: 3
  - eGambling licensees (Alderney): 44
- DNFBP CDD, recordkeeping and reporting:
  - PB Regulations mirror FSB CDD and recordkeeping requirements; STR reporting and tipping-off protections apply; transaction and CDD records retained for five years.
  - STRs by DNFBP sectors (2006–2009): TCSPs — 87, 109, 112, 151; Accountants — 3, 3, 5, 14; Legal professionals — 0, 3, 9, 23; Estate agents — 0, 0, 2, 2; eCasinos — 0, 3, 9, 18.
- eCasinos specific vulnerabilities and controls:
  - eCasinos Category 1 (organize/prepare customers) perform CDD and manage funds; Category 2 supply games and historically had no direct customer contact — on July 2, 2010 Category 2 obligations strengthened.
  - Aggregate eGambling activity: licensees had over 3 million customers and conducted £2.1 billion worth of transactions in 2009; net profits peaked Q1 2009 at £43.1 million, reduced to £35.6 million in Q4 2009.
  - Assessment concerns:
    - On-line verification software used by eCasinos not sufficiently reliable alone for non face-to-face CDD; source data imprecision and scoring <100 percent.
    - eCasinos’ measures to mitigate non face-to-face risk not uniformly required or implemented; assessors recommended legislative/regulatory requirement for additional CDD where on-line tools used.
    - Player-to-player poker and “chip dumping” pose heightened ML risk; AGCC inspections and guidance drafted to mitigate.
    - Reporting levels from eCasinos considered insufficient relative to transaction volume and ML risk (R.12 PC).
- Other DNFBP issues:
  - Exemption allowing an individual to act as director for six companies or less without TCSP license is not in line with standard — assessors recommended amendment.
  - GFSC guidance on Appendix C and Business from Sensitive Sources had contradictions (e.g., Greece listed both ways) — corrected post-visit.
- Supervision resources:
  - GFSC and AGCC have supervisory programs and resources; AGCC conducts extensive background checks but absence of consistent police record checks creates residual risk.
  - Assessors recommended increasing TCSP supervisory frequency (noted inspections fell from 43 in 2006 to 23 in 2009) and enhancing eCasino guidance/training.

### Legal persons, trusts, beneficial ownership, and company registries
- Company types and registries:
  - Company laws: Companies (Guernsey) Law 2008; Companies (Alderney) Law 1994; Guernsey companies require registered agent (licensed TCSP or Guernsey resident director) (Section 483 Guernsey CL).
  - Registered companies (at assessment): more than 18,000 companies registered in Guernsey and 530 in Alderney; about 12,700 managed by licensed TCSPs.
  - Limited partnerships: about 1,290 registered in Guernsey; around 200 have legal personality.
- Measures to ensure transparency:
  - Three key measures: registered agent requirement (reasonable steps to ascertain beneficial owners), majority of companies require licensed TCSPs, obligation to provide certain beneficial ownership information to registries and update it.
  - Registrar access and LEA access: LEAs and GFSC can obtain beneficial ownership details via statutory certificates (e.g., Section 490 Companies Law) and via production orders.
- Trusts and legal arrangements:
  - Trusts governed by Trusts (Guernsey) Law 2007; estimated Guernsey trusts: 30,000; 27,000 administered by licensed fiduciaries.
  - Trusts not subject to registration; acting as trustee is regulated activity in most cases and typically requires regulated trustee involvement.
  - Concern: up to 10% of trusts may not be administered by licensed TCSPs; those trustees/partners not subject to AML/CFT framework are not under legal obligation to obtain and maintain accurate, complete and updated beneficial ownership information (R.34 LC).
- Recommendations:
  - Authorities should clarify “beneficial owner” and “reasonable steps to ascertain” in Guernsey CL to ensure consistency and application.
  - Implement measures to ensure availability of accurate and complete beneficial ownership information for trusts and general partnerships not administered by licensed TCSPs.

### Non-Profit Organizations (NPOs) — registration, risks, and gaps
- Registration thresholds and scope:
  - Charities and Non Profit Organizations (Registration) (Guernsey) Law, 2008: registration required if gross annual income > £5,000 or gross assets/funds ≥ £10,000.
  - Manumitted organizations (charities managed by fiduciaries regulated by GFSC) not required to register with Director of Income Tax but have record-keeping obligations.
- Vulnerabilities and implementation gaps:
  - Registration regime not comprehensive; does not apply to all charitable organizations.
  - Information on purpose/objectives of NPOs and identity of persons who own/control/direct activities is not publicly available for registered NPOs; manumitted organizations’ information not publicly available.
  - Supervision limited (manumitted organizations not comprehensively supervised by GFSC prior to May 2010); Director of Income Tax does not undertake on-site supervision beyond renewals.
  - Sanctions for non-compliance with registration requirements not effective/dissuasive; administrative penalties (introduced July 28, 2010) from £10 to £500 considered insufficient.
- Recommendations (SR.VIII PC):
  - Bring manumitted organizations into registration/supervision regime.
  - Provide outreach to entire NPO sector on TF risks and protective measures.
  - Make more organizational and ownership information publicly available.
  - Strengthen sanctions for non-compliance and undertake supervision of manumitted organizations.

### National and international cooperation; MLA and extradition
- Domestic coordination:
  - Bailiwick AML/CFT Advisory Committee (since 1999; expanded 2009) provides high-level policy coordination; Financial Crime Group and Terrorist Financing Team handle operational matters; Attorney General’s Chambers has AML/CFT forum.
  - Regular inter-agency cooperation, information sharing, and industry outreach; FIS publishes reports and participates in feedback and training.
- Mutual legal assistance (MLA) and international cooperation:
  - Attorney General is central MLA authority; POCL, DTL, TL, International Cooperation Law, Fraud Law provide MLA powers including production orders, search/seizure warrants, customer information orders and account monitoring orders; ex parte orders available.
  - Prior to July 2010 restraint/confiscation measures were limited to requests from designated countries/territories (or via emergency ordinance); July 2010 legislative revisions de facto made all countries designated, removing potential impediment.
  - MLA performance: majority of requests processed timely; example response-time statistics indicate most requests dealt with within three months; average MLA processing 2003–2007: 3.6 months.
  - MLA statistics (2007–2009): 178 requests received in criminal cases involving proceeds of crime; 78 requests partially or fully granted; 25 rejected; 37 related to ML; amounts restrained in Guernsey in MLA context as of May 31, 2010: £216,747,075.
- Extradition:
  - Extradition governed by U.K. Extradition Act 1989 in practice; U.K. manages extradition process; no extraditions recorded under that Act as of assessment.
  - Dual criminality principle applies for extradition; ML/FT offenses penalized up to 14 years are extraditable.
- Information exchange and FIU international activity:
  - FIS active in Egmont Group; outgoing FIMs and spontaneous referrals significant (e.g., 2009: Overseas Referrals FIU 549; Overseas Referrals Non FIU 200; Total 1,238 disseminations in 2009).
  - GFSC and AGCC engage in spontaneous and formal cross-border supervisory cooperation; GFSC has responded to 152 queries from non-Guernsey agencies since 2004 and made 29 requests to other regulators.
- Recommendations:
  - Resolve outstanding issues with U.K. to permit Palermo Convention extension; continue enhancing application of ML provisions and prosecutions involving financial sector participants.

### Priority remedial recommendations (selected, verbatim emphasis preserved)
- Continue focusing on identifying ML crimes within the domestic financial sector and address disconnect between number of ML investigations and the number prosecuted/convicted.
- Increase use of confiscation provisions to pursue proceeds in financial-sector-related crimes (not just drug trafficking); pursue recoveries for substantial funds under restraint.
- Clarify legal framework for freezing under UNSCRs to make explicit that designated persons are not to receive prior notice of freeze actions; enhance guidance and outreach to FSBs and DNFBPs regarding UN/EU/UK lists and screening obligations.
- Enhance FIU/FIS effectiveness by improving access to financial information and increasing domestic law enforcement follow-up on ML prosecutions (rating R.26 LC).
- Expand mandatory EDD categories to include private banking and non-resident customers (R.5 LC).
- Remove or restrict reliance concessions for introducers in jurisdictions or professions (lawyers/accountants) not proven to be subject to effective AML/CFT supervision (R.9 LC).
- Require FSBs to maintain an adequately resourced independent audit function to test AML/CFT compliance (R.15 LC).
- Increase GFSC discretionary fines regime to ensure penalties are dissuasive and proportionate (R.17 LC; R.29 LC).
- Require eCasinos to implement additional CDD measures for non face-to-face transactions where online verification software is used; require AML/CFT training for all eCasinos employees; require stronger monitoring of Category 2 gambling data by Category 1 licensees (R.12 PC; R.16 LC).
- Amend PB and related regimes to eliminate director-for-six-companies exemption and ensure accurate beneficial ownership information for trusts/general partnerships not administered by licensed TCSPs (R.12 PC; R.34 LC).
- Strengthen NPO registration, outreach, supervision of manumitted organizations and make ownership/purpose information more publicly available; enhance sanctions for registration non-compliance (SR.VIII PC).
- Align cross-border cash controls across mail, freight, post and travelers to a uniform declaration and enforcement regime (SR.IX LC).

*Source: IMF country report content unit _cr1112_ (IMF assessment report for the Bailiwick of Guernsey, mission May 17, 2010 through June 1, 2010).*

### Preface ................................................................................................................

### Preface

### Purpose and Scope
- Assessment of the anti-money laundering (AML) and combating the financing of terrorism (CFT) regime of Guernsey.
- Based on the Forty Recommendations 2003 and the Nine Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force (FATF).
- Prepared using the AML/CFT assessment Methodology 2004, as updated in June 2006.
- Produced by the IMF in the context of the Financial Sector Assessment Program (FSAP) of Guernsey.

### Methodology and Sources
- The assessment team considered:
  - All materials supplied by the authorities.
  - Information obtained on site during the mission from May 17, 2010 through June 1, 2010.
  - Other verifiable information subsequently provided by the authorities.
- During the mission, the assessment team met with officials and representatives of all relevant government agencies and the private sector.
- A list of the bodies met is set out in Annex 1 to the detailed assessment report.

### Assessment Team
- Conducted by a team of assessors composed of three staff of the International Monetary Fund (IMF) and three expert(s) acting under the supervision of the IMF.
- Evaluation team members:
  - Francisco R. Figueroa (LEG, team leader)
  - Margaret Cotter (LEG, legal expert)
  - Marilyne Landry (LEG, financial sector expert)
  - Gabriele Dunker (legal expert under LEG supervision)
  - Boudewijn Velherst (financial intelligence unit expert under LEG supervision)
  - Gary Sutton (financial sector expert under LEG supervision)

### Coverage, Analysis, and Outputs
- The assessors reviewed:
  - The institutional framework.
  - Relevant AML/CFT laws, regulations, guidelines and other requirements.
  - Regulatory and other systems in place to deter and punish money laundering (ML) and the financing of terrorism (FT) through financial institutions and Designated Non-Financial Businesses and Professions (DNFBP).
- The assessors examined the capacity, implementation, and effectiveness of these systems.
- This report:
  - Provides a summary of the AML/CFT measures in place in Guernsey at the time of the mission or shortly thereafter.
  - Describes and analyzes those measures.
  - Sets out Guernsey’s levels of compliance with the FATF 40+9 Recommendations (see Table 1).
  - Provides recommendations on how certain aspects of the system could be strengthened (see Table 2).

### Acknowledgments
- The assessors express their gratitude to the Guernsey authorities for their excellent cooperation and assistance throughout the assessment mission.

*Source: Preface of the IMF assessment report for Guernsey (mission conducted May 17, 2010 through June 1, 2010).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Key Findings
- Guernsey’s comprehensive AML/CFT legal framework provides a sound basis for an effective AML/CFT regime.
- Most shortcomings identified during the assessment are technical in nature.
- Some of the deficiencies were addressed by the authorities immediately after the onsite visit.
- Money laundering (ML) and the financing of terrorism (FT) are criminalized fully in line with the FATF standard and the legal framework provides an ability to freeze and confiscate assets in appropriate circumstances.
- As of the assessment date, there had been no prosecutions or convictions for terrorist financing.
- Guernsey is able to freeze the assets of those covered by UN Security Council Resolutions 1267 and 1373 and successor regulations through administrative orders issued by the Attorney General.

### Financial Intelligence Unit (FIU) / Financial Intelligence Service (FIS)
- The Financial Intelligence Unit (FIU) for the Bailiwick of Guernsey, a law enforcement type of FIU, is the Financial Intelligence Service (FIS).
- The FIS primarily performs a pre-investigative and intermediary role before disseminating relevant information not only to domestic authorities but also to counterpart FIUs.
- There is clear separation between the intelligence and the investigative side of the handling of the suspicious transaction reports, enhancing the transparency of the process.
- However, the FIS and the other law enforcement agencies should endeavor to enhance their performance in terms of cases for investigation for money laundering activity, particularly as a stand-alone offense.

### Preventive Measures and Supervision (GFSC)
- Guernsey, through the Financial Services Commission (GFSC), has established a risk-based approach to AML/CFT.
- The preventive measures are largely in line with the FATF Recommendations.
- The GFSC has adequate authority and powers to supervise financial institutions, including money transfer systems with respect to compliance with existing AML/CFT laws, regulations, and rules.
- However, powers to sanction financial institutions for noncompliance issues, particularly applying discretionary financial penalties regime could be enhanced to ensure that the penalties are dissuasive and proportionate to the severity of the violation or level of noncompliance.

### DNFBPs and E-Casinos
- The preventive measures for DNFBPs mirror those for financial institutions.
- Supervision and regulation of DNFBPs, with the exception of eCasinos, is conducted by the GFSC.
- ECasinos are regulated and supervised by the Alderney Gambling Control Commission (AGCC).
- Shortcomings noted within the DNFBPs were related to CDD, recordkeeping, risks associated to non face-to-face transactions, licensing measures, and effectiveness issues in the eCasinos sector.
- There were also a number of shortcomings noted within the legal framework applicable to DNFBPs dealing with exemptions to the sectors.

### Legal Persons, Trusts, and NPOs
- Sound measures are in place to ensure that legal persons incorporated in the Bailiwick are transparent and that accurate, adequate and current information concerning beneficial ownership is available to law enforcement and other competent authorities.
- Trusts are recognized and well established under Guernsey law but are not subject to any registration or filing requirements.
- In most cases trusts require involvement of a regulated trustee who is subject to the full range of AML/CFT requirements.
- For trust arrangements that are not administered by a licensed TCSP some concerns remain with respect to the availability of accurate and complete beneficial ownership information.
- A registration regime for NPOs has been established although it does not apply to all charitable organizations.
- Information on the purpose and objectives of the NPO and the identity of the persons who own, control or direct their activities is not publicly available.
- Sanctions for non-compliance with registration requirements are not effective and dissuasive.

### Coordination, Mutual Legal Assistance (MLA), and Extradition
- Guernsey has effective mechanisms for coordination and cooperation among all domestic AML/CFT stakeholders including an active policy coordination committee.
- The legal framework for mutual legal assistance (MLA) and extradition is sound and the majority of requests seem to be processed in a timely and constructive manner.
- Bailiwick law allows for the provision of all types of assistance as required by the Vienna and Palermo Conventions in money laundering, terrorism financing or predicate offense cases.
- Both money laundering and terrorism financing are extraditable offenses.
- The Guernsey extradition regime is still managed by the UK authorities by virtue of the UK Extradition Act.

*Source: _cr1112 - EXECUTIVE SUMMARY*

### 1989. No extraditions are on record under that Act, but formally the legal framework is

### Legal Systems and Related Institutional Measures

### Money Laundering Provisions
- Two strand approach to criminalizing money laundering: differentiates between drug trafficking offenses and all other predicate offenses.
- Money laundering is criminalized fully in line with the international standard.
- Party to the Vienna but not to the Palermo Convention; "all technical aspects of the ML offenses as defined in the Vienna and Palermo Conventions are complied with."
- All categories of predicate offences listed in the international standard are covered.
- Offenses extend to any type of property that represents the proceeds of crime; all acts constituting money laundering or ancillary offences are criminalized in line with the international standard.
- Mens rea requirement varies; at a minimum liability where a person acted intentionally and with the knowledge that the property stems from a criminal source.
- Intent may be inferred from objective factual circumstances based on an English common law principle.
- Criminal liability extends to legal persons.
- No shortcomings identified in the legal framework, but implementation concerns remain:
  - Modest number of cases involving money laundering by financial sector participants relative to the size of the Bailiwick’s financial sector and status as an international financial center.
  - Disconnect between number of money laundering cases investigated versus number prosecuted and resulting in conviction calls into question effective application of ML provisions.

### Financing of Terrorism Provisions
- Guernsey is a party to the International Convention for the Suppression of the Financing of Terrorism.
- Terrorism financing criminalized fully in line with the international standard.
- Terrorism law and the Terrorism (UN Measures) (Channel Islands) Order 2001 allow prosecution for collection of funds with unlawful intention or knowledge that they are to be used to carry out a terrorist act, by a terrorist organization or individual terrorist.
- At the time of the on-site visit, there had been no prosecutions or convictions for terrorist financing.

### Confiscation
- Comprehensive legal framework to identify, freeze, seize and confiscate criminal assets.
- As additional financial sector money laundering and predicate activity is detected, legal provisions should be used to secure and confiscate proceeds.

### Freezing of Funds
- Legal framework and procedures for implementing UNSCRs 1267 and 1373 are largely sufficient.
- Too soon to assess effectiveness of recent enhancements in guidance to the financial sector and others.
- Legal framework should more clearly reflect that designated persons are not to receive prior notice of freezing actions.

### Financial Intelligence Unit (FIS)
- FIU for the Bailiwick is the Financial Intelligence Service (FIS), designated by law on May 17, 2010.
- FIS functions as a law enforcement type FIU performing a pre-investigative and intermediary role before disseminating relevant information domestically and to counterpart FIUs.
- Dissemination rate ranges from 70 percent to 86 percent of the total number of STRs received.
- FIS has access to law enforcement, administrative and commercial information but makes little use of administrative sources.
- Direct access to financial information is restricted:
  - Legal permission to query reporting entity for information complementary to initial disclosure.
  - Possibility to request supervisory authorities for information in their possession.
  - Access to additional financial information only available through a court order.
- FIS systematically shares information for intelligence purposes with counterpart FIUs; some 60 percent of STRs disseminated have an overseas destination.
- Overall performance:
  - Adequately performs role as key player in AML/CFT system.
  - Developed relation of trust and openness with financial sector; STRs are appropriately dealt with in a focused and professional manner.
  - Clear separation between intelligence and investigative handling enhances transparency.
- Areas for improvement:
  - Enhance performance in terms of cases for investigation for money laundering activity, particularly as a stand-alone offense.
  - System predominantly geared to local predicate criminality; challenge remains to investigate and prosecute foreign predicated money laundering as an autonomous offense based on evidence gathered in its own jurisdiction.
  - Risk of overreliance on foreign law enforcement taking initiative while money laundering activity in the Bailiwick continues.
  - Judicial authorities should further develop expertise and case law on stand-alone money laundering based on evidence collected domestically.

### Cross-border Cash Controls
- Cash Controls Law 2007 brought Bailiwick in line with EC Regulation 1889/2005; adequately covers physical and freight cross-border cash transportation.
- Controls effectively implemented: frequent declarations and STRs filed by the Post Office have resulted in a sizable amount seized and confiscated.
- Mail declaration system brought in line with cash importation regime by freight to address deficiencies for cash transported by post.

### Preventive Measures—Financial Institutions
- Primary legislative foundation: Proceeds of Crime (Bailiwick of Guernsey) (POC) Law 1999.
- Specific requirements set out in Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (Bailiwick of Guernsey) Regulations, 2007 (FSB Regulations) and supplemented by GFSC Handbook 2007 (qualifies as other enforceable means).
- GFSC established a risk-based approach addressing a vast majority of CDD elements of international standards; identified shortcomings largely technical.
- Requirements:
  - Customers and beneficial owners required to be identified in all cases.
  - Detailed requirements for legal entities and trusts.
  - Enhanced due diligence for higher risk customers, including PEPs.
  - Records of customer identification must be kept up-to-date.
  - All documentation, including transactions and customer information, must be retained for at least five years.
  - Suspicious activity effectively required to be reported to the FIU.
- No legal impediments preventing implementation of FATF Recommendations; effective confidentiality and access mechanisms exist.
- Financial institutions required to pay special attention to complex, unusual large transactions and unusual patterns without apparent lawful purpose, and to business relations from countries not following FATF Recommendations.
- Reporting:
  - All categories of financial institutions appear to be reporting suspicious transactions.
  - Legal protections for filers recently amended to be limited to those acting in good faith; tipping-off offence amended to eliminate technical noncompliance with the international standard.
- Internal controls:
  - Financial institutions required to establish internal programs and controls; however no requirement for maintaining an adequately resourced and independent audit function.
- Measures to prevent shell banks and dealing with shell banks are adequate.
- GFSC supervision:
  - Adequate authority and powers to supervise financial institutions, including money transfer systems.
  - Inspections of AML/CFT matters were risk-based and considered adequate in scope at time of visit.
  - Remedial measures required for some firms following inspections (CDD improvements, internal controls, training).
  - Broad powers to sanction; has used powers on numerous occasions.
  - Discretionary financial penalties available are limited to fines up to £200,000, considered not dissuasive and proportionate.
- Further oversight needed to strengthen CDD regime:
  - Expand list of higher-risk customers requiring enhanced due diligence; consider including private banking and non-resident customers.
  - Shortcomings noted:
    - Introducers or third parties: authorities should not include third parties from neighboring jurisdictions before satisfying themselves that the third parties are adequately regulated and supervised; ensure jurisdictions listed by the FATF as having deficiencies are not included in list of permitted introducers or third parties.
    - Internal policies, controls, and audit: obligation for FSBs to maintain an adequately resourced and independent audit function to test AML/CFT compliance.

### Preventive Measures—Designated Non-Financial Businesses and Professions (DNFBPs)
- Preventive measures for lawyers, accountants and estate agents outlined in Proceeds of Crime (Bailiwick of Guernsey) (POC) Law, 1999; detailed in Criminal Justice (Proceeds of Crime) (Legal Professionals, Accountants and Estate Agents) Regulations, 2008 (PB Regulations); supplemented by GFSC Handbook 2008 (other enforceable means).
- eCasinos requirements set out in Alderney eGambling Ordinance, 1999 and Alderney eGambling Regulations, 2009.
- TCSPs and bullion dealers subject to same requirements as financial services businesses.
- GFSC supervises lawyers, accountants, estate agents, TCSPs and bullion dealers; Alderney Gambling Control Commission (AGCC) supervises eCasinos.
- Substantial efforts made, but:
  - Risks in eCasinos sector not fully mitigated.
  - Shortcomings in implementation of preventive measures for DNFBPs supervised by GFSC.
- CDD application:
  - CDD applied to all customers and beneficial owners; detailed requirements for legal entities and TCSPs.
  - Ongoing due diligence conducted; enhanced due diligence for higher risk categories including PEPs.
  - Records kept up to date and retained for at least five years.
- Shortcomings identified:
  - On-line verification methods used by eCasinos are not sufficiently reliable.
  - Requirements to mitigate non face-to-face transaction risk in eCasinos are not in line with the standard.
  - eCasinos have not effectively implemented requirement to pay special attention to complex and unusual transactions.
  - Statutory framework and implementation by DNFBPs supervised by GFSC:
    - Exemption for individuals who act as a director for six companies or less is not in line with the standard.
    - Lawyers, accountants and estate agents not required to determine whether potential customers are PEPs.
    - GFSC guidance on low and high risk jurisdictions is contradictory.
    - GFSC has not identified legal arrangements and TCSPs as high risk.
    - Reliance should not be placed on introducers or intermediaries who are DNFBPs.
- STR reporting and internal controls:
  - Entities required to report STRs to FIU including attempted transactions.
  - Adequate protections exist for STR reporting and tipping off.
  - Entities required to establish and maintain internal procedures to prevent ML and TF; policies and procedures are tested; compliance officers must be appointed; screening procedures in hiring.
  - Improvements suggested:
    - Increase number of reports submitted by eCasinos to better reflect ML risk and size of industry.
    - eCasinos should provide training to all employees.
- Supervisory resources and risks:
  - GFSC and AGCC have powers and authority to supervise DNFBP sector and have implemented robust supervisory programs with necessary resources except for one exception.
  - AGCC conducts extensive background checks for eGambling license applicants but absence of consistent police record checks creates risk of criminal infiltration.
  - Resources dedicated to supervision of TCSPs should be increased to address reduced number of examinations in this high risk sector.

### Legal Persons and Arrangements & Non-Profit Organizations
- Company types allowed: limited, unlimited or mixed liability companies and limited liability partnerships (LLPs), subject to registration with Guernsey or Alderney companies registries.
- Registration statistics at time of assessment: more than 18,000 companies registered in Guernsey and 530 in Alderney. Sark does not provide for incorporation of companies.
- Three measures to obtain, maintain, and verify beneficial ownership for companies and LLPs:
  - Requirement for majority of Guernsey companies to have a registered agent obligated to "take reasonable steps" to ascertain identity of beneficial owners.
  - Requirement for majority of Bailiwick companies (Guernsey and Alderney) and limited partnerships to utilize a licensed Trust and Company Service Provider (TCSP), subject to supervision for compliance with CDD obligations.
  - Obligation for all Bailiwick companies (Guernsey and Alderney) and limited partnerships to provide certain beneficial ownership information to relevant registry and to update such information.
- All Bailiwick companies and limited partnerships have legal obligation to maintain shareholder, director and partner registers and to file annual returns with Alderney and Guernsey Company Registrars.
- Investigative and other powers of LEAs and GFSC support access to information held by FSBs, TCSPs and other entities.
- Overall position: measures place the Bailiwick in a very strong position to ensure legal entity transparency and availability of accurate, adequate and current beneficial ownership and control information to law enforcement and competent authorities.
- Trusts:
  - Trust (Guernsey) Law 2007 is main legislation; trusts recognized and well established.
  - No statistics maintained on number of trust arrangements or volume of trust assets administered in Guernsey.
  - Alderney and Sark laws do not provide for creation of trusts.
  - Trusts are not subject to registration or filing requirements.
  - Acting as a trustee is, with few exceptions, a regulated activity subject to full AML/CFT requirements, including identification and verification of beneficial owners and record-keeping.
  - Concerns remain about availability of accurate and complete beneficial ownership information for trust arrangements not administered by a licensed TCSP.
- Non-Profit Organizations (NPOs):
  - Substantive efforts made to mitigate terrorism financing risks associated with NPOs but changes required to enhance effectiveness.
  - Registration regime established but does not apply to all charitable organizations.
  - Information mechanisms domestically and internationally are robust; authorities have capacity for investigations relating to terrorism financing and NPOs.
  - Outreach and oversight efforts exist but outreach not provided to entire sector; oversight limited to manumitted organizations administered by TCSPs.
  - Information on purpose and objectives of NPOs and identity of persons who own, control or direct activities is not publicly available.
  - Sanctions for non-compliance with registration requirements are not effective and dissuasive.

### National and International Co-operation
- Effective mechanisms for coordination and cooperation among domestic AML/CFT stakeholders, including an active policy coordination committee.
- Regular consultation and coordination on policy and operational levels; ongoing development and refinement of common vision and strategy including regular internal assessments against the strategy.

### Mutual Legal Assistance and Extradition
- Legal framework for mutual legal assistance (MLA) and extradition is sound; majority of requests processed in a timely and constructive manner.
- Bailiwick law allows provision of all types of assistance as required by Vienna and Palermo Conventions in money laundering, terrorism financing or predicate offense cases.
- Provision of MLA is not subject to unreasonable, disproportionate or unduly restrictive conditions.
- Statistics indicate that since 2007 the majority of requests have been implemented in an efficient and timely manner.
- Both money laundering and terrorism financing are extraditable offenses.
- Guernsey extradition regime is managed by UK authorities by virtue of the UK Extradition Act 1989; Bailiwick only marginally involved in the process.
- "No extraditions are on record under that Act, but formally the legal framework is comprehensive and solid."
- Non-MLA related assistance: cross-border cooperation at FIS and police level is essential despite limited possibilities to directly collect financial information at intelligence level; relatively high volume of information exchange traffic.
- Of the STRs disseminated, some 60 percent have an overseas destination.
- FIS and police follow a constructive approach to all serious requests; consent to use supplied information for intelligence purposes has never been refused.

*IMF assessment excerpt.*

### 1. GENERAL

### 1. GENERAL

### 1.1. General Information on Guernsey — Geography and Population
- The Bailiwick of Guernsey is located in the English Channel, in the gulf of St Malo off the north-west coast of France.
- The Bailiwick comprises the principal islands of Guernsey (population 62,000), Alderney (population 2,000) and Sark (population 600), together with other smaller islands.

### 1.1. General Information on Guernsey — The Government
- The island of Guernsey’s legislative assembly is the States of Deliberation (States of Guernsey).
  - Composition: the President of the Royal Court of Guernsey (the Bailiff) as ex-officio Presiding Officer, 45 People’s Deputies, two Representatives of the States of Alderney, and the two Law Officers of the Crown.
  - People’s Deputies are elected by universal adult suffrage.
  - The island is divided into seven constituencies, each electing either six or seven members.
  - Alderney representatives are elected annually by the States of Alderney.
  - Term: The States of Deliberation sit for a term of four years; general election at end of term.
  - The Chief Minister is elected by the People’s Deputies and chairs the Policy Council, which comprises the Ministers of the 10 Government Departments.
- Alderney:
  - Constitutional legislation: Government of Alderney Law.
  - Governed by the States of Alderney: a President and 10 States members, all elected by universal suffrage.
  - President holds office for four years; States members hold office for four years; elections every two years when half the 10 States members become eligible for re-election.
  - Routine government matters performed by three committees: Policy and Finance, General Services and Building and Development Control.
  - The Policy and Finance Committee, consisting of all 10 States members, has responsibility for eGambling.
  - Fiscal arrangements of 1948: some key services provided in Alderney by the States of Guernsey; Alderney falls under the fiscal authority of Guernsey and Guernsey’s provisions on taxation apply in Alderney; the States of Alderney has no authority to raise revenue itself through such taxes.
- Sark:
  - Legislative body: The Chief Pleas, consisting of 28 elected members (Conseillers) elected for four-year terms, with half elected every two years.
  - Chief Pleas required by statute to meet four times a year; extraordinary meetings called when necessary.
  - Meetings chaired by the President (currently also the Seneschal, the judge/magistrate) or his deputy and must be in the presence of the Seigneur or his deputy.
  - The General Purposes and Advisory Committee and the Finance and Commerce Committee of the Chief Pleas have responsibility for the finance sector and AML/CFT.
  - Sark does not have a civil service; functions are carried out by unpaid elected Conseillers.

### 1.1. General Information on Guernsey — Relationship with the United Kingdom
- Constitutional status:
  - The Bailiwick is a Crown Dependency (a dependency of the English Crown).
  - The Queen of England in Council exercises supreme legislative and judicial powers in the Bailiwick and has ultimate responsibility for the good government of the islands.
  - The Crown acts through the Privy Council on recommendations of Ministers of Her Majesty’s Government.
  - The U.K. Ministry of Justice is the point of contact between the Bailiwick political authorities and the Crown; it ensures laws approved by the Bailiwick parliament are placed before the Privy Council for Royal Sanction.
  - The U.K. Parliament does not legislate on behalf of the Bailiwick without first obtaining its consent; extension of an Act of Parliament to the Bailiwick is exceptional; where uniform legislation is required the Bailiwick enacts its own “mirror” legislation.
- Additional points:
  - The Bailiwick is not represented in the U.K. parliament and is legislatively independent from the United Kingdom with full capacity to legislate for insular affairs.
  - The Bailiwick’s right to raise its own taxes is a long recognized constitutional principle.
  - The Government of the United Kingdom does not provide any direct financial assistance to the Bailiwick.
  - The United Kingdom is responsible for the Bailiwick’s international relations and for its defense.
  - In recent years the U.K. has recognized appropriateness of greater Bailiwick independence in international relations where those affairs relate to matters within the competence of the Bailiwick political authorities.
  - The Bailiwick has never been an overseas territory nor a colony; its constitutional relationship is distinctly different from that of the British Overseas Territories.

### Legal System and the Role of the Law Officers — Criminal Law System and Courts
- Criminal law:
  - The criminal law of the Bailiwick of Guernsey is substantially similar but not identical to English law.
- Criminal courts:
  - Guernsey judicature divided into: the Magistrate’s Court (limited jurisdiction), the Royal Court (unlimited criminal jurisdiction) and the Guernsey Court of Appeal.
  - Alderney: Court of Alderney; Sark: Court of the Seneschal — both have limited jurisdiction; more serious cases tried in the Royal Court of Guernsey; appeals from Alderney and Sark lie to the Royal Court of Guernsey.
  - Appeals from the Royal Court lie to the Guernsey Court of Appeal (majority of judges are English Queen’s Counsel); all judges appointed by the Crown.
  - From the Guernsey Court of Appeal there is an appeal to the Judicial Committee of the Privy Council in London.
- Judicial independence:
  - Judges in the Bailiwick of Guernsey are independent of island governments.
  - The President of the Royal Court of Guernsey is the Bailiff of Guernsey; he and the Deputy Bailiff are appointed by the Crown.
  - Senior judges in other islands: Chairman of the Court of Alderney and the Seneschal of the Court of Sark.

### Law Officers of the Crown
- Appointments:
  - Two Law Officers of the Crown in the Bailiwick of Guernsey; appointed by the Crown.
  - Senior Law Officer: Her Majesty’s Procureur (“Attorney General”); junior Law Officer: Her Majesty’s Comptroller (“Solicitor General”).
- Role and functions:
  - The Law Officers’ Chambers functions as a non-political “Department of Justice” for the entire Bailiwick.
  - Duties embrace work that in England would be carried out by the Home Secretary, the Attorney General, the Director of Public Prosecutions, and the Director of the Serious Fraud Office.
  - They supervise all prosecutions throughout the Bailiwick; in making decisions on prosecutions they act as independent officers—independent of the islands’ parliamentary assemblies and independent of the Courts before which they prosecute.
  - All prosecutions in the Bailiwick of Guernsey are brought in the name of the Law Officers.
  - The Law Officers are the central authority in the Bailiwick dealing with agencies in the United Kingdom and other countries requesting assistance in investigating and prosecuting crime.
  - Formal requests for assistance must be sent directly to the Law Officers and not through the U.K. Central Authority.
  - Preliminary contact at an early stage in an investigation and advice given by law enforcement is encouraged.

### Legislation
- Types of legislation:
  - Laws (primary legislation): can apply across the Bailiwick as a whole or specifically to Guernsey, Alderney and/or Sark; require approval of relevant Bailiwick parliaments (States of Guernsey, States of Alderney and the Chief Pleas of Sark) and require approval by the Privy Council.
  - Ordinances (secondary legislation): made by one or more of the Bailiwick parliaments.
  - Statutory Instruments (regulations): many laws permit making of Statutory Instruments by relevant political committees in the Bailiwick and sometimes by other bodies such as the GFSC and the AGCC.

### Economy — Currency and Key Statistics
- Currency: the pound sterling (£).
  - The States of Guernsey issues Guernsey bank notes and coin.
  - The Guernsey note issue and other notes denominated in pound sterling (for example, those issued by the Bank of England and the Jersey note issue) can be used in the Bailiwick.
  - The bank base rate in Guernsey is that set by the Bank of England.
- GDP and sectoral composition:
  - Guernsey’s total gross domestic product for 2008 was £1.9 billion (estimated), an increase of 7.6 percent over 2007.
  - The finance sector represents 39.9 percent of total GDP.
- Labour market and employment (end-2009):
  - Employed and self-employed people in the Guernsey workforce: 32,171.
  - Employed in the finance sector: 7,048 (21.9 percent).
  - Total workforce change: 0.9 percent (299 people) smaller than at the end of 2008.
  - Registered as unemployed: 423 people, which represents 1.3 percent of the total workforce.
  - Of those, 325 fit the International Labour Organisation (ILO) definition of being unemployed, giving an unemployment rate of 1.0 percent.
  - Employing organizations: 2,265, 90 fewer than the previous year.
  - Financial services remain Guernsey’s largest employing sector.
- Inflation:
  - Annual rate of inflation (RPI) as at the end of 2009: 2.2 percent.
  - RPI in September 2009: -1.2 percent.
  - RPI at the end of 2008: 1.2 percent.
  - RPIX (core inflation excluding mortgage interest payments) annual inflation rate at the end of 2009: 2.9 percent; at the end of the previous year: 4.6 percent.
  - Interpretation: core inflationary pressures in Guernsey were less during 2009 than in 2008.
- Alderney economy:
  - Mixed economy: growing eCommerce industry, tourism, building and finance industries.
  - eGambling plays a significant role (regulated remote gambling activity taking place from Alderney).
  - Alderney identified as a suitable site for development of a renewable tidal energy system expected to play a valuable future role.
- Sark economy:
  - Largest export: seafood, followed by lamb, eggs and other agricultural produce.
  - Several residents involved with internet-based enterprises (employment agencies, business management or accountancy services and educational publishing).
  - Tourism employs the greatest number of residents.
  - Since 2008 Sark experienced a building surge with several new builds and renovations; significant resident engagement in the building trade.

### 1.2. General Situation of Money Laundering and Financing of Terrorism — Overview and Crime Patterns
- General environment:
  - Guernsey is a politically-stable, low-crime environment.
  - The Bailiwick has a low crime rate in comparison with other areas of a similar size in jurisdictions such as the United Kingdom.
- Crime composition (2006–2009):
  - The majority of crimes committed within the Bailiwick are not of a type that generate proceeds, so can neither lead to money laundering offenses nor enable an individual to maintain a lifestyle funded solely or principally on the proceeds of crime.
  - In 2006, nearly 50 percent of recorded crimes comprised criminal damage and assault, with that percentage rising to over 50 percent in each of the following years.
  - A further 30 percent or so of annual recorded crime in this period consisted of theft and the unauthorized taking of motor vehicles.
  - The remaining 18 percent–22 percent of recorded crime covers a range of different offenses, most prominent being burglary, deception, drug-related and sexual offenses.
  - Four cases of unlawful homicide have been recorded and solved in the past four years in Guernsey.
- Police crime statistics (aggregate counts shown in source for 2006–2009):
  - 2006: 3411
  - 2007: 3024
  - 2008: 2650
  - 2009: 2936

### Drug-related Offenses (2006–2009)
- Drug trafficking identified as the most serious acquisitive crime in the Bailiwick; authorities have targeted drug importation and reduced it.
- Source-provided counts (persons convicted for drug offences and number of seizures involving Class A drugs) depicted in the source for 2006–2009 with plotted values:
  - Persons convicted for drug offences (by year): 48, 54, 46, 35
  - Number of seizures involving Class A drugs (by year): 25, 21, 25, 11

### Money Laundering Threats, Trends, and Responses
- Main laundering threat:
  - The greatest money laundering threat arises from Guernsey’s status as a significant financial center, giving rise to risk that proceeds of crime will be invested in or pass through the Bailiwick.
  - Majority of customers of Bailiwick businesses are based elsewhere, so proceeds are likely to arise from foreign predicate offenses.
- Asset restraint:
  - Approximately £220 million under restraint, mainly at the request of other jurisdictions; relates principally to offenses of fraud, drug trafficking, corruption, and tax evasion.
- Vulnerable sectors:
  - Banking and fiduciary sectors considered to have greatest vulnerability to money laundering.
  - Mutual legal assistance requests in 2009: 40 percent related to private banking business and 23 percent to community banking.
  - Other possible conduits: the post office and investment and securities businesses.
  - Analysis of STRs identified private banking and the fiduciary sectors as main sources of STRs.
- Typical laundering stage:
  - Any money laundering in the Bailiwick would be most likely to occur at the layering or integration stage of the laundering cycle.
  - No evidence of specific criminal groups operating within the Bailiwick for laundering; likely use by criminals similar to legitimate investors to maximize investment performance and spread risk.
- Recent trends and enforcement emphasis:
  - Present money laundering situation described as stable; no significant changes to patterns of offending or to the structure of the financial sector identified in the last four years.
  - Greater emphasis placed on investigation and prosecution of money laundering; Bailiwick takes a zero tolerance approach to money laundering and terrorist financing offenses.
  - Legislative review in 2007 led to amendments to the Proceeds of Crime Law and the Drug Trafficking Law to facilitate prosecution.
  - Increased focus on training and resources in AML/CFT.
  - Money laundering investigations (2006–2009): 26 investigations total, with annual numbers rising from four in 2006 to nine in 2009.
  - Upward trend continuing: three new investigations instigated in the first two months of 2010.
  - Money laundering prosecutions to date: four, two of which led to convictions (cases involved self launderers); a further prosecution involving autonomous money laundering awaiting trial.
  - In 2009 the Law Officers recruited a dedicated economic crime prosecutor with specific responsibility for money laundering who advises law enforcement on investigations and case preparation.

### Terrorist Financing
- No identified cases of terrorist activity or terrorist financing in the Bailiwick.
- Assistance requests and STRs:
  - Only five requests for assistance relating to suspected terrorist financing recorded for the last four years.
  - Total of 23 STRs with a terrorist financing element made in the same period.
- External advice:
  - Counter-terrorism unit at New Scotland Yard advises there are no indications of terrorist financing activity within the Bailiwick and the Bailiwick is likely to remain categorized as an area with a very low risk of terrorist financing activity for the foreseeable future.
  - Principal threat in Western Europe thought to come from Islamic fundamentalist groups; examples cited of U.K. attacks achieved using funds of less than £10,000.
  - New Scotland Yard assesses it is extremely unlikely any such cell would choose to operate within the Channel Islands because of the absence of a significant Asian population and a less extensive benefits system that would make fund raising more difficult.

### 1.3. Overview of the Financial Sector (as at December 31, 2009)
- All listed financial institutions are registered with, and subject to AML/CFT supervision by, the Guernsey Financial Services Commission.
- Types of regulated institutions and size metrics (as presented):
  - Banks: Deposit taking and lending; activities include acceptance of deposits, lending, transfer of money, issuing and managing means of payment, financial guarantees and commitments, money and currency changing.
    - Number regulated/registered: 44
    - Size of sector: Deposits – £114.7 billion
  - Insurers, insurance managers and insurance intermediaries: Life and general insurance; underwriting and placement of life insurance and other investment related insurance; underwriting and placement of non-life insurance.
    - Number regulated/registered: 699 insurers; 21 insurance managers; 40 insurance intermediaries
    - Size of sector: Gross assets – £21.0 billion; Gross written premiums – £3.3 billion
  - Investment firms and funds: Individual and collective portfolio management, investment advice and broking; participating in securities issues and provision of services relating to such issues.
    - Number regulated/registered: 661 licensed institutions; 884 Guernsey collective investment schemes; 1 stock exchange
    - Size of sector: Assets under management or administration – £184.2 billion
  - Registered non-regulated financial service businesses: Lending, financial leasing and other non-Core Principle activities; non-bank lending and leasing; money and currency changing; transfer of money; issuing and managing means of payment; providing financial guarantees or commitments; trading in money market instruments, foreign exchange, interest rate or index instruments or negotiable instruments; participating in securities issues; providing advice on capital structures, industrial strategy, mergers or purchase of undertakings; money broking and money changing; portfolio management services; safe custody services and safekeeping or administration of cash or liquid securities; accepting repayable funds, other than deposits; investing, administering or managing funds or money; dealing in bullion or postage stamps.
    - Number regulated/registered: 43
    - Size of sector: Small
  - Money service businesses: Money and currency changing and transfer of money.
    - Number regulated/registered: 35 (29 included in figures for banks and 6 included in registered non-regulated financial services businesses)
    - Size of sector: Small

_Italicized source attribution: IMF country report excerpt titled "1. GENERAL" (source PDF: _cr1112 - 1. GENERAL)._

### 33.      Banks are supervised by the GFSC under the Banking Supervision Law. Banking is

### Banks are supervised by the GFSC under the Banking Supervision Law. Banking is

### Banking sector structure and functions
- The banking sector has three main elements:
  - community banking (principally U.K. clearing banks) providing current accounts, overdrafts, saving deposits, mortgages and term lending to Bailiwick residents and local businesses (small and medium enterprises - SMEs);
  - deposit takers or gatherers who raise funding from retail savers and institutional customers with liquid funds and who also gather deposits from expatriate savers around the world. These banks have historically been the subsidiaries of U.K. building societies and demutualized societies; and
  - international private banks which take deposits from high net worth individuals, trust and fiduciary companies and the liquid uninvested balances of fund administration companies.
- The Bailiwick is principally a private banking and deposit gathering center. It is liability driven and not a big credit center.
- Lending is primarily Lombard lending secured against securities portfolios, cash-backed lending or secured-property lending.
- There is virtually no proprietary trading and position taking; dealing rooms are very small and cater to private client instructions and employment of group liquidity portfolios.
- Some overlap exists between the three elements, particularly two clearing banks that also take deposits from fiduciary companies while providing community banking.
- Consolidation over the last decade has reduced the number of legal entities through which banks provide services.
- Banks support other parts of the finance sector:
  - support to trust and fiduciary sector by taking deposits and providing services to trust structures;
  - support to collective investment fund sector by providing overdraft and liquidity facilities to funds;
  - support to insurance sector by providing standby letters of credit to captive insurance companies.
- There are no domestically-owned banks in the Bailiwick; all banks are subsidiaries or branches of banks from other jurisdictions. The vast majority of current account and clearing bank transactions are provided by the U.K.’s clearing banks.

### Retail banking sector — structure and deposit composition
- The Guernsey banking sector is predominantly wholesale and not retail. The vast majority of deposits are corporate, inter-bank, wholesale, or fiduciary deposits.
- International private banks account for 86.2 percent of total deposits.
- Clearing banks and deposit takers together account for 13.8 percent of total deposits.
- Deposits from the United Kingdom, Guernsey, Jersey, and Isle of Man households and individual trusts represent 8.1 percent of total deposits.
- Deposits from households and individual trusts in Guernsey account for 3.8 percent of total deposits.
- Household and individual trust deposits are proportionately more important within segment deposit bases:
  - deposit takers: 19 percent of segment deposits;
  - clearing banks: 13.2 percent of segment deposits;
  - international private banks: 2.1 percent of segment deposits.
- Segmental analysis as at December 2009:
  - Clearing banks: No. of banks 8; Deposits in £ millions 13,137; Percentage of total 11.4%; Bailiwick households and individual trusts in £ millions 1,732; Bailiwick households and individual trusts as a percentage of segment deposits 13.2%
  - Deposit takers: No. of banks 5; Deposits in £ millions 2,732; Percentage of total 2.4%; Bailiwick households and individual trusts in £ millions 518; Bailiwick households and individual trusts as a percentage of segment deposits 19.0%
  - International Private Banks: No. of banks 31; Deposits in £ millions 98,833; Percentage of total 86.2%; Bailiwick households and individual trusts in £ millions 2,057; Bailiwick households and individual trusts as a percentage of segment deposits 2.1%
  - Totals: No. of banks 44; Deposits in £ millions 114,702; Percentage of total 100%; Bailiwick households and individual trusts in £ millions 4,307; Bailiwick households and individual trusts as a percentage of total 3.8%

### Insurance sector — scope and structure
- Insurance business divided into three sectors: domestic insurance, international insurance, and insurance intermediaries.
- GFSC supervises insurance under the Insurance Business Law and the Insurance Managers and Insurance Intermediaries Law.

Domestic insurance
- As at December 31, 2009, there were 21 insurers engaged in domestic business:
  - four local insurers writing domestic insurance business in the Bailiwick;
  - 17 other domestic insurers with a physical presence in the Bailiwick (via branch office or presence of insurance agents) incorporated and authorized to write business within a Member State of the European Union.

International insurance
- International insurance categories: captive insurance, commercial insurance, international life and employee benefits.
- As at December 31, 2009, there were 355 licensed international insurers (captives and life companies), including:
  - 63 protected cell companies (―PCCs‖),
  - five incorporated cell companies (―ICCs‖),
  - six incorporated cells (―ICs‖).
- 143 international insurers were established by non-United Kingdom-based groups.
- Within the PCCs there were 323 cells as at December 31, 2009.
- PCC features:
  - a PCC is a single legal entity with separate and distinct cells;
  - a cell cannot contract in its own name; the PCC is the contracting party and must identify the relevant cell;
  - assets and liabilities in a PCC cell are segregated by law from those of other cells and are not available to creditors of other cells in insolvency;
  - a cell does not have access to the assets of the PCC core unless a recourse agreement has been put in place.
- ICC features:
  - an ICC is a legal entity and each IC associated with it is a distinct corporate entity;
  - an ICC and each IC will have directors, secretary and registered office in common;
  - ICCs offer legal segregation and a lower cost base attractive for start-up operations and ability to ―spin off‖ an IC or convert it into a stand-alone company.
- The Bailiwick is the leading captive insurance domicile in Europe in terms of numbers of captives and is fourth in the world based on premiums written.
- Captives:
  - majority are pure captives (insure exposures of the parent company and its subsidiaries);
  - some captives evolve into broad captives and may write significant third party business.
- Specialist insurance management companies manage most international insurers; as at December 31, 2009, 21 were licensed.
- As at December 31, 2009, of the 355 licensed international insurers, there were 29 life and employee benefits insurers, including eight PCCs and two ICCs licensed in respect of life business.
- Main life and employee benefits products: pensions, group life, other group employee benefit plans, single premium and other portfolio bonds.

Insurance intermediaries
- Insurance intermediaries (brokers and agents) advising in or from within the Bailiwick must be registered with GFSC.
- As at December 31, 2009, there were 40 insurance intermediaries registered.

### Investment sector — activities, scale, and licensing
- Investment and securities business supervised by GFSC under the Protection of Investors Law.
- Types of investment business in the Bailiwick include:
  - management, administration, and custody of open and closed-ended collective investment funds (domiciled in Bailiwick must be authorized or registered with GFSC; for open-ended domiciled outside the jurisdiction, regulated service provider must obtain GFSC’s formal approval before acting for the fund);
  - discretionary and non-discretionary asset management (includes subsidiaries of large multinational groups as well as independent and locally-owned firms; client range from private individuals to professional and corporate clients, including regulated firms in the Bailiwick such as fiduciaries and insurance companies);
  - stock broking (small but growing number providing traditional stock broking and wider asset management services for high net worth individuals and professional and corporate clients globally);
  - provision of investment advice (advice on investment products to collective investment schemes and non-fund clients including private individuals, high net worth individuals, and professional and corporate clients);
  - investment performance monitoring (established over the last half decade to monitor client investment portfolios held by regulated firms; licensees mainly monitor investments held by regulated firms on behalf of their clients, mainly in the fiduciary sector, together with corporate accounts);
  - intermediaries (firms providing intermediary services mainly to the local population).
- Total assets of collective investment funds under management or administration on December 31, 2009 were £184.2 billion.
- As of December 31, 2009:
  - 134,509 registered holders of shares/units/partnership interests in Guernsey open- and closed-ended collective investment schemes.
  - 276 authorized or registered open-ended collective investment schemes (of which 208 were umbrella or multi-class schemes resulting in a total 1,904 pools of assets).
  - 608 closed-ended investment schemes (of which 77 were umbrella schemes resulting in a total of 1,223 pools of assets).
  - These schemes were sponsored by institutions in 51 countries.
  - Within these totals:
    - 98 open-ended and 37 closed-ended investment funds were established as PCC structures;
    - 9 open-ended and 4 closed-ended investment funds were established as ICCs.
  - PCCs provide statutory protection so each cell does not suffer contagion from problems affecting other cells.
  - PCCs are used extensively in collective investment scheme structures, with nearly all umbrella or multi-class corporate structures being established as such.
- Clients of investment businesses include local residents, overseas residents, and local and overseas institutions and professional firms; trend towards establishing funds for high net worth individuals and institutions.
- On December 31, 2009, there were 661 institutions licensed to carry on investment business (administrators/managers and custodians/trustees of collective investment funds, stock brokers, discretionary and non-discretionary asset managers, investment advisers, and one stock exchange).

Stock exchange
- The Channel Islands Stock Exchange (―CISX‖), based in Guernsey, is the only stock exchange in the Channel Islands and commenced operations in the autumn of 1998.
- CISX offers listing facility and screen-based trading; core products: collective investment funds; structured debt instruments; primary and secondary listings of securities and shares issued by Channel Islands companies; secondary listings of securities and shares issued by overseas companies.
- CISX recognized by the United States Securities and Exchange Commission, the United Kingdom Financial Services Authority and the United Kingdom Inland Revenue.
- As of December 31, 2009 there were 2,434 listed securities on the CISX.

### Independent money services sector
- The independent (non-bank) money services sector is small: one substantial bureau de change and wire transfer provider outside the banking sector; total of five independent money services providers.
- Some hotels offer limited exchange services and fall within exemption for registration.
- Money transmission services provided by two agents of Money Gram; Western Union no longer has local representation.
- The large independent provider offers Money Gram and Cash2Account services.
- Outbound transmissions dominate, with a major portion being remittances to Latvia, Poland, and Madeira by nationals of those jurisdictions working in the Guernsey hospitality and building sectors.
- These firms are registered and supervised for AML/CFT purposes only under the Registered FSBs Law.

### Overview of the DNFBP sector
- Guernsey legislative framework provides comprehensive coverage of designated non-financial businesses and professionals (DNFBP) sectors; all categories outlined in the FATF standard are covered.
- DNFBP sectors play an important part in the Guernsey economy.
- Guernsey is seen as a primary jurisdiction for the provision of TCSP services; many lawyers and accountants provide support services to these activities.
- Guernsey has taken a leadership role in the emerging eCasinos sector.
- TCSPs represent the biggest DNFBP sector in Guernsey followed by eCasinos.
- Requirements in relevant legislation apply to both individuals and companies/firms though vast majority of obligated entities are companies and firms.

### DNFBP categories and counts (as of December 31, 2009)
- Lawyers, notaries, and other independent legal professionals (Schedule 2 to the Proceeds of Crime Law): Number regulated/registered 19; Authority responsible for AML/CFT supervision Guernsey Financial Services Commission.
- Accountants (Schedule 2 to the Proceeds of Crime Law): Number regulated/registered 7; Authority responsible Guernsey Financial Services Commission.
- Real estate agents (Schedule 2 to the Proceeds of Crime Law): Number regulated/registered 28; Authority responsible Guernsey Financial Services Commission.
- Dealers in precious metals and dealers in precious stones (Schedule 2 to the Proceeds of Crime Law): Services by bullion dealers who engage in buying or selling of bullion and conduct transactions of £10,000; Number regulated/registered 3 bullion dealers; Authority responsible Guernsey Financial Services Commission.
- Casinos — eGambling business including all forms of betting, gaming, wagering and any lottery (eGambling Ordinance): Number regulated/registered 44; Authority responsible Alderney Gambling Control Commission.
- Trust and company service providers — business of providing services to companies and trusts (Schedule 1 to the Proceeds of Crime Law): Number regulated/registered 197; Authority responsible Guernsey Financial Services Commission.

### Trust and Company Service Providers (TCSPs)
- Fiduciary services principally relate to trust management and administration, company management and administration and, to a much lesser degree, executorship services.
- Firms providing fiduciary services range from bank and institutionally-owned trust companies to independently-owned trust companies.
- As at December 31, 2009, there were 197 full and personal fiduciaries licensed by GFSC under the Regulation of Fiduciaries Law.
- License types:
  - Full fiduciary licenses available to companies and partnerships.
  - Personal fiduciary license can be held by an individual and is restricted to acting as a director, trustee (except acting as a sole trustee), protector, or as executor or administrator of estates.
- Settlors and beneficiaries of trusts and beneficial owners of companies originate from all over the world.
- The Regulations of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law 2000 outlines which TCSPs must be licensed.
- Section 3 of the Law lists exempt activities; many exemptions are in line with the standard and include company management activities undertaken in regular management of a business and activities relating to guardianship of children and administration of wills.
- Examples of exempt activities include acting as a director of a company quoted on a stock exchange, acting as the executor of a will, or acting as the guardian of a minor.
- All activities outlined by the standard are covered with one minor exception discussed in greater detail in Section 4.

*IMF staff report excerpt (selected sections, as provided).*

### 61.      The legal profession in Guernsey comprises solicitors, advocates, and notaries. There

### _cr1112 - 61.      The legal profession in Guernsey comprises solicitors, advocates, and notaries. There

### Legal profession: solicitors and advocates
- Solicitors provide advice on English, Welsh, Scottish, or Northern Irish law.
- There are five firms of overseas solicitors operating in Guernsey but they are not able to represent cases in court.
- Two firms of solicitors are registered with the GFSC.
- To qualify as a Guernsey advocate, a person must:
  - first qualify as a barrister or solicitor in England and Wales, Northern Ireland, or Scotland or another commonwealth jurisdiction,
  - undertake a minimum period of pupilage in Guernsey,
  - attain French legal qualifications, and
  - pass the Guernsey bar examinations.
- Seventeen firms of advocates are registered with the GFSC.
- Guernsey advocates are able to present cases in court.

### Notaries in Guernsey
- Guernsey notaries do not:
  - prepare transaction documents or contracts,
  - assist with contracts for the sale of land or manage conveyance of real or personal property,
  - take in, collect, transfer, or administer any client money,
  - administer transactions, or
  - give legal advice or opinions.
- Main function: physically authenticate documents and certify matters of fact.
- Typical activities:
  - authenticate copy documents or signatures for regulated financial services businesses,
  - authenticate by presentation of originals and copies or by witnessing signatures/oaths,
  - confirm identity and signature of the person executing the document or swearing an affidavit.
- Identification practice: presentation of passport when attending the notary’s office and recording the passport number, often in the document being signed or sworn and usually with a statement as to the method of identification in the fee note.
- Notaries rarely conduct work for private clients; most work is generated by persons or regulated financial services businesses known to the notary.
- There are no notaries registered with the GFSC as their activities do not fall within the requirements of the PB Regulations (i.e., the duties undertaken by notaries do not fall within the FATF’s definition of DNFBPs).
- Only Guernsey advocates may become Guernsey notaries; there are no separate firms of notaries.

### Law firms and services
- Guernsey law firms offer litigation, corporate and commercial law, real estate law, will and estate planning, and representation before the courts in criminal and civil cases.
- Some law firms are also licensed fiduciaries and carry out trust and company services.
- In total, 19 law firms (17 firms of advocates and 2 firms of solicitors) are registered with the GFSC.

### Accountants
- Guernsey accountancy firms, including branches of U.K. firms, were required to comply with Guernsey AML/CFT legislation from 2008 with the introduction of the PB Regulations.
- Seven firms of accountants have registered with the GFSC.
- Changes to the Proceeds of Crime Law in March 2010 extend the AML/CFT framework from the FATF standards to the EU standards and will include activity carried out by external accountants, tax advisers, auditors, and insolvency practitioners, resulting in the entire sector being subject to AML/CFT regulation by October 2010.
- Most audit and accountancy firms do not undertake the activities detailed in the FATF standards; majority do not handle client monies or assets and are not involved in facilitation or arrangements involving their clients.

### Real estate agents and Guernsey housing market
- Of the 28 registered real estate firms, only the larger firms are significantly involved in open-market property sales and commercial business.
- Guernsey has two residential housing markets:
  - "Local Market" for local inhabitants, and
  - "Open Market" for newcomers.
- There are about 21,000 dwellings on the island of which approximately 1,750 are available for occupation by newcomers.
- Housing licenses:
  - States of Guernsey grants housing licenses.
  - Employers unable to fill vacancies from local workforce can apply for an essential worker license to recruit a newcomer.
  - Licenses are granted subject to a rateable value limit.
  - About 5,000 licenses are currently in existence.
- Sale mechanisms: Local and Open Market dwellings can be sold by private treaty, auction, or by share transfer using standard terms agreed by the Bar Council and acceptable to the Royal Court.

### Real estate in Sark
- The Real Property (Transfer Tax, Charging and Related Provisions) (Sark) Law, 2007 requires relevant property transactions (ownership interest or long leasehold interest of 20 years or more) to be recorded in writing and registered by the Court.
- Property register maintained in the Sark Greffe Office.
- Sales in Sark are normally made by private treaty; nothing prevents sales by auction or by share transfer.
- Estate agents and advocates do not have to attend the Court.

### Dealers in precious metals and precious stones
- In the Bailiwick, there are 16 jewelry retailers and 3 bullion dealers.
- Client base of jewelry retailers includes a significant proportion of international visitors; high-value sales are paid for using debit and credit cards.
- The Proceeds of Crime Law designates bullion dealers who engage in buying or selling bullion and conduct transactions of £10,000 as a financial services business under the supervision of the GFSC; such bullion dealers have the same obligations as other FSBs.
- The Proceeds of Crime (Restriction on Cash Transactions) Regulations (December 2008) prohibit the use of cash for sale or purchase of precious metals, precious stones, or jewelry where the payment exceeds £10,000.
- Other than reporting suspicions on money laundering or terrorist financing, no other AML/CFT obligations apply to jewelry retailers.

### Casinos and eGambling (Alderney)
- No land-based casinos: Hotel Casino Concession (Guernsey) Law makes it illegal to operate a casino unless a concession for a hotel and casino has been granted by the States of Guernsey; Gambling (Alderney) Law and Gambling (Sark) Law prevent casinos in those islands.
- AGCC is responsible for regulation of eGambling licensees.
- Gambling (Alderney) Law defines gambling to include betting, gaming, wagering, and any lottery.
- eGambling license categories:
  - Category 1 eGambling licensees organize and prepare the customer for gambling (enter into agreement, register and verify customer identity, manage customer funds).
  - Category 2 eGambling licensees and Foreign Gambling Associate Certificate Holders effect the gambling transaction (strike the bet, house and record the outcome, operate the hardware/software); Category 2 licensees have no direct relationship/contact with the player.
- Types of gambling offered by Category 1 licensees: bookmaking, betting exchanges, traditional casino games, bingo networks, poker rooms.
- Licensee composition has included small start-ups, internet operations of land-based operators, and larger familiar eGambling brands.
- At the end of the first quarter of 2010:
  - 44 eGambling licensees,
  - 23 licensees holding both Category 1 and Category 2 licenses,
  - 18 holding a Category 1 license only,
  - 3 holding a Category 2 license only.
  - Therefore, 41 licensees had licenses permitting them to organize and prepare customers to gamble.
- At the end of the fourth quarter of 2009, there were 13 holders of associate certificates supplying services to eGambling licensees.
- As of the end of the fourth quarter of 2009:
  - smaller licensees had fewer than 2,000 active players,
  - the licensee with the greatest number of active players had over a million active players.
- Total active players across Alderney licensees: around three million, with in excess of two million registered with the four largest licensees.
- EGambling license holders in Alderney had over 3 million customers and conducted £2.1 billion worth of transactions in 2009.
- Net profits:
  - peaked in the first quarter of 2009 at £43.1 million,
  - reduced to £35.6 million in the fourth quarter of 2009.

### Non-Profit Organizations (NPOs)
- NPO sector composition mirrors the United Kingdom and similar jurisdictions: charities and other NPOs from professional associations to social and sports clubs.
- Charity categories (Number registered):
  - Social welfare/community support: 82
  - Health/medical/care of the elderly: 64
  - Religious: 50
  - Arts/music/sports: 33
  - Educational: 31
  - Other/general: 18
  - Overseas development: 15
  - Animal welfare: 6
  - Total: 299
- NPO categories (Number registered):
  - Sport: 36
  - Arts: 15
  - Professional/business: 15
  - Social: 12
  - Residence/housing associations: 6
  - Heritage/historical: 6
  - Education: 4
  - Other: 4
  - Religious: 3
  - Animal: 3
  - Uniformed organisations: 2
  - Total: 106
- Total registered bodies: 405 (299 charities and 106 other NPOs).
- These figures include 8 NPOs based in Alderney—3 arts/music/sports, 2 other/general, and one each of social welfare/community support, health/medical/care of the elderly and animal welfare.
- Manumitted organizations (charities managed by fiduciaries regulated by the GFSC) are not required to register with the Director of Income Tax but have record-keeping obligations.
- Charities and NPOs must register with the Director of Income Tax if:
  - gross annual income is over £5,000, or
  - gross assets and funds are £10,000 or more.

### Overview of commercial laws and mechanisms governing legal persons and arrangements: Companies and Limited Partnerships
- Bailiwick companies governed by:
  - Companies (Guernsey) Law 2008 (Guernsey CL), and
  - Companies (Alderney) Laws 1994 (Alderney CL).
- Sark does not provide for incorporation of companies on the island.
- Companies Registrar in Guernsey is responsible for registry of Guernsey companies; in Alderney, this function is performed by HM Greffier.
- Guernsey and Alderney CL do not differentiate between different types of companies; ownership and management requirements apply equally to all companies.
- All Bailiwick companies obtain legal personality upon registration with the Guernsey or Alderney companies’ registries.
- Incorporation requirements:
  - Guernsey companies may only be incorporated by a licensed TCSP,
  - Alderney law requires involvement of an advocate.
- Liability: members may have limited, unlimited, or "mixed" liability.
- Cell companies: all Bailiwick companies may be incorporated or later converted into "cell companies" allowing segregation of assets.
- Minimums and local requirements:
  - at least one (natural or legal person) founder,
  - one natural or corporate director,
  - a local registered office.
  - Most Guernsey (but not Alderney) companies require a registered agent (licensed TCSP or Guernsey resident director).
  - All Alderney companies require a registered secretary.
- Use of "nominee shareholders" and corporate directors is permissible.
- All Bailiwick companies subject to stringent accounting and record-keeping requirements and obliged to maintain shareholder and director registries at the local registered office.
- Guernsey law allows limited partnerships (but not Alderney or Sark) under the Limited Partnership (Guernsey) Law 1995:
  - require at least one limited and one general (natural or legal person) partner and a registered office in Guernsey,
  - all limited partnerships must register with the partnership registry maintained by HM Greffier.
- Beneficial ownership information:
  - Guernsey has a wide range of measures in place to obtain and maintain beneficial ownership information as outlined under Recommendation 33 of this report,
  - information maintained by registries, licensed TCSPs in the Bailiwick, and at local registered company or partnership offices,
  - supported by strong law enforcement and supervisory powers to obtain access to information as outlined under Recommendations 27 and 28 of this report.
- At the time of the assessment:
  - about 18,000 companies were registered in Guernsey and 530 in Alderney.
  - about 12,700 are managed by licensed TCSPS.
  - about 1,290 limited partnerships were registered in Guernsey of which around 200 have legal personality.
  - Authorities stated majority of Guernsey companies would be asset holding companies and majority of Alderney companies would be e-Casinos.
  - Authorities stated companies not administered by a licensed TCSP would mostly be local trading and service companies.

### Trusts and General Partnerships
- Trusts governed by the Trusts (Guernsey) Law 2007 (Trusts Law); trusts may be established under Guernsey but not Alderney or Sark law.
- General partnerships permitted under the Partnership Law 1995.
- Neither trusts nor general partnerships are subject to any registration requirement.
- Definition: a trust under Guernsey law is a legal arrangement in which a person (trustee) holds or has vested in him property which does not form or which has ceased to form part of his own estate for the benefit of another person (beneficiary), whether or not yet ascertained or in existence, and/or for any purpose other than a purpose for the benefit only of the trustees.
- Trusts commonly set up by deed, declaration, or will; Trusts Law allows creation in any manner, including oral declaration or conduct.
- Flexibility:
  - settlor may maintain a wide range of direct powers over management and administration of trust property,
  - Guernsey law allows both settlor and trustee to be a trust beneficiary, including the sole beneficiary,
  - settlor may reserve powers including to amend or revoke trust terms, give binding instructions on management, appoint/remove trustees/beneficiaries/enforcers/protectors, change law of the trust, and require consent of settlor or third person before trustee action.
- Protectors, enforcers, and flee clauses are allowed but used to a very limited extent according to authorities and private sector participants.
- The Convention on the Law Applicable to Trusts and on their Recognition has been extended to Guernsey and Guernsey law recognizes foreign trusts.

*Source: _cr1112 - 61.      The legal profession in Guernsey comprises solicitors, advocates, and notaries. There*

### 99.      The authorities do not maintain statistics or information pertaining to the number of trust

### _cr1112 - 99.      The authorities do not maintain statistics or information pertaining to the number of trust

### Statistics on trusts, partnerships, and TCSPs
- Estimated number of Guernsey trusts: 30,000.
- Number of Guernsey trusts administered by licensed fiduciaries: 27,000.
- Amount of assets held by Guernsey trusts: could not be ascertained.
- Total number of general partnerships under Guernsey law: authorities could not provide.
- Number of partnerships linked to a licensed TCSP: 496.

### AML/CFT strategies and priorities
- Ministerial commitment:
  - In early 2004, the President of the States of Guernsey Advisory and Finance Committee provided a Ministerial commitment to the FATF’s Recommendations and Special Recommendations.
- Core strategy document:
  - Title: "Bailiwick of Guernsey Financial Crime Strategy" (―Strategy document‖).
  - Identified seven strategic imperatives with objectives and supporting measures:
    - to build knowledge and understanding about the cause and effects of financial crime on the economy of Guernsey;
    - to increase the amount of criminal proceeds recovered and increase the proportion of cases in which they are pursued;
    - to make innovative use of the criminal and civil forfeiture legislation;
    - to continue to collaborate with international partners to ensure together the effective prosecution of those responsible for financial crimes and/or recover the proceeds;
    - to build upon the risk assessment culture which identifies the threats and vulnerabilities posed by financial crime;
    - to maintain an appropriate overarching strategy to counter financial crime, involving all partners, to enable sustained confidence and growth in Guernsey’s economic future; and
    - to support inter-agency working and value the contribution of partners concerned with mitigating the impact of financial crime within the Bailiwick.
- States endorsement and summarized strategies (March 2010 endorsement; process began October 2008):
  - Prevent Guernsey businesses from being used for money laundering or the financing of terrorism.
  - Have an effective suspicious activity reporting regime, including effective development of intelligence from reports of suspicion.
  - Ensure ML/FT offences are effectively identified and rigorously investigated.
  - Provide effective enforcement measures to identify, trace, restrain, seize, and confiscate proceeds of crime and terrorist assets, including nonconviction-based asset forfeiture.
  - Undertake prosecution of ML/FT offences swiftly and effectively.
  - Promote comprehensive and effective international cooperation and assistance to other jurisdictions.
  - Participate and contribute to international initiatives to prevent and combat financial crime.
  - Have effective measures to detect physical cash movements.
  - Provide effective training and professional development for AML/CFT actors.
  - Ensure sufficient resources are directed to meeting the strategies.
  - Maintain an overarching AML/CFT strategy coordinated by the Advisory Committee to enable sustained confidence and growth in the Bailiwick’s economic future.
- Alderney:
  - In 2008, States of Alderney Policy and Finance Committee confirmed Alderney’s commitment to AML/CFT standards.
  - States of Alderney AML/CFT strategies and priorities are allied to those of the Bailiwick.

### Implementation, capacity, and recent developments
- Strategy document review and updates:
  - Subject to regular review by the Bailiwick AML/CFT Advisory Committee.
  - Most recent update: first quarter of 2010.
  - Advisory Committee prioritized prosecution of money laundering and development of the civil forfeiture regime.
- Strengthening prosecution and asset recovery:
  - Creation of specialist posts within the Attorney General’s Chambers.
  - Recruitment of a highly-experienced specialist economic crime prosecutor (recently recruited).
  - A dedicated asset recovery lawyer joined the Attorney General’s Chambers.
- FIU resourcing and systems:
  - FIU has a continuing recruitment program and is soon to move to new premises.
  - New computer system to facilitate processing of STRs expected to be in use by June 2010.
  - Further amendments to the AML/CFT legislative framework expected to come into force soon.

### Institutional framework for combating ML/TF
- Law enforcement reorganization:
  - In 2008, the Financial and Economic Crime Branch (FECB) of the customs service was established; its head joined the BFCC.
  - FECB composed of 3 divisions: FIS (Financial Intelligence Service) within FECB for STR collection/analysis/MLA processing; criminal division for criminal investigations, seizures, confiscations; civil division for civil matters.
  - FECB rebranded as the FIU in 2009.
  - In December 2008, the BFCC was renamed the Bailiwick AML/CFT Advisory Committee; membership expanded to include Director of Income Tax, Chief Executive Officer of the AGCC, and more recently the Registrar of Companies.
- Political/policy level responsibilities:
  - Policy Council of the States of Guernsey (PCSG) chaired by the Chief Minister; overall political responsibility for AML/CFT strategy with Advisory Committee support.
  - Advisory Committee (AC): strategic policy coordination, development, cooperation; liaises with politicians; members attend Crown Dependency AML/CFT meetings with Jersey and Isle of Man.
  - Financial Crime Group (FCG): operational responsibility; reports to Advisory Committee.
  - Home Department of the States of Guernsey (HDSG): politically responsible for police and customs; develops criminal justice legislation/policy with the Attorney General.
  - Law Enforcement Commission:
    - Bailiwick to introduce a new independent statutory Law Enforcement Commission to oversee law enforcement and allocate resources to LEAs.
    - Chief Officers will report to the Commission rather than the Home Department.
    - Law Enforcement Commission expected to be in place by the middle of 2011.
  - Treasury and Resources Department (TRDSG): political responsibility for registration framework for charities and NPOs.
  - Commerce and Employment Department (CEDSG): political responsibility for registration framework for companies.
  - States of Alderney: political responsibility for the AGCC; AGCC reports annually to the States of Alderney and meets the Policy and Finance Committee of the States of Alderney (PFCSA).

### Criminal justice and operational arrangements
- FIU and customs:
  - Criminal division of FIU within customs responsible for cross-border investigations, criminal restraint and confiscation orders.
  - Civil forfeiture investigations, seizures, restraint and forfeiture orders handled by the FIU civil division.
  - Customs service to change to the Guernsey Border Agency by middle of 2011; functions and responsibilities of FIU and its three divisions unaffected.
- Police:
  - Fraud Department of the police responsible for investigation/detection of domestic fraud and other predicate offenses without cross-border element.
- FIS:
  - FIS division of the FIU is the Bailiwick’s designated national body responsible for collection, analysis, and dissemination of all STRs.
- Attorney General’s Chambers:
  - Attorney General and Solicitor General are Law Officers and designated recipients of letters of request for MLA.
  - There is a dedicated prosecution directorate, a dedicated mutual legal assistance lawyer, and a dedicated asset recovery lawyer.

### Financial sector and DNFBP regulation
- Guernsey Financial Services Commission (GFSC):
  - Established in 1988.
  - Prudential regulator of banks; collective investment schemes and their service providers; TCSPs; insurers and insurance intermediaries; investment firms and investment intermediaries; and the stock exchange.
  - Responsible for AML/CFT regulation of other FATF-defined financial institutions and much of the DNFBP sector (TCSPs—treated as financial services businesses—legal professionals, accountants, estate agents).
  - Issues AML/CFT rules and guidance in two handbooks:
    - Handbook for Financial Services Businesses on Countering of Financial Crime and Terrorist Financing (―FSB Handbook‖).
    - Handbook for Legal Professionals, Accountants and Estate Agents on Countering of Financial Crime and Terrorist Financing (―PB Handbook‖).
- Alderney Gambling Control Commission (AGCC):
  - Licenses and regulates forms of gambling in Alderney authorized by Ordinance (e.g., eGambling Ordinance).
- Professional oversight:
  - Practicing lawyers and accountants also subject to oversight by SROs in larger jurisdictions (e.g., Institute of Chartered Accountants in England and Wales; Law Society of England and Wales).
  - Guernsey Advocates subject to the Guernsey Bar; its Chambre de Discipline has jurisdiction over AML/CFT related issues in addition to GFSC’s role.

### Registrars and NPOs
- Director of Income Tax:
  - Acts as Registrar of NPOs, establishing and maintaining a register of NPOs separate from income tax functions.
  - Legislation to formalize separation by creating a statutory office of Registrar is awaiting royal sanction by the Privy Council.

### Approach concerning risk: criminal justice, GFSC, and AGCC
- Criminal justice:
  - Law enforcement agencies required to undertake continuous risk and threat assessments in all areas.
  - Financial Crime Group has ongoing mandate from Advisory Committee to monitor current and emerging AML/CFT threats and risks and reports to Advisory Committee.
- GFSC risk-based supervision:
  - GFSC does not differentiate prudential regulation and AML/CFT regulation.
  - GFSC adopts a risk-based approach but all businesses are subject to on-site inspection regime.
  - Inspection frequency:
    - All financial institutions subject to inspection within a timeframe of three years.
    - High-risk entities receive more frequent inspections driven by assigned risk profile.
  - Factors considered in risk profiling include customer base type; reliance on CDD by introducers; vulnerability of products/services; quality of corporate governance/internal controls; and intelligence suggesting high risk.
  - GFSC considers private banking and TCSP sectors to pose the highest potential ML and FT risk.
  - After December 2007 FSB Regulations and FSB Handbook introduction, GFSC required banks and the forty TCSPs whose relationships posed the highest risk to provide business risk assessments for review.
    - GFSC found initial assessments varied in quality; subsequent quality improved.
  - Limited exceptions to AML/CFT coverage exist in legislation or GFSC rules based on risk considerations (effect of exemption; sector/sub-sector size; business size; customer base; mitigating factors).
  - GFSC reviews administration of AML/CFT framework regularly; in early 2009 GFSC fell behind on on-site inspections schedule due to resource diversion to banking sector crisis; program back on track by end of 2009.
  - GFSC recruited additional on-site inspector for trust and company service providers.
  - Reviews have led to issuance of Instructions to FSBs on AML/CFT issues.
  - Recently added to financial services businesses subject to registration and FSB Regulations/FSB Handbook: bullion dealers, bullion brokers, and postage stamp dealers (in addition to investment advisers and general insurers).
  - Outside clearing banks, general insurers and estate agents, few businesses take advantage of reduced/simplified CDD provisions; procedural preference for "standard risk" approaches.
- AGCC risk approach and controls:
  - AGCC reviews and must approve every licensee or certificate holder’s internal control system prior to live operation.
  - Gambling equipment required to be independently tested to ensure game fairness.
  - Licensees use software to monitor operations in real time to identify suspicious transactions.
  - Requirement that each licensee must be an Alderney company provides presence within the Bailiwick enabling AGCC regulatory action; Alderney companies can only be formed with GFSC consent.
  - AGCC priority areas:
    - player identification and verification (considered cornerstone of fight against ML and FT);
    - circumstances when CDD and enhanced CDD are required.
  - eGambling sector specifics:
    - No concept of low risk; transactions are standard or high risk; CDD levels set accordingly.
    - Licensees cannot rely on CDD undertaken by affiliates or associates; licensee must undertake appropriate CDD or enhanced CDD.
    - AGCC reviews (2008 and 2009) identified greatest ML/FT risks as ownership/control by criminals; collusion among customers (e.g., "chip dumping" in poker); use of stored value pre-payment cards.
    - Mitigations: license application process protects against criminal ownership/control; stored value pre-payment cards not permitted; licensee systems mitigate collusion and "chip dumping."
    - All operative licensees receive an annual on-site inspection at the main operating location wherever that may be in the world; inspections focus on financial, technical, and regulatory aspects.
    - Evidence from on-site inspections indicates businesses are aware of obligations to report suspicions of ML and FT and observe CDD provisions of the eGambling Ordinance and Regulations.

*Italicized source: content unit from _cr1112 - 99. The authorities do not maintain statistics or information pertaining to the number of trust (PDF chapter/section).*

### 138.      The issue of minors accessing eGambling websites features heavily in licensees’

### _cr1112 - 138.      The issue of minors accessing eGambling websites features heavily in licensees’

### Minors, registration, and corporate social responsibility
- Paragraph 138: Minors are prohibited from gambling under the Gambling (Alderney) Law and the eGambling Ordinance.
- Every player undergoes a registration and verification process; it is a criminal offense under the eGambling Ordinance to effect a gambling transaction other than as a registered customer of an eGambling licensee.
- Licensees treat registration/verification, AML/CFT obligations, and corporate social responsibility as interlinked objectives that have produced strong procedures.

### Money laundering and terrorist financing (ML/FT) risks by game type
- Paragraph 139:
  - Traditional house casino games (slot machines, roulette, and blackjack) pose lower risks: games of chance, single player against house, outcomes from random number generator.
  - Bingo and keno present lower risk despite being pari-mutual; results based on random number generator, involve low values and little or no skill.
- Paragraph 142:
  - Player-to-player ("P2P") poker poses greater ML risk due to element of skill and multiple players.
  - Identified ML techniques in P2P environments include "chip dumping", "player to player" transfers, table allocation, player collusion and misuse of the banking system.
  - Definition of chip dumping: one player deliberately throws a good hand, losing to another player to pass funds; winnings then appear to come from the casino rather than from another losing player.
  - STRs submitted to the FIS have identified chip dumping as posing the greatest potential risk of ML/FT.
  - Licensees invest significant resources into eliminating chip dumping; AGCC inspections assessed measures and drafted guidance covering this topic.

### Inherent controls and sector features reducing ML/FT risk
- Paragraph 140:
  - eGambling systems provide a complete audit trail for each transaction (financial: deposit; transfers; payments; withdrawals; and gambling transactions) irrespective of game type.
  - Use of computers enables deployment of complex software to identify unusual or suspicious transactions in real time—capability not matched in land-based casinos.
- Paragraph 141:
  - A basic requirement limits laundering usefulness: repayment to the customer is made by the same method of payment used to fund the deposit, normally on a "first in, first out" basis.
  - Returning funds to the original method of payment diminishes attractiveness for money laundering/terrorist financing.
- Paragraph 145:
  - Trend in P2P poker toward high liquidity — bigger rooms run by bigger, more sophisticated operators; computerized rooms increase probability that unusual playing patterns and repeat pairings of players or internet protocol addresses will be identified in real time.
- Paragraph 146:
  - Historical threat of ML and FT in eGambling has been low due to risk of total loss and "house advantage" deterrent, and availability/widespread use of real time search tools to identify unusual patterns of play.

### Additional vulnerabilities and transactional issues
- Paragraph 143: Licensees are alert to transactions with no economic value (e.g., players seeking to withdraw funds without wagering).
- Paragraph 144:
  - Use of stolen or "cloned" credit or debit cards can facilitate deposits.
  - Anonymous stored value cards can be used to launder money; the AGCC does not permit licensees to accept anonymous stored value cards as a method of deposit.
- Paragraph 147:
  - Emerging concern: use of pre-payment cards could enable cash to enter the eGambling sector via other regulated entities despite prohibition on the use of cash in the eGambling industry.
- Paragraph 148:
  - New payment methods (e.g., payments through mobile telephony) are being devised.
  - The AGCC requires licensees wanting to introduce new payment methods to undertake a risk assessment and explain to the AGCC’s satisfaction how that method meets the requirements of the AML/CFT regime.

### Progress since the last IMF/WB assessment (selected items)
- Paragraph 149: The Bailiwick believes all recommendations have been met, except ratification of the Palermo Convention has not yet been extended to the Bailiwick pending review of extradition regime and related developments in the United Kingdom.
- Paragraph 149 (measures taken — selected):
  - The Prevention of Corruption Law enacted and the Bailiwick has ratified the UNCAC.
  - Extradition is currently under review.
  - See Terrorism Law, Schedule 2, paragraph 1 (1) (c) for amendment to provide for a receiver for property owned by a defendant to satisfy a confiscation order.
  - Legislation for asset forfeiture fund and asset sharing: not found necessary; current non-statutory arrangements continue to work effectively.
  - Sections 1 to 3 of the Disclosure Law and sections 12, 15 and 15A of the Terrorism Law address making it a crime to fail to report a suspicious transaction.
  - STR submission requirements set out in the Disclosure Regulations and the Terrorism and Crime Regulations.
  - The Disclosure Regulations and the Terrorism and Crime Regulations entitle the FIS to request further information within 7 days without satisfying the burden of proof for production orders.
  - The FIS has trained further investigators and has also appointed an intelligence analyst.
  - Funding made available and a new computer system to facilitate processing of STRs is expected to be in use by June 2010.
  - Registered FSBs Law enacted to regulate MSBs.
  - FSB Regulations and the PB Regulations, together with the GFSC’s FSB Handbook implemented to address CDD and other FSB standards.
  - Wire Transfers Ordinances require specified information to accompany transfers of funds.
  - The AGCC’s Alderney eGambling Regulations, 2009 introduced for Alderney eGambling licensees.
  - Changes to the Proceeds of Crime Law require AML/CFT obligations for legal professionals, accountants, and estate agents.
  - Civil Forfeiture Law introduced seizure and forfeiture regime for cash representing proceeds of crime.
  - Cash Controls Law introduced declaration system for cross-border movements of cash by travelers.
  - Charities and NPOs Registration Law introduced registration system for charities and NPOs.
  - Proceeds of Crime (Restriction on Cash Transactions) Regulations created an offense of accepting cash payments in excess of a specified amount by dealers in high value goods.
  - Site Visits Ordinance extended GFSC powers to enter premises and obtain information.

### Legal framework: criminalization of money laundering (overview)
- Paragraphs 151–159:
  - ML criminalized through Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 (POCL), Drug Trafficking (Bailiwick of Guernsey) Law 2000 (DTL), and Terrorism and Crime (Bailiwick of Guernsey) Law 2002 (TL). All three laws apply to the whole Bailiwick.
  - POCL covers ML related to all predicate offenses except drug trafficking (covered by DTL); FT as defined in the TL is a predicate offense to ML under both TL and POCL.
  - As a Crown Dependency, the Bailiwick cannot ratify conventions in its own right; the U.K. is responsible and may arrange for extension of ratifications to the Bailiwick upon request.
  - U.K.’s ratification of the Vienna Convention extended to the Bailiwick on April 9, 2002; the Palermo Convention has not been requested for extension due to extradition law concerns.
  - Sections 38 POCL and 57 DTL define concealment, conversion, transfer, removal from the Bailiwick as ML acts and removed a specific purpose requirement on March 24, 2010.
  - Sections 38 (3) POCL and 57 (3) DTL specify that "concealing or disguising any property includes concealing or disguising its nature, source, location, disposition, movement, or ownership or any rights with respect to it."
  - Sections 40 POCL and 59 DTL criminalize acquisition, use, or possession knowing property represents proceeds of criminal conduct/drug trafficking; possession is treated as doing an act in relation to it.
  - Sections 40 (2) POCL and 59 (2) DTL provide a defense if the person acquired/used the property for adequate consideration; services or goods assisting criminal conduct are not adequate consideration.

*Source: Excerpts from the IMF staff report content unit _cr1112 - 138.*

### 160.      However, the authorities explained that the defense would not pose an obstacle to the

### _cr1112 - 160.      However, the authorities explained that the defense would not pose an obstacle to the

### Application of Sections 40 POCL and 59 DTL; defense threshold
- Authorities: the defense would not pose an obstacle to the application of Sections 40 POCL and 59 DTL, particularly in cases of third party laundering.
- Threshold for denial of defense: person B would not have a defense where the rather low threshold, namely, that he/she had "reasonable grounds to suspect that the services or goods may assist the other person (person A) in criminal conduct", is met.
- "Criminal conduct" requirement: authorities stated that the reference to "criminal conduct" would not require that the commission of a certain predicate offense is established; it suffices to show that person B should have known that his services or goods may assist person A in laundering his/her proceeds of crime.

### Safeguards and overlap with other provisions
- Exception scope: even though the exception in Sections 40 (2) POCL and 59 (2) DTL are beyond the international standard as set forth in the Vienna and Palermo Conventions, in the context of the Bailiwick there are sufficient safeguards in place to ensure that they cannot be abused for ML or FT purposes.
- Overlap after removal of purpose requirement: removal of the purpose requirement under Sections 38 POCL and 57 DTL resulted in significant overlap with Sections 39 POCL and 58 DTL; Sections 39 POCL and 58 DTL are more geared towards contractual arrangements with the predicate offender (for example, lawyers and TCSPs).
- Example prosecution: charges against an employee of an insurance company for ML, currently pending before the court, were filed based on Section 39 POCL.

### Applicability of POCL, DTL and TL to terrorism-related property
- POCL applicability: provisions of the POCL apply with respect to proceeds from offenses defined under the TL, including terrorism financing and terrorism acts.
- TL Section 11 ML provision: Section 11 of the TL sets out a ML provision applicable with respect to "terrorist property," defined to include proceeds of terrorism and terrorism financing offenses.
- Section 11 offense elements: it is an offense to enter into or become concerned in an arrangement which facilitates the retention or control by or on behalf of another person of terrorist property through concealment, removal from the jurisdiction, the transfer to nominees, or through any other way.

### Gaps in TL Section 11 compared to Vienna and Palermo Conventions
- Required elements under Section 11: (1) existence of an arrangement; (2) involvement of terrorist property; (3) arrangement facilitates retention or control of another's terrorist property; and (4) perpetrator knew or should have known at the time the arrangement was made that the property constituted terrorist property.
- Limitations:
  - Does not cover conversion or transfer of criminal proceeds for the purpose of disguising or concealing illicit origin unless an arrangement can be established beyond a reasonable doubt.
  - Does not cover concealing or disguising the true nature, source, location, disposition of, or rights with respect to proceeds of crime unless all three elements of the offense can be established.
- Coverage by POCL: such situations would be covered by and could be prosecuted under the POCL provisions.

### Summary on ML provisions and conventions
- Conclusion: the ML provisions in the DTL and in the POCL in combination with the TL cover all material elements of the money laundering offenses as defined in the Palermo and Vienna Conventions.

### The laundered property (definitions and scope)
- ML offenses under POCL and DTL apply to "any property which is, or in whole or in part directly or indirectly represents, ... proceeds of crime".
- Section 50 (1) POCL and 68 (1) DTL: define "property" to include "money and all other property, real or personal, immoveable or moveable, including things in action and other intangible or incorporeal property" whether situated in the Bailiwick or elsewhere.
- Section 4 (1) POCL: "proceeds" includes "any property obtained by a person at any time [...] as a result of or in connection with criminal conduct".
- Section 4 (1) DTL: extends the term to "any payments or other rewards received by a person at any time [...] in connection with drug trafficking".
- TL Section 7 (2): defines "terrorist property" as any property which wholly or partly, and directly or indirectly represents the proceeds of or money and property likely to be used for acts of terrorism, including payments or other rewards in connection with its commission.
- TL Section 79: "property" includes "all property, wherever situated and whether real or personal, hereditable or moveable, and things in action and other intangible or incorporeal property."

### Intangible instruments and legal documents
- No express reference: none of the provisions expressly refer to legal documents or instruments evidencing title to, or interest in such assets.
- Authorities' clarification: the concept of "intangible" or "incorporeal" property includes "interests in property" and "tangible" or "moveable" property includes legal instruments evidencing title to assets and property.
- Legal support: Section 10 of the Trusts Law defines "personal property" to include interest in trust property; Section 2 of the Property Law 1979 stipulates that "property" includes both debts and legal remedies.
- Case law example: confiscation of insurance policies as proceeds of drug trafficking (Law Officers of the Crown vs. Naylor 2006), reasoning that an insurance policy is a legal instrument evidencing title to and the surrender value of the policy an interest in proceeds of crime.

### Proving property is proceeds of crime
- No requirement for predicate conviction: the POCL, the DTL, and the TL do not require a conviction for a predicate offense to prove that certain property constitutes proceeds of crime.
- Pending clarification: this has not yet been confirmed by the Royal Court because there have not yet been any convictions for standalone money laundering; one case involving nine charges for standalone money laundering is currently awaiting trial.
- Standard of proof: United Kingdom and Bailiwick case law require the prosecution to establish beyond a reasonable doubt that the property stems from criminal conduct in general rather than from a specific predicate offense.
- Authorities' view on practicability: the "beyond a reasonable doubt" standard would not constitute an obstacle in obtaining convictions for standalone ML, but this interpretation is an assumption pending outcomes in the pending autonomous ML case.

### Scope of predicate offenses (listing summary)
- POCL extends to all offenses triable on indictment; under Bailiwick law offenses not exclusively classified as summary offenses are triable on indictment.
- Many statutes apply to the whole Bailiwick; some were initially applied to certain islands then extended.

### Predicate offense categories (selected examples as listed)
- Participation in an organized criminal group and racketeering: covered through "conspiracy" and "aiding, abetting, counseling and procuring" (Sections 7, 8 and 12 Criminal Justice (Attempts, Conspiracy and Jurisdiction) (Bailiwick of Guernsey) Law 2006; Section 1 Criminal Justice (Aiding and Abetting etc.) (Bailiwick of Guernsey) Law 2007).
- Terrorism, including terrorism financing: Sections 4-6, 8-10, 55, 57–60, 63, 66, 71, 72 and 74 of the Terrorism Law.
- Trafficking in human beings and migrant smuggling: Section 25 of the Immigration Act 1971, as extended to the Bailiwick of Guernsey by the Immigration (Guernsey) Order; Law Officers of the Crown vs. Wong (2009, as yet unreported).
- Sexual exploitation, including sexual exploitation of children: Sections 1–6, 9 and 12 of the Protection of Women and Girls Law; Sections 1–3 of the Sodomy Law; Sections 1 to 3A of the Protection of Children Law; customary law offense of rape, Law Officers of the Crown vs. Presland (2007).
- Illicit trafficking in narcotic drugs and psychotropic substances: Sections 2 to 4 of the Misuse of Drugs Law; Sections 38 and 41 of the Drug Trafficking Law.
- Illicit arms trafficking: Section 3 of the Firearms Law and equivalent provisions in the Firearms (Sark) Law 2001 and the Dangerous Weapons (Alderney) Ordinance 1965.
- Illicit trafficking in stolen and other goods: Sections 25 -27 of the Theft Law; Section 23 of the Customs Law.
- Corruption and bribery: Sections 1, 3 and 4 of the Prevention of Corruption Law.
- Fraud: Sections 1-2, 6-7 and 9-11 of the Fraud Law; Sections 15 to 19 and 22 of the Theft Law.
- Counterfeiting Currency: Sections 12 to 17 Forgery and Counterfeiting (Bailiwick of Guernsey) Law 2006.
- Counterfeiting and piracy of products: Section 134 of the Copyright Ordinance; Section 31 of the Registered Designs Ordinance; Sections 89 to 92 of the Trade Marks Ordinance; Sections 56 to 58 of the Registered Patents and Biotechnological Inventions Ordinance; Section 38 of the Performers Rights Ordinance; Sections 36 to 38 of the Registered Plants Breeders Rights Ordinance.
- Environmental crime: Section 9(1) of the Food and Environment Protection Act 1985 extended to the Bailiwick by the Food and Environment Protection (Guernsey) Order 1987 as amended; Section 11 of the Trans-frontier Shipment of Waste Ordinance 2002.
- Murder, grievous bodily injury: customary law offenses, Law Officers of the Crown vs. Rouget (2008); Law Officers of the Crown v Truffit (2007); customary law offence of rape, Law Officers of the Crown vs. Presland (2007).
- Kidnapping, illegal restraining and hostage taking: customary law offense of kidnapping, Law Officers of the Crown vs. Marsh (2009, as yet unreported); customary law offense of false imprisonment, Law Officers of the Crown vs. Le Prevost (2009, as yet, unreported); Section 1 of the Taking of Hostages Act 1982, as extended to the Bailiwick by the Taking of Hostages (Guernsey) Order.
- Robbery or theft: Sections 7, 8 and 14 of the Theft Law.
- Smuggling: Sections 30, 32, 37, 38 and 40 of the Customs Law.
- Extortion: Section 23 of the Theft Law.
- Forgery: Sections 1–5 Forgery and Counterfeiting (Bailiwick of Guernsey) Law 2006.
- Piracy: Sections 1–4 of the Aviation Securities Act as extended to the Bailiwick by the Aviation Security (Guernsey) Order.
- Insider trading and market manipulation: Section 1 of the Insider Dealing Law; Section 41F of the Protection of Investors Law.

### Threshold approach for predicate offenses
- POCL Section 1: "criminal conduct" includes all criminal offenses triable on indictment as well as any conduct that would constitute an offense triable on indictment had it occurred in the Bailiwick.
- Classification note: all offenses not classified as exclusively summary offenses are triable on indictment; categorization is based on considerations such as gravity of the criminal conduct rather than solely the sanction.
- Customary offenses: predicate offenses constituting customary rather than statutory offenses qualify as offenses triable on indictment under Sections 10 (1) and 10 (4) of the Magistrates Court Law.
- Conclusion: Bailiwick law effectively adopts a threshold approach linked to a category of serious offenses.

### Extraterritorially committed predicate offenses
- All three statutes (POCL, DTL, TL) define ML offenses to cover conduct which constitutes a predicate offense in the Bailiwick and any conduct committed abroad that would have constituted a predicate offense had it occurred in the Bailiwick (Sections 1 of the POCL and DTL and Section 62 TL).
- Dual criminality: required only for offenses under the DTL.
- Jurisdictional links: no provisions require links such as citizenship or residence as long as the laundering offense has been committed in the Bailiwick.

### Laundering one’s own illicit funds
- Sections 38 POCL and 57 DTL: make it an offense for a person to conceal, disguise, transfer, or convert criminal proceeds whether stemming from another or from the person himself.
- Sections 40 POCL and 59 DTL: acquisition, possession, or use of proceeds of crime criminalized regardless of whether property stems from another person’s criminal behavior.
- TL limitation: TL does not extend the ML offense to situations where the terrorist or terrorist financer himself conceals or transfers property to conceal the source; TL covers only persons who do so for or on behalf of somebody else.
- Remedy: self-launderer could still be prosecuted pursuant to POCL provisions.

### Ancillary offenses and liability of parties
- Attempt and conspiracy: Section 7 of the Criminal Justice (Attempts, Conspiracy and Jurisdiction) (Bailiwick of Guernsey) Law 2006 criminalizes attempt and conspiracy to commit an offense triable on indictment.
- Aiding, abetting, counseling, procuring: Section 1 of the Criminal Justice (Aiding and Abetting etc.) (Bailiwick of Guernsey) Law 2007 provides for these offenses against both triable summarily and on indictment offenses.
- Specific ancillary ML offenses: Sections 41 (7) POCL and 1 (3) DTL set out aiding, abetting, counseling or procuring, attempting, conspiring or inciting to commit ML offenses.
- Liability: Bailiwick law allows prosecution of all parties involved; persons convicted of ancillary offenses are liable to the same extent and may be subject to the same penalties as the primary offender.

### Additional element—acts overseas that would be predicate if domestic
- Restatement: all three statutes define ML to cover conduct which constitutes a predicate offense in the Bailiwick or would have constituted a predicate offense had it occurred in the Bailiwick (Sections 1 of the POCL and DTL and Section 62 TL).
- Dual criminality requirement reiterated: required only for offences under the DTL.

### Liability of natural persons and mental element
- Intentionality: all ML offenses (Sections 38, 39 and 40 POCL; Section 57, 58, and 59 DTL; Section 11 TL) are intentional crimes and apply to persons who knowingly engage in the relevant conduct.
- Mental element variations by offense:
  - Conceal, disguise, convert, transfer: prosecution must establish beyond a reasonable doubt that the person knew or suspected the property stems from criminal conduct.
  - Acquisition, possession, or use: required mental element is actual knowledge that the property constitutes criminal proceeds.
  - Assisting another to retain benefit of crime: prosecution must establish beyond a reasonable doubt that the perpetrator knew or suspected the person with whom he/she entered into an agreement is or has been engaged in or has benefited from criminal conduct; defendant has a defense and right to acquittal if he/she can establish by preponderance of evidence that he did not actually have knowledge of the criminal nature of the property.
  - Terrorism predicate ML under TL: TL does not expressly stipulate a mental element with respect to nature of the property, but provides a defense if the defendant can prove by a preponderance of evidence that he did not know and had no reasonable cause to suspect the arrangement related to terrorist property.
- International standard alignment: intent as defined under Bailiwick law meets the Vienna and Palermo Conventions' minimum standard that the perpetrator acts in the knowledge that the laundered property is the proceeds of crime.

*Source: Excerpt from the provided IMF content unit.*

### 188.      None of the three laws contain a provision clarifying whether or not the mental element

### _cr1112 - 188.      None of the three laws contain a provision clarifying whether or not the mental element

### Mental element (inference from objective circumstances)
- None of the three laws contain a provision clarifying whether or not the mental element may be inferred from objective factual circumstances.
- A fundamental principle of Bailiwick law, derived from customary Bailiwick law and the common law of England and Wales, allows for the mental element of an offense to be inferred from objective factual circumstances.
- The principle applies to any criminal offense, including money laundering, and has been confirmed by the Royal Court in Law Officers of the Crown vs. Taylor (2007-08 GLR 207).

### Liability of legal persons (c. 2.3 – c. 2.4)
- The money laundering provisions of the POCL, the DTL, and the TL apply to any “person” without differentiating between legal and natural persons.
- Section 9 of the Interpretation (Guernsey) Law 1948 provides that the term “person” shall include legal persons unless it is stated otherwise. The Interpretation Law by its terms applies only to Guernsey, but its provisions expressly apply to any Bailiwick-wide criminal statute (Sections 51(2) POCL, 69(2) DTL and 79(3) TL).
- Section 49E POCL and Section 67O DTL provide that offenses under the two statutes committed by legal persons or partnerships may result in criminal liability of both:
  - the body corporate or partnership; and
  - its individual partners, directors, managers, secretary, or other officers.
- The language of the money laundering offenses does not preclude the possibility of parallel criminal, civil, or administrative sanctions for perpetrators that are legal entities.
- Authorities confirmed both criminal and civil/administrative proceedings could be instituted against legal persons at the same time, but in practice this has never been done as no criminal proceedings have ever been instituted against legal persons.
- If parallel proceedings were to be instituted, close cooperation between the regulatory authority and the AG’s office would be required to ensure that the administrative action does not have an adverse impact on criminal proceedings.

### Sanctions for money laundering (c. 2.5)
- For ML convictions on indictment (applicable to both natural and legal persons):
  - imprisonment for a term not exceeding 14 years and/or an unlimited fine (Pursuant to Sections 38 (4), 39 (6) and 40 (10) POCL, Section 62 (1) DTL and Section 17 TL).
- Sanctions for summary convictions:
  - imprisonment for a term not exceeding 12 months (in cases of ML based on the TL, the applicable sanction is six months) and/or a fine not exceeding £10,000.
- Confiscation of the benefit may be ordered as outlined under Recommendation 3 of the report.
- Comparative sanctions:
  - blackmailing and handling of stolen goods: imprisonment of up to 14 years;
  - corruption, insider dealing, and market manipulation: imprisonment of up to 12 months and/or a fine (upon summary conviction) or imprisonment for a term not exceeding 7 years and/or a fine (upon conviction on indictment).
  - The Bailiwick’s sanctions for money laundering are almost identical to those applied by the United Kingdom, the Isle of Man and Jersey.
- Additional sanctions and remedies:
  - criminal courts may oblige convicted money launderers to pay compensation to victims (Section 1 Compensation Law);
  - Guernsey Financial Services Commission (GFSC) may impose administrative sanctions, including a fine of up to £200,000, withdrawal or suspension of an existing or refusal to issue a new license, or imposition of conditions to existing licenses;
  - upon application of the GFSC or the AG, the court may disqualify a person from holding office in a financial institution or any other business or having any involvement in a financial services business and may issue an injunction to restrain unlawful business.
- Practice to date (as of assessment mission):
  - two convictions for ML, both sanctioned with imprisonment but not fines;
  - first conviction: imprisonment for two years and three months;
  - second conviction: imprisonment for 15 months;
  - No sanctions have ever been applied to legal entities.

### Investigations, prosecutions, convictions, and statistics (applying c. 32.2.)
- Statistics in respect of all investigations, prosecutions, and convictions for money laundering offenses are kept by the FIU, based on data collated by them and on information supplied by the police force and the Attorney General’s Chambers.
- Since 2006:
  - 31 investigations for ML were conducted, of which five led to a prosecution.
  - Of the five prosecutions, two resulted in a conviction based on a guilty plea for both the ML and the predicate offense and one case for autonomous ML is still ongoing.
  - Two cases were terminated (one due to failure/inability of the witness to testify; one because the defendant was prepared to plead guilty on the more serious predicate offenses).
  - All prosecutions related to self-laundering.
  - The ML convictions were both obtained based on Section 38 POCL.
- Of the remaining 26 investigations:
  - 16 were terminated or suspended based on lack of evidence;
  - 10 are still ongoing.
- Majority of ML investigations related to: theft, fraud, embezzlement, human trafficking, and drug trafficking predicate offenses.
- Since the beginning of 2010, three investigations for ML involving financial sector participants were initiated.
- Statistics for the last 4 years:
  - 2006: Investigations 4, Referrals to prosecutors 2, Prosecutions ML 0, Convictions ML 0
  - 2007: Investigations 7, Referrals to prosecutors 2, Prosecutions ML 2, Convictions ML 1
  - 2008: Investigations 8, Referrals to prosecutors 3, Prosecutions ML 2, Convictions ML 1
  - 2009: Investigations 7, Referrals to prosecutors 1, Prosecutions ML 1, Convictions ML 0
  - 2010: Investigations 5, Referrals to prosecutors 0, Prosecutions ML 0, Convictions ML 0

### Implementation and effectiveness
- Legal framework for investigating, prosecuting and sanctioning ML offenses is applicable to both legal and natural persons and the ML provisions are fully in line with the international standard.
- Bailiwick officials are extremely well informed about the various requirements of the ML offenses under the POCL, DTL, and TL.
- Effective application of provisions is facilitated by a mature, stable, and comprehensive institutional framework.
- Authorities’ observations:
  - Good number of investigations for ML when compared to other countries based on GDP and population.
  - Considering the size of the Bailiwick’s financial sector and its status as an international financial center, until the end of 2009 only one out of 26 cases involved third party ML by a financial sector participant.
  - Authorities conceded that more emphasis should be put on identifying financial crime within the domestic financial sector, including where the predicate offense was committed abroad.
  - An attorney specialized on financial crime was hired by the AG’s office at the end of 2009 to assist the FIU with screening incoming MLA requests to identify possible criminal conduct within the domestic financial sector.
  - As a direct result, five ML investigations were commenced since 2010, including three involving third party ML by financial sector participants; at the time of the on-site mission, one of these cases was already in the prosecution stage.
- Disconnect noted between number of investigations versus number of prosecutions and convictions:
  - Authorities stated they initiate ML investigations in most cases involving proceeds generating conduct, but agreed with the AG’s decision not to initiate prosecutions in most cases.
- Efforts to develop Bailiwick jurisprudence on autonomous money laundering to clarify:
  - (1) whether money laundering can be sanctioned even in the absence of a conviction for the predicate offense; and
  - (2) in cases involving autonomous ML, how specific evidence needs to be with respect to the predicate offense.

### Recommendations and compliance (2.1.2 and 2.1.3)
- Recommendations:
  - The authorities should continue to focus their attention on identifying ML crimes within the domestic financial sector.
  - The authorities should further examine the underlying reasons for the disconnect between the number of ML investigations vis-à-vis the number of ML prosecutions and convictions and take measures to overcome any identified obstacles.
- Compliance with Recommendations 1 and 2 — Rating Summary of factors underlying rating:
  - R.1 LC
    - Given the size of the Bailiwick’s financial sector and its status as an international financial center, the modest number of cases involving third party ML by financial sector participants and the disconnect between the number of ML cases investigated versus the number of cases prosecuted and eventually resulting in a conviction calls into question the effective application of the ML provisions.
  - R.2 LC
    - Given the size of the Bailiwick’s financial sector and its status as an international financial center, the modest number of cases involving third party ML by financial sector participants and the disconnect between the number of ML cases investigated versus the number of cases prosecuted and eventually resulting in a conviction calls into question the effective application of the ML provisions.

### Criminalization of Terrorist Financing (SR.II) — legal framework and key points (2.2.1)
- Bailiwick law criminalizes the financing of terrorism through Sections 8–10 of the TL and Sections 4 and 5 of the Terrorism (UN Measures) (Channel Islands) Order 2001.
- The Bailiwick is a Crown Dependency and cannot sign or ratify international conventions in its own right; the United Kingdom may arrange for the ratification of any convention to be extended to the Bailiwick.
- The U.K.’s ratification of the International Convention for the Suppression of the Financing of Terrorism (―FT Convention‖) was extended to the Bailiwick on September 25, 2008.
- Of the remaining 15 international counter-terrorism related legal instruments, only the Unlawful Seizure Convention, the Civil Aviation Convention, the Diplomatic Agents Convention, and the Nuclear Material Convention have been extended to the Bailiwick. Extension of the Airport Protocol has been requested but not yet been granted.

Key terrorist financing offenses and definitions
- Section 8 TL: offense to receive or provide or invite another to provide money or property where the person either intends that the property should be used or knows or has reasonable grounds to suspect that the property may be used for the purpose of terrorism.
- Section 9 TL: criminalizes the use of money or other property for purposes of terrorism and possession of money or property with the intention to use it for terrorism or having reasonable cause to suspect that it may be used for terrorism.
- Section 10 TL: offense to enter into or become concerned in an arrangement as a result of which property is made available or is to be made available to another and the person knows or has reasonable cause to suspect that it will or may be used for purposes of terrorism.
- Section 7 TL: “terrorist property” extends to money or other property likely to be used for the purpose of terrorism, including resources of a proscribed organization, as well as the proceeds of the commission of terrorist acts and acts carried out for the purpose of terrorism.
- Section 79: “property” includes property situated in the Bailiwick or elsewhere, including real or personal, hereditable or moveable, and things in action and other tangible or incorporeal property.
- Terrorism (UN Measures) (Channel Islands) Order 2001:
  - Section 4: criminal offense to invite another to provide funds or to receive or provide funds with the intention that they be used, or knowing or having reasonable cause to suspect that they may be used, for the purposes of terrorism.
  - Section 5: criminalizes the provision of funds, financial assets, economic benefits or financial services to or for the benefit of a person who commits, attempts to commit, facilitates or participates in the commission of terrorism or who is controlled, owned, directly or indirectly, or is acting on behalf of or on the direction of such a person.
  - The Order defines “funds” widely to include instruments such as securities dividends and letters of credit; “economic resources” is given a relatively wide definition.

Compatibility with international standard and scope
- FATF requires terrorist financing offense to extend to any person who provides or collects funds by any means, directly or indirectly, with the intention that they be used for terrorist acts, by a terrorist organization or by an individual terrorist.
- Section 1 TL defines “terrorism” with two elements:
  - (1) the act involves serious violence against a person or damage to property, endangers a person’s life other than that of the person committing the act, creates a serious risk to the health or safety of the public or a section thereof, is designed to interfere with or seriously disrupt an electronic system, or involves the commission of an offense or is an act of the type described in Schedule 1 of the law; and
  - (2) the use or threat is designed to influence a government or international organization or to intimidate the public or a section thereof and is made for the purpose of advancing a political, religious, or ideological cause.
- If acts under (1) involve firearms or explosives and are committed for the purpose of advancing a political, religious, or ideological cause, they are considered terrorism regardless of whether requirements in (2) are met.
- The generic offense under Bailiwick law adds an element not set forth in the FT Convention by requiring acts or threats to be undertaken with the intention of advancing a political, religious, or ideological cause; authorities should assess the domestic implications of this approach and ensure it does not negatively impact the ability to prosecute Convention offenses.
- Section 1 TL contains an express reference to the offenses defined in the nine Conventions and Protocols listed in the Annex to the FT Convention; Bailiwick law is fully in compliance on this point.

Terrorist organizations and individual terrorists
- Section 1 (5) TL: references to “action taken for the purpose of terrorism” include action taken for the benefit of a proscribed terrorist organization.
- Sections 8, 9, 10 TL apply to provision or collection of funds for the benefit of proscribed terrorist organizations.
- Section 5 TL criminalizes provision of support other than through money or property to proscribed organizations.
- An organization is proscribed if it is listed in Schedule 1 to the TL (list taken over from U.K. legislation).
- Section 8 TL may apply where a person collects or provides funds he/she has reasonable cause to suspect may be used by terrorist organizations; Section 5 of the Terrorism (UN Measures) (Channel Islands) Order 2001 criminalizes making funds or financial services available to or for the benefit of a legal or natural person who commits, attempts to commit, facilitates or participates in terrorism, or who is controlled or owned directly or indirectly by such a person, or who acts on behalf of or on the direction of such a person.
- Under the TL, the standard of “reasonable cause to suspect” that the funds “may” be used for terrorism is a relatively low one.
- In the absence of jurisprudence, the court has not yet confirmed whether the provision of living and private expenses to a terrorist organization would be covered by Sections 5–10 of the TL; evidence can be adduced to rebut the assumption.
- The TL does not expressly criminalize the financing of individual terrorists, nor does it contain a definition of the term “terrorist.”
  - Authorities stated a person who provides funds to an individual terrorist would be assumed to have reasonable cause to suspect that the money “may” be used for terrorism and could be held criminally liable under the TL.
  - The court has not yet determined that provision of living and private expenses to an individual terrorist would be covered by Sections 5–10 of the TL.

*Source: _cr1112 - 188.      None of the three laws contain a provision clarifying whether or not the mental element*

### 222.      However, as in the case of non-proscribed terrorist organizations, the provision of

### _cr1112 - 222.      However, as in the case of non-proscribed terrorist organizations, the provision of

### Definition of Money and Property
- The terrorism financing offenses under Section 8, 9, and 10 refer to the provision of “money or other property” pursuant to Section 79 TL, which:
  - includes property wherever situated and whether real or personal, hereditable or moveable, and things in action and other intangible or incorporeal property.
  - although not expressly referring to legal documents or instruments evidencing title to, or interest in such assets, the terms are concluded to extend to any type of property, including legal documents or instruments evidencing title to, or interest in the referenced types of assets.
- Section 79 TL language is not limited to property from illegitimate sources; terrorism property as defined in Section 3 in connection with Section 1 of the TL extends to property from illegal as well as legitimate sources.
- The terrorism financing provisions do not require that funds provided are actually used to carry out or attempt the commission of a terrorist act or linked to a specific terrorist act; it is sufficient that:
  - the funds are intended for use in the commission of a terrorist act, or
  - the financer has reasonable cause to believe that they will be used for terrorism or for the benefit of a proscribed terrorist organization.
- The Terrorism (UN Measures) (Channel Islands) Order defines:
  - “funds” widely to extend beyond cash and balances in bank accounts to include instruments such as securities dividends and letters of credit.
  - “economic resources” relatively widely to include assets of every kind, whether tangible or intangible, movable or immovable, which are not funds but can be used to obtain funds, goods or services.

### Ancillary Offenses
- Section 7 of the Criminal Justice (Attempts, Conspiracy and Jurisdiction) (Bailiwick of Guernsey) Law 2006 criminalizes attempt and conspiracy to commit an offense triable on indictment.
- Section 1 of the Criminal Justice (Aiding and Abetting etc.) (Bailiwick of Guernsey) Law 2007 provides offenses of aiding, abetting, counseling or procuring commission of any criminal offense (triable on indictment or summarily) by another person.
- Section 79 of the TL provides for ancillary offenses of aiding, abetting, counseling, or procuring the commission of terrorist financing.
- Guernsey law allows prosecution of all parties involved in terrorism financing offenses.

### Predicate Offense for Money Laundering (c. II.2)
- Terrorism financing as contained in Sections 8 – 10 of the TL and Section 5 of the Terrorism (UN Measures) (Channel Islands) Order 2001:
  - are offenses triable on indictment and thus constitute predicate offenses for the ML provisions under the POCL.
- The ML offense in Section 11 of the TL is applicable with respect to FT predicate offenses.

### Jurisdiction for Terrorist Financing Offense (c. II.3)
- Section 62 TL provides criminal liability for acts committed outside Guernsey that would constitute a terrorism financing offense pursuant to Sections 8–11 TL had they been committed in the Bailiwick.
- Definitions broaden jurisdictional reach:
  - “action” includes any action outside the Bailiwick;
  - “person or property” includes any person or property, wherever situated;
  - “the public” extends to the public of any country or territory other than the Bailiwick.
- The TL terrorist financing offenses apply regardless of whether the alleged offender is in the same or a different country from the terrorist or terrorist organization or the location of the terrorist act.
- No jurisdictional provisions require links such as British citizenship or Bailiwick residency.

### The Mental Element of the TF Offense (applying c. 2.2 in R.2)
- The terrorism financing offenses under the TL require that the perpetrator:
  - knows or intends that the funds are being used for a terrorist act, or
  - has reasonable cause to suspect that they may be used for terrorism purposes, including for the benefit of proscribed terrorist organizations.
- The TL does not expressly state that intent may be inferred from objective factual circumstances; however:
  - a fundamental principle of Bailiwick law, derived from customary Bailiwick law and the common law of England and Wales, allows the mental element of an offense to be inferred from objective factual circumstances.
  - this principle applies to any criminal offense, including money laundering, and was confirmed by the Royal Court in Law Officers of the Crown vs. Taylor (2007- 08 GLR 207).

### Liability of Legal Persons (applying c. 2.3 & c. 2.4 in R.2)
- The terrorism financing offenses of the TL apply to any “person” without differentiating between legal and natural persons.
- Section 1 (4) TL and Section 9 of the Interpretation (Guernsey) Law 1948 apply the term “person” to both natural and legal persons; Interpretation Law provisions expressly apply to any Bailiwick-wide criminal statute (Sections 51(2) POCL, 69(2) DTL, and 79(3) TL).
- The language of the terrorism financing offenses does not preclude parallel criminal, civil or administrative sanctions against legal entities.
- Authorities confirmed both criminal and civil/administrative action could be instituted against legal persons concurrently, with criminal proceedings taking priority in practice.
- At the time of the assessment, no FT proceedings had been initiated with respect to a legal entity.

### Sanctions for FT (applying c. 2.5 in R.2)
- Section 17 TL sanctions for terrorism financing offenses (Sections 8, 9, 10):
  - upon conviction on indictment: imprisonment for a term not exceeding 14 years, to an unlimited fine or to both;
  - upon summary conviction: imprisonment for a term not exceeding six months, to a fine not exceeding £10,000 or both.
- Additional measures:
  - criminal courts may require convicted terrorist financers to pay compensation to victims (Section 1 Compensation Law).
  - the GFSC may impose administrative sanctions, including a fine of up to £200,000, withdrawal or suspension of an existing or refusal to issue a new license, against current or former license holders or their officers.
  - upon application of the GFSC or the AG, the court may disqualify a person from holding office or involvement in a financial services business and may issue an injunction to restrain unlawful business.
- Empirical note:
  - There has never been a conviction for terrorist financing in the Bailiwick.
  - In 2006, one investigation for FT was instigated in the Bailiwick but was later referred to the United Kingdom, where the case is still pending.

### Statistics (applying c. 32.2.)
- Yearly summary for FT:
  - 2006: Investigations: 1; Referrals to prosecutors: 0; Prosecutions FT: 0; Convictions FT: 0
  - 2007: Investigations: 0; Referrals to prosecutors: 0; Prosecutions FT: 0; Convictions FT: 0
  - 2008: Investigations: 0; Referrals to prosecutors: 0; Prosecutions FT: 0; Convictions FT: 0
  - 2009: Investigations: 0; Referrals to prosecutors: 0; Prosecutions FT: 0; Convictions FT: 0

### Implementation and effectiveness
- Authorities appear familiar with FT provisions.
- At the time of assessment:
  - only one FT investigation (triggered by an MLA request) had occurred;
  - no prosecutions relating to terrorism financing cases had taken place.
- Because FT offenses have never been tested in Bailiwick courts, assessing their effectiveness is difficult.

### Recommendations and Comments
- Consider the impact of including in the FT offense “intention of advancing a political, religious, or ideological cause” on the Bailiwick’s ability to successfully prosecute in the factual settings contemplated by the FT Convention.

### Confiscation, freezing, and seizing of proceeds of crime (R.3) — Legal Framework and Key Provisions
- Applicable Bailiwick-wide laws for provisional measures and confiscation:
  - The Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999, as amended (POCL);
  - The Drug Trafficking (Bailiwick of Guernsey) Law, 2000, as amended (DTL);
  - The Terrorism and Crime (Bailiwick of Guernsey) Law, 2002 (TL or Terrorism Law);
  - The Forfeiture of Money, etc. (Bailiwick of Guernsey) in Civil Proceedings Law, 2007 (Civil Forfeiture Law);
  - The International Cooperation Law.
- Provisions of the POCL may be applied in the case of all criminal offenses under Guernsey law, including terrorism and terrorist financing offenses, except drug trafficking (DTL applies to drug trafficking).
- The TL contains additional provisions for forfeiture upon conviction for terrorism financing, use or possession for the purposes of terrorism, funding arrangements in support of terrorism, or laundering terrorist property.
- The Civil Forfeiture Law provides for forfeiture of cash in civil proceedings with a lower burden of proof.

### Confiscation of Property related to ML, FT or other predicate offenses including property of corresponding value (c. 3.1)
- Proceeds — Crimes other than Drug Trafficking:
  - Part I POCL provides for confiscation, restraint, and charging orders for all crimes other than drug trafficking; POCL may be used for FT offenses alongside TL provisions.
  - Section 2 POCL: Royal Court may issue a confiscation order at sentencing if satisfied the offender has benefited from criminal conduct.
  - Court must determine amount to be recovered and order payment of the benefit or realizable amount; may order an amount it thinks fit if victims have civil proceedings.
  - POCL contains provisions to recover additional amounts above realizable amount if additional assets are found later.
- Assumptions and burdens:
  - The court must make certain assumptions unless shown incorrect or a serious risk of injustice (see Section 4(3)(4), POCL).
  - Assumptions include that any property held by the defendant since conviction or transferred during the six years before proceedings was received in connection with criminal conduct, and expenditures in that period were from such property.
  - Effect: once convicted, all unexplained wealth is reachable including proceeds of other criminal conduct.
  - “To benefit from criminal conduct” defined as obtaining property as a result of, or in connection with, the offender’s or any other person’s criminal conduct.
  - Standard of proof for benefit and amount is a balance of probabilities.
  - Failure to pay allows the court to order imprisonment with a sliding scale of maximum terms keyed to default amounts (Section 9, POCL); imprisonment does not extinguish payment obligation.
  - Sheriff may be appointed as receiver to realize property if confiscation order unsatisfied (Section 29, POCL).

- Drug Trafficking:
  - DTL confiscation provisions similar to POCL; Royal Court may proceed even without Attorney General request.
  - DTL references “payments or other rewards” rather than “property” (Section 4).
  - Procedures to assess benefit and realize confiscated amounts parallel POCL.

- Terrorism:
  - Section 18 TL provides for criminal forfeiture when a defendant is convicted of any of four TL offenses:
    1) fundraising for purposes of terrorism (including receiving and providing property for purposes of terrorism);
    2) use or possession with intent to use property for purposes of terrorism;
    3) involvement in funding arrangements for the purposes of terrorism;
    4) laundering terrorist property.
  - “Forfeiture” relates to money and other property that an offender possesses or controls at the time of the offense intended for terrorism purposes or where defendant had reasonable cause to suspect such use; the court may also order forfeiture of any payment or other reward received in connection with the terrorism offense.
  - Forfeiture orders under the TL are at the discretion of the court; prosecutor application is not necessary.
  - Schedule 2 to the TL details implementation: Court may require money/property be provided to the Sheriff; may direct non-land property be sold; may appoint a receiver to take possession of land; may direct the Sheriff to pay part of recovery to persons other than defendant who claim interests; provides for restraint orders to prohibit dealing in property liable to forfeiture.

- Laundered Property:
  - Laundered property is subject to confiscation in all instances, including stand-alone money laundering prosecutions, due to breadth of recoverable property (all benefits of criminal conduct).
  - Under U.K. case law (R vs. Allpress and Ors), relied upon in the Bailiwick, where a stand-alone launderer does not retain ownership of tainted property but had operational control, the property is treated as a benefit and the launderer is liable for the totality of funds transferred through his hands or accounts.
  - Limited Bailiwick prosecutions mean recovery of laundered funds in stand-alone prosecutions has not been faced; authorities expect decision to follow U.K. case law.

- Property in Third Party Hands:
  - Legal provisions enable recovery of proceeds, instrumentalities, laundered property, or corresponding value in third-party hands where defendant alienated such property.
  - Value-based approach: full amount of proceeds/benefit is recoverable from any property of the defendant.
  - Defendant’s property includes property gifted away in the six years before proceedings and property received in connection with criminal conduct and given away (Section 8, POCL).
  - Receiver can seek to recover property in third-party hands that the defendant gifted away, subject to bona-fide purchaser defense.
  - If defendant does not pay, court may appoint Sheriff as receiver to enforce charges on realizable property to satisfy confiscation order.
  - “Realizable property” defined in Section 6 POCL and DTL as “any property held by the defendant and any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Law.”

*Source: Excerpt from the provided IMF assessment text.*

### 257.      The authorities have successfully restrained property in third-party hands.

### _cr1112 - 257.      The authorities have successfully restrained property in third-party hands.

### Restraining and recovering property (overview)
- The authorities have successfully restrained property in third-party hands. (paragraph 257)
- Multiple legal instruments permit recovery of instrumentalities and property subject to confiscation, including general criminal provisions, the Police Property and Forfeiture Law (PPFL), the Misuse of Drugs Law 1974, the Drug Trafficking Law (DTL), the Terrorism Law (TL), the Proceeds of Crime Law (POCL), and ancillary search and seizure powers. (paragraphs 258–261, 263–266, 269–276)

### Instrumentalities of crime
- General provision: Section 3 of the Police Property and Forfeiture Law permits the court to forfeit instrumentalities upon conviction, depriving the offender of any rights in the property. This provision applies to all offenses. (paragraph 259)
- Drug trafficking and terrorism:
  - Section 26 of the Misuse of Drugs Law 1974 permits forfeiture of anything shown to relate to the offense and either destroyed or otherwise dealt with as ordered by the court. The Customs Law (Section 57(1)) also provides for forfeiture of property used to transmit or conceal items as drugs. (paragraph 260)
  - Section 18 of the TL provides for forfeiture of property a defendant possessed or controlled which he intended, knew or had reasonable cause to suspect would be used for the purposes of terrorism. (paragraph 261)

### Property of corresponding value and value-based confiscation
- Guernsey’s confiscation regime (POCL and DTL) incorporates the concept of equivalent value: confiscation is value-based and targets realizable property regardless of relation to the offense. POCL may apply to financing of terrorism offenses, allowing recovery of equivalent value for such offenses. (paragraph 262–263)
- At the time of the on-site mission, there was no specific law to cover confiscation of income, profits, or other benefits that derive from proceeds; statutory language in Section 4(1) and Section 2(3) POCL treats proceeds and benefits as "property obtained... as a result of or in connection with criminal conduct" and treats derived pecuniary advantage as if obtained as a sum of money equal to its value. (paragraph 264)
- Although practice in the Bailiwick has been to assess interest, income and profits as part of the benefit, there was no specific jurisprudence; amendments adopted on July 28, 2010 to the POCL and DTL make explicit coverage for interest, dividends, or other forms of income or value. Sections 2(3) POCL and DTL. (paragraph 266)
- Under the DTL, a person "has benefited" if he has received any payment or other reward in connection with drug trafficking; pecuniary advantage is treated as a sum of money equal to its value. Section 2(2)-(3). (paragraph 267)
- Under the TL, proceeds from an FT offense include property "which wholly or partly, and directly or indirectly, represents the proceeds" of the terrorism-related act and includes payments or other rewards; Section 7(2) TL, and amendments mirrored interest/dividend coverage (Section 7(1)(a) TL). (paragraph 269)

### Provisional measures to prevent dealing in property subject to confiscation
- POCL Articles 25–28 provide preservation of assets (both proceeds and property of corresponding value) via restraint orders (Section 26), realty charging orders (Section 27), and personality charging orders (Section 28). Orders are available where criminal proceedings have been or are about to be instituted, and where a criminal investigation has commenced. The Court must be satisfied the defendant or alleged offender "has benefited from his criminal conduct." (paragraph 270)
- Restraint orders: Section 26(1) prohibits dealing with any realizable property and may apply to all realizable property a specified person holds, and to property transferred after the order (Section 26(2)). Orders may be varied or discharged; Section 25(6)(7). The court may appoint HM Sheriff as receiver and direct delivery of restrained property to the HM Sheriff; Section 26(4) and 26(6). (paragraphs 271–272)
- Realty charging orders secure payment of a confiscation order or the full value of the real property; personality charging orders secure payment against securities and vessels registered in the Bailiwick. Authorities have used realty charging orders post-conviction and can lodge copies of restraint orders with title to restrain real property prior to confiscation. (paragraph 273)
- If production orders are not complied with, police may apply for a search warrant under Section 46 POCL. (paragraph 274)
- DTL contains parallel restraint and charging order provisions (Sections 25–28) and Section 64 allows seizure where restraint is unlikely to be effective. (paragraph 275)
- TL provisions permit restraint of property in support of eventual forfeiture; property liable includes property in possession or control of a person against whom proceedings for an FT offense have been instituted or who is under investigation. Schedule 2, paragraph 3 and Section 18. TL Schedule 5 provides for warrants to search and seize property. (paragraph 276)

### General seizure power at investigative stage
- Section 14, Police Powers and Criminal Evidence Law 2003: during an authorized search police may seize an item if reasonable grounds exist to believe it was obtained in consequence of an offense or has evidentiary value and seizure is necessary to prevent concealment, loss, damage, alteration, or destruction. This applies to proceeds but not to assets unrelated to the offense representing equivalent value (which are addressed through POCL and DTL). (paragraph 277)

### Ex parte provisional applications
- Applications to restrain and seize property in support of a confiscation order may be made ex parte. Section 25(5), POCL and DTL. Applications are made by the Attorney General to the Bailiff in chambers. Once in effect, notice of the order must be provided to persons affected. (paragraph 278)

### Identification and tracing of property subject to confiscation
- POCL and DTL provide avenues for investigators to secure information and evidence on extent and location of proceeds and property subject to confiscation, assisting police in identifying and tracing such property. (paragraph 279)
- Police, with Attorney General consent, may apply for orders to make specified material available for investigations into whether a person engaged in or benefited from criminal conduct or into extent/whereabouts of proceeds. Bailiff grants order if: i) reasonable grounds to suspect person engaged in or benefited from criminal conduct; ii) reasonable grounds to suspect material is likely to be of substantial value to the investigation; iii) reasonable grounds to believe it is in the public interest. Section 45 POCL; Section 63 DTL. In practice these orders are sought and granted regularly with an average of about 8–9 per year. (paragraph 280)
- If production orders are not complied with, police may apply for a search warrant (Section 46 POCL; Section 64 DTL). TL Schedule 5 similarly provides search warrants and production orders. (paragraph 281)
- Customer information orders and account monitoring orders:
  - Customer information orders may require specified financial service businesses to provide customer information including existence, number and balance of accounts. Sections 48A–48B POCL; Section 67A DTL; Section 37 and Schedule 6 TL. Standards: substantial value to investigation and public interest (e.g., Section 48C POCL). (paragraph 282)
  - Account monitoring orders require ongoing account information for up to 90 days. Section 48H POCL; Section 67H DTL; Section 39 and Schedule 7 TL. Standards similar to customer information orders (e.g., Section 48I POCL). In Guernsey practice, account monitoring orders have been used successfully. (paragraph 283)
- Special investigatory powers without court order are available to the Attorney General in serious fraud, insider dealing, or market abuse investigations; the Attorney General may require persons to answer questions or produce documents and may ask the court for search and seizure warrants. Section 1, Criminal Justice (Fraud Investigation) Law 1991; Section 10–13, Insider Dealing Law; Section 41L, Protections of Investors Law. (paragraph 284)

### Protection of bona-fide third parties
- POCL and DTL protect rights of creditors and bona-fide third parties in assessing realizable property: "amount that might be realized" equals total value less obligations with priority (Section 6 POCL); value defined as market value less amount to discharge encumbrances where another holds an interest (Section 7 POCL). Thus third-party interests are generally not realizable property. (paragraph 285)
- Gifts to third parties that fall within "gift caught by this Law" are realizable property and not recognized as valid third-party interests. (paragraph 286)
- Section 29(8) POCL/DTL: reasonable opportunity for persons holding an interest to make representations before court realizes property. Court and Sheriff must exercise realization powers with view to allowing bona-fide third parties to retain or recover value of property held. Section 31(4) POCL and DTL. (paragraphs 287–288)
- Where property is restrained, any person affected may apply for discharge or variation of the order; Section 25(7) POCL and DTL. All affected persons must be provided notice of restraint and charging orders. Section 25(5)(c) POCL and DTL. (paragraph 288)
- TL protections: Section 18(7) TL requires the court to afford a third party claiming ownership or interest in property to be heard before forfeiture; Schedule 2 and Sections 4(1)(c) and (4) TL require notice to persons affected by restraint and allow applications for discharge. (paragraphs 289–290)
- General right to apply for judicial review exists for any person adversely and wrongly affected by a confiscation or forfeiture measure. (paragraph 291)
- Under Section 1(1) Police Property and Forfeiture Law 2006, any third party who believes he is entitled to an instrumentality or other property in police possession may apply to the court for return of the property. (paragraph 292)

### Power to void actions and address prejudicial transfers
- Common law permits setting aside contracts illegal or contrary to public policy (Gaudion v Weardale (1998) 25 GLJ61). (paragraph 293)
- Confiscation provisions address attempts to thwart recovery: any gifts made in the six years before proceedings commence are considered realizable property; interests include beneficial interests. Court may order person holding an interest in realizable property to pay a sum to the Sheriff equivalent to the gift recipient’s interest or the defendant’s beneficial interest. The court may grant, transfer, or extinguish interests in property. (paragraph 294)

*Source: _cr1112 - 257.      The authorities have successfully restrained property in third-party hands.*

### 295.      In addition, since actions aimed at hindering recovery are likely also to constitute

### _cr1112 - 295.      In addition, since actions aimed at hindering recovery are likely also to constitute

### Statistics (R. 32) — Use of POCL and DTA provisions; FIU statistics (2006–May 31, 2010)
- POCL and DTA provisions to restrain and confiscate proceeds of crime are used in domestic cases and in many situations for international requests.
- The FIU maintains statistics on confiscation and provisional measures undertaken in the Bailiwick. The following statistics cover the years 2006 through 2009 and 2010 through May 31, 2010.

Confiscation — Proceeds/benefits confiscated and proceeds/benefits repatriated without confiscation
- 2006 — 10 total: Confiscated 9 local Drug Trafficking (DT)     £79,944   £65,766; 1 Int’l (U.K. human trafficking)        £3,551     £3,551
- 2006 — 1 total: Repatriated Ponzi case (to U.S.)      £1,810,455* *(2,636,205(usd)
- 2007 — 10 total: Confiscated 9 local Drug Trafficking  £68,525     £65,421; 1 Int’l (Drug Trafficking)         £267,496
- 2007 — 0 total: Repatriated
- 2008 — 5 total: Confiscated 5 local Drug Trafficking      £68,026    £65,106
- 2008 — 1 total: Repatriated Ponzi case (to U.K.)**      £416,207* (*($606,029(USD))
- 2009 — 9 total: Confiscated 7 local Drug Trafficking      £96,530       £37,027; 2 Int’l (Drug Trafficking)                   £2,351,244
- 2009 — 0 total: Repatriated
- 2010 — 2 total: Confiscated 1 local Drug Trafficking         £200          £200; 1 Int’l (Drug Trafficking) £707,109   £707,109 (2010 Figures through May 31, 2010)
- 2010 — 2 total: Repatriated Ponzi case (to U.K.)**       £888,673; U.K. Revenue Fraud       £229,045

Totals of Amounts Recovered Jan. 2006 - May 2010
- Local (Drug Trafficking) £234,520
- International (Drug Trafficking)  £3,329,400
- International (Other)  £3,551
- Int’l Repatriated (Ponzi Fraud–one case) £3,115,335
- Int’l Repatriated (Revenue Fraud–one case) £229,045
- Total: £6,911,851

Key findings from statistics
- Authorities have successfully recovered £6,911,851 in the last four and a half years.
- No confiscations or repatriations were based upon ML or FT charges; confiscations were almost uniformly drug trafficking, and repatriations were one major fraud case (Ponzi scheme) and one revenue matter.

Amounts frozen (2006–2009)
- In the years 2006–09, amounts frozen including both domestic cases and those pursuant to MLA requests totaled £109,795,203 as follows:
  - 2006 — 18 cases — £104,469,834
  - 2007 — 14 cases — £2,192,950
  - 2008 — 8 cases — £234,427
  - 2009 — 8 cases — £2,897,992
  - Total — £109,795,203

Amounts under restraint as of May 31, 2010
- Approximately £219,365,274 was under restraint (this includes property restrained at international request in 2004 and 2005).
- Breakdown as of May 31, 2010:
  - Domestic Cases: DT £53,289; ML £701,850; Other £0; Total £755,139
  - Int‘l Cases: DT £0; ML £0; Other £218,610,135; Total £218,610,135
  - Total Under Restraint: £219,365,274

Operational notes on ML/FT restraints and confiscation outcomes
- In the entire period, there have been only two restraints in ML cases, and none relating to FT.
- One ML case is awaiting trial. In the other, the restraint was lifted when the ML prosecution was discontinued because with the age of the principal witness, the prosecution was not viable.
- Two ML convictions (bank officials for self-laundering) resulted in custodial sentences; neither provisional measures nor confiscation were used. In one case, approximately £8,475 of stolen funds was repaid. In the second, none of the £277,335 taken could be located; the court made an order of a nominal amount as the realizable amount to permit future recovery if assets become available.

### Additional Elements (Rec 3) — Confiscation of organizational assets; civil forfeiture; reversal of burden of proof

Property of organizations principally criminal in nature
- Property of organizations criminal in nature is subject to confiscation on the same basis as criminal confiscation generally, either through actions against such organizations that are legal persons or through actions against its members.
- Criminal organizations that are legal persons are subject to criminal liability in Guernsey and if convicted on criminal charges, are liable to confiscation to the full extent of its criminal benefits.
- For organizations that are not legal persons, property would be accessed through civil or criminal proceedings against persons that are part of the organization.
- Civil forfeiture is also available for such property to the extent that it is funds and represents the proceeds of unlawful conduct.

Civil Forfeiture
- Guernsey enacted a Civil Forfeiture Law in 2007 that applies to cash and bank accounts with a balance in excess of £1,000.
- The law permits civil forfeiture of cash that is the proceeds of unlawful conduct or intended for use in unlawful conduct, and provides for restraint of property and investigatory powers in support of civil forfeiture actions. Funds in a bank account may be frozen by the court upon showing of reasonable grounds to suspect that the funds are proceeds of unlawful conduct. Section 10.
- Procedural rules for cases under the Civil Forfeiture Law are under review and expected to be adopted shortly.
- Civil forfeiture cases will be heard by the Bailiff sitting alone (no jurats). As of the time of the assessment, there were no civil forfeiture cases before the court nor had the court enforced a foreign forfeiture order using the new act.
- The provisions apply only in the case of cash and bank account deposits.
- Police officers may seize cash based upon the same grounds for a 48-hour period which then may be extended by judicial authorities. The provisions apply to all offenses including those under the POCL, DTL, and TL.

Offender demonstrating lawful origin
- Guernsey has provisions requiring a defendant to demonstrate the lawful origin of property. There is a mandatory assumption that defendant’s assets in the six years preceding the institution of charges were proceeds of crime unless the assumption is shown to be incorrect in the specific case, or the court is satisfied that there would be a serious risk of injustice if the assumption were made. Section 4, POCL.

### Analysis, Implementation and Effectiveness
- The Bailiwick has a comprehensive legal framework permitting confiscation of proceeds of crime, including proceeds from money laundering and terrorist financing offenses, and includes provisions for provisional measures (restraint and charging orders before and after proceedings).
- The value-based system allows authorities to address benefits of criminal activity without tracing actual proceeds into substitutes; authorities can rely on any assets of the defendant, including those alienated, to recover benefits.
- The POCL and TL provide avenues to recover proceeds of terrorist activity and terrorist property of all kinds including funds to be used for terrorist purposes and instrumentalities.
- Law enforcement and prosecution officials indicate that provisions in the POCL and other laws for investigation, restraint and confiscation have worked well in practice; officials can secure production, account monitoring and restraint orders and ultimately secure confiscation orders.
- At the time of the on-site mission, statute was not definitively clear that income, profits or other benefits that derive from proceeds are covered as proceeds or benefits of crime. In practice such property had been recovered; subsequent to the on-site mission the Bailiwick adopted a provision clarifying that such income and profits are covered.
- Guernsey’s statutory framework, including civil forfeiture provisions applicable to cash, appears excellent and when used works well, but there are a limited number of cases to draw larger conclusions.
- Since 2006 the effective use of the provisions in terms of actual confiscation has largely been limited to recovering benefits in drug trafficking matters, aside from voluntary repatriation in one Ponzi matter.
- The Bailiwick now has substantial funds under restraint, mostly at foreign request, and authorities indicated they will work towards recoveries in these matters and new cases as they implement a strategy to focus on financial sector criminal activity, develop ML cases and recover proceeds and benefits in a wider range of matters.

### Recommendations and Comments
- Authorities are committed to using the confiscation provisions of the POCL and DTL to recover assets in every proceeds-generating financial—and other—crime prosecuted in the Bailiwick, and in international matters.
- The authorities should increase efforts to use their robust framework more effectively to address financial sector criminal activity in addition to drug trafficking and use the confiscation provisions in such matters.
- Authorities indicated commitment to reviewing financial sector activities more carefully and developing investigations and cases consistent with the Bailiwick’s profile as a financial center; with this, additional strides in effective use of provisions can be expected.

### Compliance with Recommendation 3 — Rating and rationale
- Rating: R.3 LC
- Summary of factors underlying rating:
  - Although the Bailiwick’s provisions are robust and used routinely where applicable, they have not yet been used in a fully effective manner because of the few cases instituted in proceeds-generating matters other than drug trafficking.

### Freezing of funds used for terrorist financing (SR.III) — Description and Analysis

Legal Framework
- Guernsey implements obligations to freeze funds of persons and entities subject to sanctions under UNSCR 1267 and successor resolutions and UNSCR 1373 and related resolutions through:
  - Terrorism (United Nations Measures) (Channel Islands) Order 2001 (―Terrorism Order 2001‖)
  - Al-Qa’ida and Taliban (United Nations Measures) (Channel Islands) Order 2002 (―Al-Qa’ida Order 2002‖)
- These two Orders-in-Council were made in the United Kingdom under the U.K’s United Nations Act 1946 and extended to the Channel Islands. Their validity was confirmed on a temporary basis (until December 31, 2010) by the U.K.’s 2010 Terrorist Asset Freezing (Temporary Provisions) Act 2010. They are law in Guernsey (Section 1(4), United Nations Act 1946).
- Authorities recognize reliance on the 2001 and 2002 Orders-in-Council must be re-evaluated in light of the decision of the U.K. Supreme Court in HM Treasury vs. Ahmed and others [2010] UKSC 2.
- The U.K. Supreme Court decision expressed concerns including issuance under the United Nations Act 1946 by the executive without Parliamentary scrutiny. The U.K. Parliament enacted the 2010 Terrorist Asset Freezing (Temporary Provisions) Act 2010 to deem certain Orders-in-Council valid until December 31, 2010.
- The Bailiwick will be formulating new legislation before the end of 2010.
- Other criminal investigation and prosecution measures under Guernsey law are available to address terrorism-related assets, including restraint, seizure, and confiscation/forfeiture; these are addressed in the section on Provisional Measures in Section 2.3.1 (Recommendation 3).
- An administrative procedure under Section 20 of the Terrorism Law allows issuance of a freezing order (without court intervention) only in the case of threats to the economy of Guernsey or to the life or property of nationals of the United Kingdom or residents of Guernsey. The Bailiwick’s Policy Council is empowered to issue the order. This TL provision could be used, in narrow circumstances, to assist in effecting compliance with the UNSCR obligations.

Freezing Assets under UNSCR 1267 (c. III.1)
- The Al-Qa’ida and Taliban (United Nations Measures) (Channel Islands) Order 2002 provides a legal basis to freeze funds of persons and entities listed under UNSCR 1267 and successor resolutions.
- The Order allows freezing via a notice issued by the Attorney General where the Attorney General has reasonable grounds to suspect that funds are or may be held by, or are or may be under the control of, a listed person (Section 8).
- The Order makes it an offense to make any funds available to or for the benefit of a listed person or a person acting on behalf of a listed person (Section 7), or to contravene a direction not to make funds available made by notice under Section 8 (Section 8(9)). Notices may take immediate effect or effect on a specified date.
- A listed person is defined in the Order (reference to UNSCR 1390 (January 16, 2002) list).
- The Attorney General as licensing authority may issue a notice directing that funds are not to be made available except under a license if he has reasonable grounds to suspect that ―the person by, for or on behalf of whom any funds are held is or may be listed.‖ (Section 8). There is no requirement of prior notice to the designated person; once holders receive a notice they must provide the owner of the funds with a copy of the notice (Section 8(5)).
- Section 7 provides the exception to the prohibition: funds may be made available pursuant to a license granted by the Attorney General.
- The Order criminalizes failure by a financial services business to disclose any knowledge or suspicion that a customer, previous customer, or other person with whom it has dealt, is a listed person or acting for such person (Section 10). This offense provision does not cover non-financial businesses and persons such as lawyers, accountants, or non-profits; such persons are required under other laws to report suspicions of the financing of terrorism and criminal penalties apply to a failure to do so.
- To meet the freeze without delay requirements of UNSCRs 1267/1390 and UNSCR 1373, Guernsey adopted a framework where the obligation to freeze depends upon funds having been located and the Attorney General issuing a freeze notice. Even absent such notice, it is a criminal offense to make funds available to a person or organization on the 1267/1390 list, or to a person who is a terrorist under UNSCR 1373.
- Law Officers Chambers have indicated legislative review will consider adopting an approach not dependent upon specific funds having been identified and an administrative order specific to those funds being issued.
- Bailiwick authorities are drafting an Ordinance under the EU implementation law to adopt the approach used by European countries (including the United Kingdom) of directly applicable regulations as to persons on the UN 1267 list, persons identified on the EC external list and directly applicable requirements regarding an internal list. This approach would strengthen Guernsey’s framework to freeze without delay in appropriate circumstances.

*Source: Extracted content from the provided IMF assessment document.*

### 325.      The Terrorism (United Nations Measures) (Channel Islands) Order 2001, an Order-in-

### _cr1112 - 325.      The Terrorism (United Nations Measures) (Channel Islands) Order 2001, an Order-in-

### Freezing regime and designated authority
- The Terrorism (United Nations Measures) (Channel Islands) Order 2001 gives effect to UNSCR 1373 and, under Section 1(4), the Order is law in Guernsey.
- The Attorney General is designated as the licensing authority and, under Section 6, may issue a notice to freeze any funds held by, for, or on behalf of:
  - a person who commits or attempts to commit or participates or facilitates the commission of terrorism, or
  - a person controlled by such a person.
- The Order provides a freezing regime similar to that used for UNSCRs 1267 and 1390.

### Definitions, standards for designation, and judicial influence
- Determination of who falls within the ambit of UNSCR 1373 is made by the Attorney General when considering whether to issue a freezing notice.
- No pre-existing domestic list of persons designated under UNSCR 1373 exists in the Bailiwick (unlike U.K. or European Community lists).
- The statutory standard for issuing a freezing notice is "reasonable ground for suspecting" that a person "is or may be" in the proscribed category (textual standard preserved).
- The Law Offices Chamber indicated that, in light of the 2010 decision of the highest court in the United Kingdom in the Ahmed case, such a notice would be issued only under a stricter standard of suspecting a person is within the proscribed category.

### Criminal prohibitions and licensing exceptions
- Under Section 5 of the Order, it is an offense to make funds or financial services available to persons described in the freeze provisions.
- Section 9 criminalizes failure by an institution to disclose knowledge or suspicion that a customer, previous customer, or other person with whom it has dealt is involved in terrorism; this provision shares practical issues noted for Section 5 (lack of clear domestic lists/guidance).
- There is an exception to the prohibition on making funds available if the Attorney General has granted a license permitting the provision of payments, support, etc.

### Communication to financial sector and guidance
- Notices are issued to specific persons/institutions holding funds directing them not to make funds available; there are no general sector-wide notices to freeze funds for all institutions.
- The person to whom an order applies is notified immediately by service of the order on him, or with service to his last known address if necessary (e.g., Section 8(6), Al-Qa’ida Order).
- Procedures exist for the Attorney General to notify specified persons at the Guernsey Financial Services Commission (GFSC) and for the Commission to publicize the notice to make financial sector participants aware.
- Guidance accompanying specific Freezing of Funds Notices includes:
  - instructions on freezing action,
  - how to seek revocation of the Notice,
  - how to apply for a license to disburse funds.
- GFSC website sets forth sanctions information referencing the two Orders and provides a page with additional information from Guernsey’s Law Offices of the Crown; it notes that the full list of individuals may be found in the financial sanctions section of the U.K. HM Treasury website and cautions that breach of sanctions may lead to criminal prosecution.

### Freezing actions requested by other countries
- Guernsey is prepared to consider and give effect to freezing actions of other states at their request, though it has not received such a request to date.
- Requests are most likely to be received through official U.K. channels (the United Kingdom acts for Guernsey in international matters) or through a foreign law enforcement request.
- Authorities state they would use the freezing powers under the Al-Qa’ida and Terrorism Orders to effect freezes requested by another country; Law Offices Chambers would evaluate requests and consult U.K. authorities as needed.
- The Attorney General would decide whether to issue a Notice of a Freeze based on the statutory standard: reasonable grounds to suspect that funds are or may be held by, or are under the control of, a listed person (Al-Qa’ida Order, Section 8) or a person involved in terrorism (Terrorism Order, Section 6).
- Even absent a formal Attorney General freezing notice, there is an indirect obligation on anyone holding funds or assets of a person listed pursuant to UN Resolutions 1267/1390 to freeze those assets because it is an offense to make funds available to a listed person (Section 7, Al-Qa’ida Order). However, until the Attorney General issues a notice, there is no affirmative obligation to freeze funds—only the possibility of criminal liability in the absence of a freeze.
- Guernsey has not incorporated into its system the external EU terrorist list or the U.K. internal list; such lists are consulted but have no binding effect.
- Foreign lists (e.g., U.S. OFAC) are generally taken into account on a voluntary basis by many financial sector participants for suspicious transaction evaluation and risk-based assessments; it is not clear this practice extends to non-financial businesses and professions or NPOs.

### Scope of "funds" and assets controlled by designated persons
- Both Orders define "funds" broadly: "financial assets, economic benefits and economic resources of any kind and economic benefits of any kind." Examples include "interest, dividends or other income on or value accruing from or generated by assets".
- The definition does not explicitly state coverage of jointly owned, indirectly owned, or controlled assets, but:
  - Section 8(1) of the Al-Qa’ida Order and Section 6(1) of the Terrorism Order extend freezing to funds held for or on behalf of a person, thereby covering controlled or indirectly owned funds.
  - Authorities view coverage of jointly owned property as implicit in the sanctions regime and cite jurisprudence (e.g., Law Officers of the Crown vs. Baum (2007)) supporting the view that full or joint ownership would not alter coverage. The assessors accept this position.

### De-listing, unfreezing, and revocation procedures
- The U.K. government acts for the Bailiwick in international affairs; for de-listing requests the Attorney General would consult with U.K. authorities and rely on U.K. de-listing procedures.
- There have been no de-listing requests to Bailiwick authorities to date.
- The Attorney General may revoke a Freezing of Funds Notice:
  - Section 6(3) of the Terrorism Order 2001 and Section 8(3) of the Al-Qa’ida Order 2002 permit revocation by notice; judicial intervention is not required.
  - Revocation procedures and guidance are provided in the Attorney General’s Guidance Note accompanying a Freezing of Funds Notice and in "A Guide to Revocation Notices under the Terrorism (United Nations Measures) (Channel Islands) Order 2001 and the Al-Qa’ida and Taliban (United Nations Measures) (Channel Islands) Order 2002".
- The GFSC website summarizes procedures for unfreezing of funds and directs persons to contact the Attorney General’s office.

### Unfreezing inadvertently affected persons and court access
- The Attorney General is empowered to revoke a freezing notice if revocation appears appropriate (Section 8(3), Al-Qa’ida Order; Section 6(3), Terrorism Order), enabling immediate unfreezing without specific request if warranted.
- Persons affected by a Freezing of Funds Notice may apply to the Royal Court to have the direction set aside (Sections 6A and 6B of the Terrorism Order; Sections 8(7) and (8) of the Al-Qa’ida Order); this avenue is publicized on the GFSC website.
- Affected persons may both request administrative revocation by the Attorney General and seek judicial relief in the Royal Court.

### Access to frozen funds for basic and extraordinary expenses
- Under Sections 7 (Al-Qa’ida) and 5 (Terrorism) of the Orders, the Attorney General is authorized to issue licenses permitting access to funds.
- Licensing power may be exercised to comply with S/RES/1452 (2002) so that freezes do not apply to funds determined necessary for payment of basic expenses after notification with the relevant UN Committee.
- Guidance "A Guide to Licenses under the Terrorism (United Nations Measures) (Channel Islands) Order 2001 and the Al-Qa’ida and Taliban (United Nations Measures) (Channel Islands) Order" is available on request; it states:
  - licenses are within the Attorney General’s discretion,
  - licenses are normally issued only for basic expenses, but in exceptional circumstances can cover extraordinary expenses,
  - the Guide follows the provisions of UNSCR 1452.
- Where UN committee referral/review is necessary, such matters would be forwarded through the United Kingdom acting for Guernsey.

### Review of freezing decisions and administrative remedies
- Affected persons may apply to the Royal Court to set aside freezing directions (Al-Qa’ida Order Sections 8 (7)-(8); Terrorism Order Sections 6A–6B); applicants must provide a copy of the application and any witness statements to the Attorney General at least seven days before the hearing.
- The Attorney General retains discretion to revoke Freezing of Funds Notices administratively; affected persons may provide grounds for administrative revocation.

### Freezing, seizing, and confiscation in criminal contexts
- Provisions to freeze, seize, and confiscate terrorist-related funds exist in the Bailiwick’s general criminal law context as well as under UN sanctions regimes.
- Terrorist-related funds and assets are subject to provisional measures and confiscation when they are proceeds or benefits of criminal conduct or are instrumentalities—applying to the terrorist act itself and to financing of terrorism.
- Funds and assets may be forfeited as terrorist property under the Terrorism Law.
- Criminal offenses established to comply with the Convention for the Suppression of the Financing of Terrorism, substantive terrorism offenses, and offenses in the two Orders provide bases for provisional measures and confiscation; terrorist activity and financing may also form a basis for civil forfeiture when cash exceeds the statutory minimum under Guernsey’s Civil Forfeiture Law.

### Protection of third parties and compensation
- Third parties and any person who is the subject of a Freezing of Funds Notice may apply to the Attorney General for revocation and may apply to the Royal Court to have a freezing decision set aside; third parties therefore have access to review.
- For freezes ordered under the Terrorism Law (non-UN-related restraints) affected persons may seek discharge (Schedule 2, para. 4(4), Terrorism Law).
- If there is an acquittal, pardon, or quashing of a conviction, compensation may be available (Schedule 2, para. 7); freezing orders may in some circumstances include provisions for compensation (Schedule 4, paragraph 9).

*Based on the content unit _cr1112 - 325.*

### 363.      Measures in Guernsey to monitor compliance with the legislation, rules, and

### Measures in Guernsey to monitor compliance with the legislation, rules, and

### Monitoring compliance and supervisory practices
- GFSC materials for financial services participants and prescribed businesses address financing of terrorism generally, but on UNSCR sanctions they address only steps necessary once the Attorney General issues a freezing of funds notice.
- Handbooks and the GFSC website do not provide much clarity regarding:
  - steps participants should take to locate and screen for funds of persons on the 1267 list; and
  - determination of who might be covered by UNSCR 1373 and thus should be part of screening and CDD processes.
- Supervisory oversight:
  - GFSC has monitored whether participants use screening mechanisms to check against UN lists, the EU or U.K. lists as they conduct CDD or engage in other activities.
  - Many FSBs have software that checks their databases daily for matches with the consolidated list of targets provided by HM Treasury (that list contains the UN Sanctions Committee list).
  - Supervisory questionnaires/checklists in banking, insurance, and investment industries addressed use of lists in very generic terms (inquired how information regarding UN sanctions is disseminated to the Board and staff).
  - Lists under the resolutions are available to the private sector, although through a number of steps, on the GFSC website; their status vis-à-vis the Guernsey legal framework was not made clear at the time of the visit.
- Improvements since on-site visit:
  - FSB and PB Handbooks amended to include a new chapter on “UN, EU and other Sanctions” and reference to copies of the Orders and guidance; GFSC advised all financial services businesses and prescribed businesses of the revision on June 25, 2010.
  - On-site checklists amended and enhanced to facilitate a more thorough review of compliance.
  - Company registry officials check directors and shareholders using World Check; ongoing effort for Alderney registry.
  - Registrar of NPOs provides FIS details of high and medium-risk NPOs; FIS checks databases, including World-Check, for individuals and entities linked to these NPOs.
  - Registrar has advised NPOs to be mindful of UNSCRs 1267 and 1373.

### Sanctions: criminal and regulatory penalties
- Offenses and penalties:
  - Failure to comply with a Freezing of Funds Notice under either the Al-Qa’ida or Terrorism Order is an offense under Sections 8(9) and 6(7), respectively.
    - Punishment on indictment: term not exceeding seven years or a fine or both.
    - Summary conviction: term not exceeding six months or a fine or both. (Section 20(1), Al-Qa’ida Order; Section 12(1), Terrorism Order.)
  - Same penalties apply to making funds available to a listed person (Section 7, Al Qaeda) or to a person who commits, attempts to commit, or participates in the commission of terrorism, or is controlled by such person or acting on behalf of such person (Section 5, Terrorism).
  - Failure to comply with freezing orders under Section 20 of the TL: criminal offense punishable with a maximum of two years imprisonment and an unlimited fine (Schedule 4, par. 7(2)).
- Regulatory powers:
  - GFSC and AGCC may impose sanctions including refusal to grant a license, revocation or suspension of a license, and imposition of financial penalties.

### Statistics and threat assessment (R.32)
- New Scotland Yard’s Counter-Terrorism Unit view (agreed by Guernsey authorities): there is a low level of FT risk in Guernsey.
- Consistent with this threat level:
  - To date, there has been no Freezing of Funds Notices issued; and
  - No requests from other jurisdictions to give effect to actions initiated under their freezing mechanisms.
- Attorney General’s Chambers maintains and periodically reviews statistics regarding UNSCR freezing actions and requests.

### Implementation and effectiveness of sanctions regime
- Legal basis and mechanism:
  - Guernsey relies on Orders-in-Council permitting the Attorney General to issue freezing notices on an administrative basis.
  - Notices impose an affirmative obligation on named holders of funds not to make those funds or other assets available to designated persons or persons falling under UNSCR 1373.
  - Institutions or persons receiving a freeze notice must comply immediately.
- Assessment of system:
  - The system may be adequate if vigorously implemented, but is not particularly strong: it does not impose a general obligation in the absence of a specific freeze notice (affirmative obligation to freeze is triggered only once actual funds are found and an administrative order is issued).
  - Contrasts with EU/UK approach where regulations require all persons and institutions to freeze funds/resources of those on regularly-updated UNSCR 1267/1390 lists or UNSCR 1373 lists drawn up by the European Council — no intermediate step of first locating funds.
  - In the Bailiwick:
    - There is an implied general obligation because Orders-in-Council provide criminal sanction if a person makes funds available to listed persons or 1373 designees, but no explicit prohibition that applies to all persons absent a notice.
    - Communication to a specific institution at the time they must freeze is excellent, and subsequent notification to other financial institutions of that specific freeze occurs.
    - Authorities had not undertaken sufficient communication to all institutions, the general public, DNFBPs, etc., about the general obligation to freeze and to whom it applies (UN 1267 list and those covered by 1373). Improvements in communication have occurred since the on-site visit.
  - Limitations exacerbating the framework:
    - GFSC website referred readers to a U.K. website and U.K. lists but did not make clear what obligations applied in Guernsey regarding persons and entities appearing on U.K.-published lists.
    - Missing clarity on import of the specific list, how to locate it, what it contains, and how it applies in the Bailiwick context. Bailiwick authorities updated the website after the on-site visit.
    - Limited outreach beyond the financial sector (e.g., DNFBPs, public).
    - Many FSBs use Head Office software to screen entire group databases for matches with lists including EU, U.K., and OFAC designations.
  - Legal review:
    - Bailiwick is reviewing the two Orders-in-Council forming the legal basis for UN sanctions compliance in light of Supreme Court decision HM Treasury vs. Ahmed and others [2010] UKSC2; expected updating presents an opportunity to strengthen legal and practical framework.
- Practical guidance and service of notices:
  - Law Officers Chambers prepared three guidance notes:
    - One general guide provided to recipients when notified of a Freezing of Funds Notice.
    - Two specific guides available upon request addressing how to seek revocation of a Freezing of Funds Notice and how to request a license to access funds (based on UNSCRs 1373 and 1452).
  - Previously these latter guides were available only upon request and not routinely provided to the person whose funds were frozen; authorities are now providing for service of the guides on the affected person(s) at the time the Freezing of Funds Notice is served.
- Key practical attention points for regimes where freezing obligations arise only upon issuance of specific notices:
  - Clearly articulate and provide ready access to the UN 1267 list and indicate the kinds of persons that may fall within the ambit of UNSCR 1373.
  - Communicate effectively to financial sector and to a range of persons beyond the financial sector that might encounter such funds.
- GFSC updates:
  - GFSC Handbooks and sanctions section of the GFSC website were improved after the on-site mission to provide greater guidance and specificity to the industry.

### Recommendations and comments (from assessors)
- Legal and procedural clarifications:
  - Make explicit in the legal framework that a designated person does not receive prior notice of a freeze action.
  - For convictions under Section 5 of the Terrorism Order to be successful, provide greater clarity in relevant statutes regarding who might fall under the category of a person who commits or attempts to commit or participates or facilitates the commission of terrorism or a person controlled by such a person.
- Clarity and outreach:
  - GFSC public information (website or elsewhere) should provide greater clarity on the import of lists appearing on the HM Treasury website, specifically which lists apply in Guernsey and in what manner.
  - Provide additional clarity on the obligation of financial sector and other participants to locate and screen for funds of persons on the UNSCR 1267 list, and steps they might consider to determine who might be covered by UNSCR 1373 and thus part of their screening and CDD processes.
  - Emphasize the obligation not to make funds available that is irrespective of the STR process.
- Service of information on affected persons:
  - At the time the Freezing of Funds Notice is served on the designated person, they should also receive information regarding the availability of revocation and the possibility of a license to permit access to some assets and be advised that guides are available regarding these issues.
- Supervision and monitoring:
  - Authorities should enhance monitoring of compliance with legislation, rules, and regulations relevant to the UN sanctions regime by including more in supervisory checklists.
- Note: These matters have each been addressed in the period since the on-site visit, but the effectiveness of these measures cannot yet be assessed.

### Compliance assessment for Special Recommendation III
- Rating: LC
- Summary factors underlying rating:
  - It is not explicit in the legal framework that a designated person is not to receive prior notice of a freeze action.
  - Convictions under Section 5 of the Terrorism Order may be difficult because of a lack of clarity regarding who might fall under the category of a person who commits or attempts to commit or participates or facilitates the commission of terrorism.
  - Guidance to financial sector and other persons on the import of the lists appearing on the HM Treasury website; on their obligation to locate and screen for funds; and on an obligation not to make funds available that is irrespective of the STR process was enhanced in the period just after the on-site visit, but it is too soon to assess the effectiveness of the new measures.

### The Financial Intelligence Unit (FIS/FIU) — description and functions (R.26)
- Legal framework and reporting regime:
  - Legal basis for reporting is in the Disclosure Law (DL) 2007 (Sections 1 to 3A) and the Terrorism Law (TL) 200A2 (Sections 12, 15 and 15A).
  - Established a direct reporting obligation of ML/FT suspicions to either a “nominated officer” (for financial services businesses) or, since May 17, 2010, a “prescribed police officer.”
  - “Nominated officer” is the person nominated by FSBs (normally but not necessarily the MLRO), who must report suspicions to a “prescribed police officer.”
  - Failure to disclose is an offense.
  - Disclosure (Bailiwick of Guernsey) (Amendment) Regulations, 2010 (in effect since May 17, 2010): “prescribed police officer” means a police officer who is a member of the Financial Intelligence Service (FIS).
- Establishment and structure:
  - Financial Intelligence Unit for the Bailiwick of Guernsey is the Financial Intelligence Service (FIS), specifically designated by law with the introduction of the “prescribed police officer” function on May 17, 2010.
  - FIS established on April 1, 2001 as a joint police/customs unit; relocated to Financial and Economic Crime Branch (FECB) in 2008 following law enforcement reorganization.
  - FECB was renamed as the Financial Investigation Unit (FIU) in November 2009.
  - Before 2010 amendments, disclosures could legally be made to any police officer; in practice they were channeled to the FIS.
- Organizational composition (Financial Investigation Unit):
  - FIU consists of three specialist divisions, one of which is the FIS performing FIU functions.
  - Organizational roles described include Intelligence Team, Financial Criminal Team, Civil Forfeiture Team with specified position counts in the chart (e.g., “Inv Officer x6”, “Admin x3”, “Analyst x2”, “Total of 12 positions”, etc.).
- Receiving, analysis, and dissemination:
  - FIS acts as first reception point of disclosures and conducts initial analysis.
  - Two-step internal process: Intelligence Team decides if and to whom information will be passed for law enforcement purposes.
  - In practice, incoming STRs are first evaluated by a senior officer and then registered for further analysis.
  - When consent is requested by the reporting entity:
    - STR is subject to a risk assessment and a senior officer decides whether to grant consent, if possible, within three days; urgent requests are dealt with immediately.
    - On average approx 22 percent of initial STRs received by the FIS contain consent requests.
    - Consent is withheld in approximately 4 percent of these cases (when suspicion of ML/FT is serious or more time is needed); withholding consent amounts to an actual freezing of the assets involved.
  - Dissemination:
    - If analysis indicates link to proceeds of crime or terrorism funding, case passed to an officer of the Financial Criminal Team for investigation.
    - Dissemination also occurs to other authorities, particularly counterpart FIUs.
    - Dissemination rate ranges from 70 percent to 86 percent of total STRs received.
- Reporting format and systems (c. 26.2):
  - All STRs must be submitted in the prescribed form (Schedule to the Regulations 2007 issued by the Home Department under Section 11 of the DL and Section 15C of the TL).
  - The form requests identification data, status of business relationship, supporting documents, reasons for suspicion to enable FIS initial analysis and reliable statistics.
  - Form available on the FIS website and as an Appendix to both the FSB Handbook and the PSB Handbook, issued by the GFSC.
  - Disclosures can be delivered manually, by mail, by fax, or transmitted electronically.
  - FIU was developing an online reporting function in its intelligence database expected to become operational in June 2010.

*Source: Extract from IMF PDF chapter _cr1112 - 363. Measures in Guernsey to monitor compliance with the legislation, rules, and*

### 390.      Besides the guidelines issued by the supervisory authority, the FIS provides regular

### _cr1112 - 390.

### Training and Reporting Practices
- The FIS provides regular training sessions for the MLROs which include reporting requirements, case studies and other feedback issues.
- Reports not in the prescribed form are not accepted; in practice they are sent back to be corrected while the FIS starts its analysis anyway.

### Access to Information on a Timely Basis by FIU (c. 26.3)
- The FIS, as a police/customs unit, has full and direct access to local and U.K. law enforcement databases: Linkworks (Police), ICIS (Customs), and PNC (U.K. Police).
- Attorney General information: obtainable under Section 2 of the Fraud Investigation Law for investigation/prosecution purposes.
- Administrative information: available under Section 6 of the DL to “authorized persons” (government department employees authorized by a chief or equivalent officer).
- Tax information: obtainable under Section 9(2) of the DL for disclosure by the Director of Income Tax to a police or customs officer for law enforcement purposes.
- Charities/NPO information: available via the Director of Income Tax as keeper of the register of charities and NPOs.
- Financial/commercial information: GFSC may disclose information it already possesses under Section 21(2)(b) of the Financial Services Commission Law for prevention/detection of crime; additional financial information requires a court order.
- Beneficial ownership details: obtainable from Company Service Providers under Section 490 of the Companies Law by police or customs officers on service of an authorized certificate from the Chief Officer of Police or Chief Officer of Customs.
- The FIU/FIS subscribes to commercial databases including Experian (+ Force view), Equifax, LexisNexis, Companies House, JARD, World Check, Country Check, and C6.

### Additional Information from Reporting Parties (c. 26.4)
- Regulation 2 of the Disclosure Regulations 2007 (under Section 11 of the DL and Section 15C of the TL) requires reporting parties to provide requested additional material within seven days of a written notice.
- Failure to comply without reasonable excuse: offense punishable by up to five years imprisonment and unlimited fine.
- Section 11 powers have been used twice; incoming STRs generally do not give rise to frequent additional questioning because reporting entities generally provide full disclosure.
- The power to request additional information applies only to the entity that made the disclosure; querying other FSB or entities for financial information at intelligence level yields voluntary responses unless the case is lifted to investigative level and court orders issued.

### Dissemination of Information (c. 26.5)
- Legal basis: Section 8 of the DL permits police or customs officers to disclose information obtained under any enactment or in connection with functions for purposes in Section 8(2) (prevention, detection, investigation, prosecution of offenses in the Bailiwick or elsewhere; carrying out GFSC functions; intelligence service functions; other public functions designated by Home Department).
- Section 10 of the DL permits senior police/customs officers to disclose information to the Director of Income Tax if it may assist in carrying out his functions.
- Within the FIU, dissemination occurs by passing intelligence from FIS to other divisions (financial criminal team or civil forfeiture team) for further investigation or appropriate action.
- FIS role: selectively develop cases, collect additional information, and add value to disclosure information to initiate/direct investigations or support pending enquiries.
- STR intelligence is sanitized, evaluated into written intelligence reports using the U.K. National Intelligence Model grading system, and placed on local law enforcement databases or disseminated per Egmont principles.

### Operational Independence (c. 26.6)
- FIU and FIS do not have autonomous legal status; the FIU has its own budget.
- Both are part of overall law enforcement structure and accountable to hierarchy.
- Reporting lines: head of FIS → head of Financial Investigation Unit → head of Law Enforcement Division of the customs service.
- Functional interaction between the three sections of the Financial Investigation Unit exists; operationally the Unit is quite independent and controls its information.
- Assessment found no indication of undue outside interference or political pressure.

### Protection of Information Held by FIU (c. 26.7)
- Legal protection: Section 8 of the DL, POCL Sections 43 and 44, and DTL Sections 62B and 62C restrict instances where FIS information may be divulged, subject to Data Protection Law, 2001.
- FIS officers are contractually bound to confidentiality; breaches may lead to disciplinary action.
- Physical protection: FIU located within separate premises of the Cross Border Crime Division of the Guernsey Border Agency; secured access, restricted staff entry, secure storage of confidential documentation.
- Controls: cabinets locked when unattended; removal of intelligence material requires supervisor reference and is recorded; non-FIS staff removal recorded; no intelligence material placed on laptops or other media without senior investigation officer permission and appropriate security protocols.

### Publication of Reports and Outreach (c. 26.8)
- The FIS publishes periodic reports on its website and circulates hardcopy to organizations; reports contain statistical data and analysis of STRs, sanitized case reports, and overviews of additional activities (feedback project, training initiatives).
- FIS activities included in police and customs service annual reports.
- FIS has compiled articles for the Guernsey Association of Compliance Officers newsletter and written directly to sectors on particular issues (e.g., cash transactions by high-value goods dealers, use of the prescribed reporting form, awareness-raising).
- Operational reporting: quarterly reports for law enforcement and quarterly reports for the Bailiwick AML/CFT Advisory Committee to inform of current trends and cases of interest.

### Egmont Group Membership and Principles (c. 26.9–26.10)
- The Guernsey Financial Intelligence Unit has been an active Egmont Group member since 1997 (as Joint Financial Crime Unit initially, from 2001 as the FIS).
- The FIS hosted the plenary meeting in 2004 and participates in Egmont activities such as the Training Working Group.
- FIS Staff handbook and practice built on Egmont Principles for Information Exchange: free exchange for analytical purposes, prior consent before dissemination, and confidentiality.
- Significant use is made of the Egmont secure web for disseminations and exchanges.

### Adequacy of Resources—FIU (R. 30)
- FIS establishment: 12 staff comprising:
  - a senior investigation officer,
  - a detective sergeant,
  - four customs service investigators,
  - one detective constable,
  - two dedicated financial investigators,
  - one financial crime analyst,
  - two administrative staff (including a process manager).
- Analytical software: i2 Analyst Notebook, Microsoft Excel 2007, KYC360, and iTel.
- FIU budget expenditure for 2009: £1,600,000.
- Assessment: human and financial resources deemed sufficient to effectively perform functions.
- Recruitment and vetting: comprehensive recruitment processes including criminal conviction checks; FIS personnel selected from customs service and police based on investigative experience and aptitude; local and enhanced security clearance required; annual and interim appraisals applied.
- Training: induction, locally based courses by Guernsey Training Agency covering core financial vehicles (e.g., companies and trusts), data protection training.
- Core investigative training: NPIA Financial Investigation Training program; all investigative staff accredited as financial investigators/intelligence officers and subject to NPIA continuous development requirements.
- Specialized staff: two dedicated terrorist finance officers attended U.K. NTFIU course; one Financial Crime Analyst with long industry experience and specialist courses.
- Staff participate in regular joint training sessions and presentations within the Bailiwick for AML/CFT stakeholders.

### Statistics (R.32) — Grounds for STRs (annual counts)
- Yearly STR counts by ground (2006, 2007, 2008, 2009):
  - Tax: 152, 440, 192, 263
  - Cash transaction: 84, 43, 68, 63
  - Unexplained lifestyle: 73, 52, 25, 16
  - Due diligence issues: 30, 52, 41, 44
  - Layering: 40, 26, 3, 0
  - Fraud/false accounting/forgery: 47, 48, 86, 130
  - Other inc. defensive/reactive: 53, 42, 69, 64
  - Internet/media etc: 37, 23, 7, 13
  - Early redemption of product: 25, 7, 2, 1
  - Third party referral: 0, 2, 0, 4
  - Corruption: 8, 19, 13, 16
  - Unusual foreign exchange: 0, 0, 0, 0
  - High risk business activity/area: 1, 5, 1, 2
  - Service of order: 6, 1, 12, 11
  - Total: 555, 760, 519, 627
- Observation: Disclosures based on tax and fraud grounds predominate, with an average of around 60 percent of total STRs over the last three years.

### STRs Analyzed and Disseminated (2006–2009)
- Summary table values (Year: 2006, 2007, 2008, 2009):
  - Total no of STRs: 555, 760, 519, 627
  - Average no of Reports: 615, 615, 615, 615
  - Reports under Proceeds of Crime Law: 545, 731, 0, 0
  - Reports under Drug Trafficking Law: 5, 5, 0, 0
  - Reports under Disclosure Law (in force 17/12/07): 0, 24, 510, 622
  - No of reports above with FT link: 1, 3, 3, 1
  - Reports made under Terrorism Law: 5, 0, 6, 4
  - Number of Reports disseminated (in some cases to multiple recipients): 383, 557, 418, 542
- STR dissemination rate: ranged from 70 percent in 2006 to 86 percent in 2009.
- Note: Disseminations include local and international; STRs forwarded to multiple destinations often.

### Dissemination Figures (2008–May 2010)
- Dissemination totals by year:
  - 2008: Local Referral Law Enforcement 429; Local Referral External 17; Overseas Referrals FIU 403; Overseas Referrals Non FIU 142; Total 991; *Response to Referrals* 205; **Refused Response** 0
  - 2009: Local Referral Law Enforcement 464; Local Referral External 25; Overseas Referrals FIU 549; Overseas Referrals Non FIU 200; Total 1238; *Response to Referrals* 277; **Refused Response** 0
  - 2010: Local Referral Law Enforcement 94; Local Referral External 7; Overseas Referrals FIU 123; Overseas Referrals Non FIU 30; Total 254; *Response to Referrals* 188; **Refused Response** 0
- Extrapolation (2007–2009): around 40 percent of reports with a local destination and 60 percent forwarded to foreign authorities (mostly counterpart FIUs); this estimation requires caution.

### Geographic Distribution of Subjects (2006–2009)
- Country/region of residence of person(s) subject of STRs by year (2006, 2007, 2008, 2009):
  - Local: 137, 87, 91, 100
  - UK: 194, 439, 180, 207
  - Europe (excl UK & local): 123, 103, 132, 152
  - Africa: 34, 35, 40, 55
  - North America: 33, 38, 33, 59
  - Middle East: 12, 23, 14, 17
  - Caribbean: 2, 4, 4, 4
  - South Asia: 8, 5, 6, 13
  - Oceania: 8, 6, 6, 9
  - South America: 2, 8, 6, 4
  - Asia: 2, 12, 7, 7
  - Total STRs: 555, 760, 519, 627
- Ratio figures stated: 25 percent, 11.5 percent, 17.5 percent, 16 percent (presented in source).

### Outcomes and Investigations — Overall Results
- Total STRs submitted and total STRs resulting in further investigations (known results) and percentage:
  - 2007: 760 total STRs; 65 total known results; 8.6%
  - 2008: 519 total STRs; 83 total known results; 16%
  - 2009: 627 total STRs; 100 total known results; 16%
  - 2010: 173 total STRs; 21 total known results; 12.1%

### International Results (STRs of interest to jurisdictions outside Channel Islands, incl. UK)
- STR totals, known results, and summaries:
  - 2007: STR Total 42; No of (known) result(s) 11 — Eight convictions, two pending conviction and one case closed
  - 2008: STR Total 64; No of (known) result(s) 17 — Nine convictions, two pending trial, three cases closed, three investigations
  - 2009: STR Total 76; No of (known) result(s) 18 — Nine convictions, three ongoing investigations, two cases closed, four pending trial / sentencing
  - 2010: STR Total 14; No of (known) result(s) 6 — One conviction, one pending trial and four ongoing investigations
- International investigations involved countries including: Isle of Man; Belgium; Czech Republic; France; Germany; Turkey; Gibraltar; Italy; Norway; Portugal; Romania; Serbia; Switzerland; Sweden; United Kingdom; Argentina; Australia; Bermuda; Botswana; Brazil; British Virgin Islands; UAE; Ghana; Hong Kong; Iceland; India; Indonesia; Israel; Kenya; Mexico; Nigeria; the Philippines; Russia; Singapore; South Africa; Thailand; the United States; Zimbabwe.

### Local (Bailiwick of Guernsey) Investigations — Selected Categories (2007–2010)
- Mutual Legal Assistance 2007–2010:
  - 2007: STR Total 8; Known Result(s) 4 — One conviction / Civil Freezing Order
  - 2008: STR Total 1; Known Result(s) 0
  - 2009: STR Total 2; Known Result(s) 1 — One conviction / Restraint Order
  - 2010: STR Total 0; Known Result(s) 0
- Guernsey (Drug Trafficking) 2007–2010:
  - 2007: STR Total 8; Known Result(s) 7 — Three ongoing investigations, three convictions, one confiscation and one civil case ongoing
  - 2008: STR Total 7; Known Result(s) 5 — Two cases closed and three ongoing investigations
  - 2009: STR Total 10; Known Result(s) 7 — Seven ongoing investigations
  - 2010: STR Total 3; Known Result(s) 3 — Two ongoing investigations and one pending trial
- Guernsey (Crime) 2007–2010:
  - 2007: STR Total 2; Known Result(s) 1 — One pending trial
  - 2008: STR Total 4; Known Result(s) 1 — One arrest community service
  - 2009: STR Total 2; Known Result(s) 1 — One arrest community service
  - 2010: STR Total 0; Known Result(s) 0
- Guernsey (Crime) Money Laundering 2007–2010:
  - 2007: STR Total 0; Known Result(s) 0
  - 2008: STR Total 3; Known Result(s) 3 — Ongoing investigation
  - 2009: STR Total 2; Known Result(s) 2 — Ongoing investigation pending trial
  - 2010: STR Total 1; Known Result(s) 1 — One ongoing Investigation
- Guernsey (Fraud) 2007–2010:
  - 2007: STR Total 3; Known Result(s) 2 — Two convictions
  - 2008: STR Total 2; Known Result(s) 0
  - 2009: STR Total 2; Known Result(s) 0
  - 2010: STR Total 1; Known Result(s) 1 — One case closed
- Guernsey (Immigration Crime) 2007–2010:
  - 2007: STR Total 0; Known Result(s) 0
  - 2008: STR Total 0; Known Result(s) 0
  - 2009: STR Total 5; Known Result(s) 5 — Investigations ongoing, one conviction
  - 2010: STR Total 0; Known Result(s) 0
- Guernsey (Social Security) 2007–2010:
  - 2007: STR Total 0; Known Result(s) 0
  - 2008: STR Total 0; Known Result(s) 0
  - 2009: STR Total 0; Known Result(s) 0
  - 2010: STR Total 1; Known Result(s) 1 — Case under investigation
- Guernsey (Housing Benefit) 2007–2010:
  - 2007: STR Total 0; Known Result(s) 0
  - 2008: STR Total 1; Known Result(s) 0
  - 2009: STR Total 0; Known Result(s) 0
  - 2010: STR Total 1; Known Result(s) 1 — One pending investigation
- Jersey Fraud 2007–2010:
  - 2007: STR Total 0; Known Result(s) 0
  - 2008: STR Total 2; Known Result(s) 0
  - 2009: STR Total 1; Known Result(s) 1 — One conviction
  - 2010: STR Total 0; Known Result(s) 0

*Source: _cr1112 - 390.*

### 424.      The authorities supplied the following table on the amount of funds recovered through

### _cr1112 - 424.      The authorities supplied the following table on the amount of funds recovered through

### Recovered funds, convictions, and sentences (table summary)
- 2007
  - Convictions: 17
  - Sentence (Years): 46.3
  - Criminal Confiscation: £341,928
  - Other Funds Recovered: £12,267,505
  - Fines: £272,405,200
  - Bonds: £40,000
- 2008
  - Convictions: 9
  - Sentence (Years): 26.4
  - Criminal Confiscation: 0
  - Other Funds Recovered: 240 hours
  - Civil Recovery: £3,551,726
  - Community Service: (listed)
  - Fines: (listed)
- 2009
  - Convictions: 15
  - Sentence (Years): 100
  - Criminal Confiscation: £890,000
  - Other Funds Recovered: 5 Years
  - Confiscated Amounts/Proceeds: £204,427,151
  - Fines: £1,863,060
  - Community Service: 240 hours
  - Directorship ban: (listed)
  - Restrained: (listed)
- 2010
  - Convictions: 1
  - Sentence (Years): 15
  - Criminal Confiscation: £500,000
  - Other Funds Recovered: £1,634,431
  - Confiscation Pending: (listed)
- Totals (as presented)
  - Total Convictions: 42
  - Total Sentence (YRS): 187.7 (YRS)
  - Total Criminal Confiscation: £1,731,928
  - Total Other Funds Recovered: £496,189,074
  - Grand Total: £497,921,002

### Caveats on the table
- The total number of convictions (42 international + local) does not correspond with the breakdown statistics above (in total 39, including community service); discrepancy may be due to double counting or incomplete feedback.
- The relation between STRs and investigations/convictions: some STRs may have triggered investigations directly; others may have been used only as supportive or illustrative material. The statistics do not differentiate the role of STRs in investigations/prosecutions.

### FIU/FIS establishment, designation, and functions
- No legal statute or instrument formally established a Financial Intelligence Unit in the Bailiwick.
- Reporting regime evolution:
  - Obligation to report to a “police officer” evolved to (since May 17, 2010) a “prescribed police officer.”
  - FIS formally designated as the central reception point of disclosures made under the Disclosure Law.
  - Long-standing practice since April 1, 2001: channeling all STRs to the Financial Intelligence Service as a subdivision within the Financial and Economic Crime Branch (renamed Financial Investigation Unit–FIU).
- Functional role of FIS:
  - Central authority receiving all STRs.
  - Subjects STRs to an analytical process.
  - Decides if and to whom information should be disseminated.
- Organizational separation: clear distinction between intelligence functions (FIS) and investigative law enforcement functions (FIU).

### STR processing, access to information, and international engagement
- STR processing path:
  - Incoming disclosures matched with FIS-accessible databases.
  - Subjected to evaluation and forwarded to law enforcement authorities (mostly Financial Crime Team within FIU) if indications of ML/TF exist.
- FIS analytical practice:
  - Described as “in practice rather passive.”
  - Power to query all administrative services of the Bailiwick, but exercised only on two occasions since 2007 (requests for tax information).
  - Limited direct access to financial information: legal permission only to query the reporting entity for complementary information and to request supervisory authorities for information in their possession.
  - Tracing existing financial accounts (FAE) practiced, but financial institutions not under obligation to disclose that information.
  - Other financial information requires court intervention and statutory investigative powers of the FIU.
- International activity:
  - FIS active in international scene and shares intelligence with counterpart FIUs.
  - Systematic (spontaneous) dissemination of information to competent authorities of other jurisdictions.

### Human and financial resources; skills and operational capabilities
- Resources reflect serious commitment to protecting reputation of financial center.
- Professional level of FIS staff and specific AML/CFT training noted.
- Multidisciplinary approach: police and customs officers, analysts, legal assistants.
- Access to law enforcement, administrative, and commercial information, but limited use of administrative sources.
- Contract for forensic accountancy services available to law enforcement financial crime teams.
- Technical skills within FIU/police/customs: CHIS handling, trained search team, forensic computing skills.

### Effectiveness metrics and observations
- Reporting level: approximately 50 STRs per month, and increasing.
- Dissemination rate: reached 86 percent in 2009.
- Estimated dissemination rate to overseas authorities (in terms of single STRs): 60 percent.
- Estimated STRs resulting in investigations: 16 percent in the last two years (based on feedback); caution advised due to variability and reliability of foreign feedback.
- Domestic ML performance (2007–2009):
  - Five ML investigations over three years.
  - Five ML prosecutions undertaken.
  - Two ML convictions obtained.
  - STR information used in only one prosecution.
- Timeliness:
  - No indications of lack of timeliness or unreasonable delays due to internal structural factors.
  - Delays may occur when FIU depends on external sources.
  - Consent procedure imposes time pressure but has not caused real difficulties; positive effect includes immobilization/freezing of suspected assets.

### Identified weaknesses and challenges
- Limited direct access to financial information for FIS; additional financial information ordinarily obtainable only through court order (an investigative measure).
- FIS has made little use of available administrative sources.
- Heavy dependence on assistance from counterparts abroad, which is not always forthcoming or sufficiently informative.
- Low level of domestic law enforcement follow-up on money laundering prosecutions and convictions relative to STR volume.
- System predominantly focused on processing predicate criminality and deferring substantive ML prosecutions/asset recovery to foreign originating countries.
- Need to enhance capability to investigate and prosecute money laundering as a stand-alone offense within the Bailiwick, relying on domestic evidence and retaining prosecutions locally.

### Recommendations and compliance (R.26)
- Recommendation:
  - The FIU/FIS, as part of the Bailiwick law enforcement community, should implement steps to improve the effectiveness of the reporting system to support an increase in the number of investigations and prosecutions.
- Compliance with Recommendation 26
  - Rating: LC
  - Summary of factors underlying rating:
    - Limited effectiveness of the overall reporting system in terms of domestic law enforcement results in respect of money laundering.
    - Lack of effectiveness due to a limited direct access to financial information.

### Law enforcement, prosecution, confiscation and freezing framework (R.27 and R.28) — description and analysis
- Legal framework:
  - Proceeds of Crime Law (POCL)
  - Drug Trafficking Law (DTL)
  - Terrorism Law (TL)
  - Civil Forfeiture Law (CFL)
  - Police Powers and Criminal Evidence (Bailiwick of Guernsey) Law, 2003
  - Regulation of Investigatory Powers (Bailiwick of Guernsey) Law, 2003
  - Customs officers can exercise same powers as police officers (see i.a. s.17 DL, s. 51 POCL).
- Attorney General powers:
  - Overall responsibility for prosecution.
  - Investigative powers under Fraud Investigation Law, Insider Dealing Law, Protection of Investors Law.
  - Responsible for issuing warrants under Regulation of Investigatory Powers Law.
  - All prosecutions brought in his name and presented by specialist prosecution team within his Chambers.
- Designation of authorities for ML/FT investigations:
  - Financial Investigation Unit (Cross Border Crime): division of Guernsey Border Agency (Customs and Excise); primary responsibility for cross-border ML/TF and all other financial crime with cross-border element; staffed by police and customs officers; made up of three teams.
    - Financial Criminal Team: responsibility for confiscation, ML/TF investigations, evidence gathering, prosecution file compilation.
    - Civil Forfeiture Team: responsibility for non-conviction based asset recovery.
  - Police Commercial Fraud Department (PCFD): responsible for domestic financial crime investigations; can add ML charges but substantive ML/confiscation investigations conducted by FIU.
  - Guernsey Police: investigates offences not assigned to specific law enforcement departments; can add money laundering charge to local proceed-generating offences.
- Ability to postpone/waive arrest or seizure (c. 27.2):
  - Police Powers Law confers permissive power to arrest and seize; exercise can be deferred, postponed, or waived to follow the money trail, identify suspects, or gather evidence.
- Use of special investigative techniques (c. 27.3 and c. 27.4):
  - Regulation of Investigatory Powers Law provisions:
    - Sections 3 to 5: interception of communications.
    - Sections 22 and 23: directed surveillance.
    - Section 24: covert human intelligence sources.
    - Section 26: intrusive surveillance.
    - Section 39: entry on to and interference with property.
    - Section 46: investigation of electronic data protected by encryption.
  - Use of techniques dependent on consent of the Attorney General, except Section 46 which requires written permission from a person holding judicial office.
  - Techniques have been used against serious crime syndicates (example: Operation Cash Extraction).
- Specialized investigation groups and multinational cooperation (c. 27.5):
  - Financial Criminal Team staffed by trained financial investigators; supported by Technical Support Units.
  - Investigators possess CHIS handling, trained search team, forensic computing skills.
  - FIU manages contract for forensic accountancy services.
  - Assistance using special investigatory techniques afforded to other jurisdictions on a case-by-case basis; use subject to Regulation of Investigatory Powers Law and joint protocols.
- Review of ML and TF trends (c. 27.6):
  - Internal and interagency reviews of methods, techniques, and trends take place regularly.
  - FIU circulates Egmont group newsletters and sanitized cases of interest.
  - FIU receives FT assessments and circulars from Serious Organized Crime Agency via Special Branch and Police Force Intelligence Bureau.
  - FIU subscribes to ML publications and emphasizes skill and sector knowledge development.
  - Relevant practitioners meet quarterly via AML/CFT Advisory Committee, Financial Crime Group, and Terrorist Finance Team meetings to discuss developments and current cases.

*Source: IMF staff report content unit _cr1112 - 424.*

### 449.      There are several legal provisions conferring law enforcement authorities the power

### _cr1112 - 449.      There are several legal provisions conferring law enforcement authorities the power

### Investigatory powers over financial evidence (paragraph 449 and related)
- Law enforcement authorities can, directly or through court intervention, demand, search for, and seize evidentiary material of a financial nature in money laundering or terrorism financing investigations.
- Production orders:
  - Section 45 of the POCL and Section 63 of the DTL permit a police officer with the authorization of the Attorney General to apply ex-parte to the court for a production order (order requiring a named person to deliver up specified material).
- Search and seizure warrants:
  - Section 46 of the POCL and Section 64 of the DTL permit a police officer with the authorization of the Attorney General to apply for a warrant to search specified premises, such as FSB, and seize material found there, under certain conditions.
- Customer information orders:
  - Section 48A of the POCL and Section 67A of the DTL allow courts to issue customer information orders, requiring FSB to provide specified information related to a particular customer if that person is the subject of an investigation into money laundering, or location of criminal proceeds.
- Account monitoring orders:
  - Section 48H of the POCL and Section 67H of the DTL permit court-issued account monitoring orders requiring named FSB to provide information about any dealings relating to the account or group of accounts named in the order, for a period not exceeding 90 days.
- Application to terrorism financing:
  - Terrorism financing offenses fall within the definition of criminal or unlawful conduct at Section 1 of the POCL and Section 61 of the CFL; investigatory powers under these laws are engaged.
  - Schedules 5 to 7 of the TL (including Section 31) provide specific investigatory powers in terrorism investigations, including warrants permitting entry, search and seizure, production orders, orders requiring explanation of seized or produced material, customer information orders, and account monitoring orders.
- General police powers:
  - Parts I and II of the Police Powers Law contain generally applicable powers of search and seizure if there are reasonable grounds to believe a serious arrestable offense as defined in Section 90 has been committed; that definition covers offenses involving actual or intended substantial financial gain or serious financial loss, threats to the security of the Bailiwick or to public order, or causing death or serious injury, thereby applying to most predicate offenses and proceeds-of-crime and terrorist funding cases.
- Fraud and market misconduct statutes:
  - Section 1 of the Fraud Investigation Law gives the AG special powers to obtain evidence without a court order in respect of serious or complex fraud, including financial proceeds aspects; the AG may require production of evidence and seek search and seizure warrants from the court.
  - Sections 10 to 13 of the Insider Dealing Law and Sections 41L and 41M of the Protection of Investors Law provide similar powers applicable where predicate offenses involve conduct covered by those laws.

### Power to take witnesses' statements (paragraphs 450–451)
- General authority:
  - All law enforcement officers are entitled and have the power to take down statements of witnesses; this authority is inherent to the investigative function of a police or customs officer and embedded in general principles of criminal law and procedure.
- Non-voluntary statement powers in special circumstances:
  - Par. 6 of Schedule 5 to the TL permits explanation of material produced in response to a production order or as a result of a search warrant.
  - Section 1(2) and (3)(b) of the Fraud Investigation Law permit the AG to require answers to questions or furnishing of information relevant to the investigation or the whereabouts of documents.

### Statistics and adequacy of law enforcement resources (paragraphs 452–457)
- FIU and law enforcement staffing:
  - The FIU within the customs service is funded under a budget allocated to the Law Enforcement Division and comprises three teams: the Financial Criminal team, the FIS, and the Civil Forfeiture Team.
  - The FIU is currently staffed by 21 personnel.
  - The police force has an establishment of 176 officers, augmented by 61 civilian support staff, to police the Bailiwick.
  - The Police Fraud Department has four officers who come under the line management of the Detective Inspector CID, who has command of a further twelve detectives in that Department.
- Prosecution resources:
  - The Director of Prosecutions has a team of five other lawyers, a paralegal (a former police officer), and a personal assistant.
  - A mutual legal assistance lawyer and an asset recovery lawyer work alongside the prosecution directorate and share the paralegal and personal assistant resource.
- Prosecutor qualifications and training:
  - All professional members of the prosecution directorate are required to have qualified as solicitors or barristers in the United Kingdom or in a Commonwealth jurisdiction.
  - Senior position holders must demonstrate significant experience of criminal practice.
  - All lawyers in the prosecution team are required to undertake training in money laundering and terrorist financing by attending a minimum of at least one relevant course per year.
- Operational independence and cooperation:
  - Police and customs have full operational autonomy and independence and are free from undue influence or interference.
  - Prosecutors work closely with law enforcement but retain final decision-making power on prosecutions; the Code for Crown Prosecutors is applied.
  - All staff in law enforcement and the prosecution directorate receive regular compulsory AML/CFT training. Financial investigators and analysts attend NPI and similar courses; Police Commercial Fraud Department officers undergo a basic fraud investigation course in the United Kingdom followed by the NPIA/ARA course for financial investigation.
  - Partnership agreements with U.K. forces, the Metropolitan Police, and the City of London Police allow short-term attachments to Economic Crime Units.

### Implementation and effectiveness (paragraphs 458–460)
- Case statistics (money laundering cases 2006–2009; see 2.1 referenced):
  - 26 investigations
  - 8 referrals to prosecutors
  - 5 prosecutions
  - 2 convictions (guilty pleas)
  - 1 prosecution pending on several counts of money laundering (autonomous)
  - An STR was involved (value unknown) in only 1 case that ended in a conviction.
- Assessment:
  - Number of investigations is steadily rising, but prosecutions remain very modest.
  - Law enforcement authorities are described as adequately resourced and trained with a sufficient legal arsenal to conduct investigations and collect evidence, yet results are modest.
  - Emphasis on sharing information with overseas agencies is commendable but carries risk of overreliance on foreign law enforcement taking the initiative while money laundering activity in the Bailiwick continues.
  - Limited number of successful prosecutions for money laundering raises an issue of overall system effectiveness.
  - Recommendation for judicial authorities to develop expertise and case law in stand-alone money laundering based on evidence collected in the Bailiwick’s jurisdiction.

### Recommendations and compliance (paragraphs 2.6.2–2.6.3)
- Recommendation:
  - The authorities should implement steps to improve effectiveness by seeking to increase the number of investigations and prosecutions, particularly on autonomous money laundering.
- Compliance ratings summary:
  - R.27: LC
    - Factor: Limited law enforcement effectiveness as reflected in the low number of cases resulting in prosecution.
  - R.28: C

### Cross-border cash control regime (paragraphs 461–474 and related)
- Legal framework and objectives:
  - Cash Control (Bailiwick of Guernsey) Law, 2007 introduced a cross-border cash control regime to "disrupt the cash transfer networks which support terrorism, money laundering and all forms of financial crime" and to align with FATF standards and EC Regulation 1889/2005.
  - The Law came into effect on February 18, 2008.
  - Other relevant statutes: Customs Law 1972 (transportation by freight) and the Post Office Ordinance (parcel post). All extend to Sark and Alderney.
- Declaration system and threshold:
  - Guernsey uses a declaration system aligned with EU external border regime: individuals importing into or exporting from the Bailiwick cash and bearer-negotiable instruments to a value of €10,000 or more must report to an "officer" (Customs and Excise).
  - It is an offense to carry in excess of a "specified" amount (set at €10,000) into or out of the Bailiwick unless the cash passes through a designated port or customs service airport and the individual completes a truthful cash control declaration (S.1(1)).
- Coverage and exceptions:
  - Cash transported by freight or containerized cargo is governed by the Customs Law 1972 general declaration regime (S.14 & 28); Section 6(2) of the Cash Control Law deems cash in excess of €10,000 to be "goods" for Customs Law purposes.
  - Mail by parcel or courier is controlled by Section 5 and 6 of the Post Office Ordinance 1973; packet declarations must state nature, quantity, and value. The Ordinance terminology ("dutiable goods, small packets, or letter packets") is not specified in relation to the Cash Control Law and is difficult to reconcile.
- Definition of cash amendments:
  - Original Cash Control Law (S.10 (1)) covered currency and bearer negotiable instruments per international references.
  - Definition extended on August 10, 2009 by the Cash Control Law (definition of cash) Ordinance, 2009 to include bullion (including gold, silver, palladium, platinum bullion).
  - Amended on March 24, 2010 by the Cash Control Law (amendment of definition of cash) Ordinance, 2010 to include postage stamps.
- Powers to request origin/use information:
  - Section 6 of the Cash Control Law applies Customs Law, so customs officers may require "evidence" under Section 33 of the Customs Law, including enquiries on origin or use of cash. No equivalent provision in the Post Office Ordinance.
- Restraint and seizure:
  - Civil Forfeiture Law Sections 6 and 7 enable cash in excess of £1,000 to be seized for an initial period of 48 hours, extendable by court order to up to two years if suspicion of criminal proceeds or intended unlawful use exists; Section 3 of the Civil Forfeiture Law defines cash similarly to the Cash Control Law.
  - Terrorist-related cash can be seized under Section 19 and part 2 of Schedule 3 of the TL for an initial period of 48 hours, extendable by court order to up to two years; Schedule 3, paragraph 1 TL defines cash similarly; there is no minimum threshold for terrorist cash seizure.
  - False declaration: seizure and detention powers under Section 56 of the Customs Law can be applied; cash may be forfeited under Section 22(e) of the Customs Law and Section 7(b) of the Cash Control Law. The Post Office Ordinance makes goods liable to forfeiture under Section 12 but lacks specific temporary restraint provisions.
- Data retention:
  - Section 4 of the Cash Controls Law charges the Chief Officer of Customs and Excise to keep a record of all information from cash control declarations and to conserve the data for a minimum of six years.
  - All declaration data made under the Customs Law is retained for three years.
  - Declarations under the Post Office Ordinance are retained for three years only if goods have been forfeited because of a false declaration.
  - All cases of suspected money laundering or terrorist financing generate an investigation with data from the investigation being kept for 6 years; in practice information is stored with the FIS.
  - Declaration data are not categorized as STR information (except information disclosed by the Post Office under the Disclosure Law as STRs) and remain accessible and available to other law enforcement agencies.
- FIU access and domestic coordination:
  - Agreed procedure: all information collected under the Cash Control Law is sent to the FIS for analysis and further investigation, if necessary.
  - Only two cases from declarations were forwarded to the Director of Income Tax in 2008; otherwise no declaration triggered further law enforcement action.
  - Information on cash declared in freight or by post is forwarded to the FIS only if there is suspicion or during periodic risk assessments.
  - In the past four years, 130 STRs were made by the Guernsey Post Office, most about parcels containing cash.
  - Coordination for law enforcement purposes between authorities is common practice; immigration is part of the Customs Service facilitating coordination; FIU comprises officers from both Customs and Police.
- International cooperation:
  - Section 5(1) of the Cash Controls Law allows disclosure of information for investigation, prevention, or detection of crime or for criminal proceedings not limited to Guernsey; Section 5(1)(f) permits sharing with competent authority of another country or territory on a reciprocal basis when an officer suspects information relates to illegal activity.
  - Guernsey Customs participate in global information exchange networks via bilateral and multilateral Customs agreements.
  - Section 4(6) of the European Communities (Bailiwick of Guernsey) Law 1973 provides for exchange of information and cooperation with EU Customs on Community obligations, covering EU Regulation 1889/2005 on cross-border cash control.

*Italic: Content derived from the provided IMF chapter/section text.*

### 475.      In addition to the offense of making an untrue declaration in violation of Section 1 of

### _cr1112 - 475.      In addition to the offense of making an untrue declaration in violation of Section 1 of

### Offenses and sanctions for false declarations and “smurfing”
- Section 1(2) makes it an offense for an individual to enter into an agreement or arrangement by which cash in excess of the specified amount is split and carried by two or more individuals to avoid making cash control declaration (“smurfing”).
- Both offenses (untrue declaration and smurfing) are punishable on indictment by:
  - an unlimited fine; and
  - a term of imprisonment of up to two years (Section 7).
- Cash concerned is liable to forfeiture by virtue of:
  - Section 7(b) of the Cash Controls Law; and
  - Section 22(e) of the Customs Law.
- Freight declaration non-compliance (Sections 14 and 28 of the Customs Law) is punishable with a fine of up to £5,000 and cash may be forfeited under Section 22.
- Under Section 12 of the Post Office Ordinance 1973, the parcel related to false declarations is only liable to forfeiture.
- Regulatory sanctions of the GFSC and the AGCC, such as license revocation, can be invoked as appropriate.
- Section 9 of the Interpretation Law extends sanctions to natural and legal persons by defining “person” to include any corporate or unincorporated body.
- Prosecutions for ancillary offenses can be brought under the Attempts Law and the Aiding and Abetting Law where necessary.
- Prosecution responsibility:
  - Prosecution directorate of the Attorney General’s Chambers prosecutes the above offenses;
  - Bailiwick courts apply the penalties;
  - Regulatory sanctions are the responsibility of the GFSC and the AGCC.
- Concurrent prosecution may be brought against directors or senior managers of a legal person if their involvement can be established; regulatory sanctions can also be applied to directors and senior managers.

### ML/TF-related criminal procedure and penalties (cross-border physical transportation)
- Depending on evidentiary value and elements, ML and FT criminal procedure and code provisions apply:
  - Sections 38 & 40 PCL; Sections 57 and 59 DTL; 9 and 11 TL — all carrying up to 14 years imprisonment and an unlimited fine.
- Criminal charges may be brought against the person within the context of the cross-border declaration regime.

### Confiscation and application of Civil Forfeiture/Terrorism laws
- On suspicion the cash is proceeds of crime or related to terrorism financing, all seizure and forfeiture provisions of the Civil Forfeiture Law and of the Terrorism law fully apply.
- Example case: In 2005 a sum of £14,950 sent by post was seized and ultimately confiscated.

### Confiscation pursuant to UN SCRs
- Declarations are routinely checked against lists of designated terrorists.
- Persons crossing the border with funds subject to UNSCR 1267 and 1373 sanctions, or attempting to do so, breach the legislation imposing those sanctions.
- Cash liable to seizure under:
  - Sections 6 and 7 CFL; or
  - Section 19 and Part 2 of Schedule 3 of the TL;
  - Confiscation depends on evidentiary value.

### Precious metals and stones (definition, reporting, Kimberley Process)
- Since August 10, 2009, the Cash Controls Law definition of cash was extended to include gold, silver, palladium, and platinum bullion.
- Customs service gives special attention to import and export of such precious goods.
- As a matter of practice, unusual or suspicious movements of gold, precious stones, or metals would be reported to the customs service or other appropriate authority in the country of origin.
- Unusual importations of precious metals or stones will be reported through the Kimberley process to the relevant U.K. office.
- No unusual movements have taken place to date; no notifications were sent as yet to foreign agencies.

### Safeguards for proper use of declaration information
- Section 5 of the Cash Controls Law limits lawful use and disclosure of cash declaration related data.
- Data are stored within the FIS and physically protected in the same way as STRs.
- Information is categorized as intelligence material and disseminated as such.
- Reports made under the Cash Controls Law are centrally stored in computerized form within the FIS and are available to competent authorities for AML/CFT purposes; dissemination follows POCL and DL provisions.

### Training, data collection, enforcement, targeting
- All customs investigators and border staff have received training to identify and assess movements of cash into and out of the Bailiwick; guidance published in the customs service handbook.
- Data relevant to cross-border movement of cash is collated by the FIS.
- Regular risk-assessment exercises are conducted to identify cross-border movement of cash; exercises supported by specially trained cash-sniffing dogs.
- Contraventions related to cash are to be reported and investigated by the FIU.

### Practical detection and interdiction capacity (implementation of SR.IX best practices)
- Customs service officers at borders have received training on movement of cash; regular typologies and national cases are provided to up-skill staff.
- Detection tools available include X–ray equipment and other detection methods; cash-sniffing dog used on occasions.
- Customs and Special Branch ports officers maintain good working relationships with port staff; port staff receive routine briefings and are encouraged to report suspicions.
- Profiling practices: officers profile passenger movement and identify travel to/from high-risk jurisdictions, unusual routes, race, religion, or ethnicity; typologies assist detection.
- Law enforcement access to data: passport information, ticket details, routing, shipping documents, cargo manifests, airway bills.
- Where cash is detected, staff are trained to evaluate traveler’s need to carry cash and identify early indicators funds may be proceeds of crime or for terrorism financing.
- Tests available to check for traces of explosives or drugs on currency.

### Statistics on cross-border declaration system (Cash Controls Law)
- Overall number of declarations:
  - 2008: Total 29; Exiting Jurisdiction 18; Entering Jurisdiction 11; Air Travel 24; Sea Port 5; Intelligence Disseminated 2
  - 2009: Total 55; Exiting Jurisdiction 34; Entering Jurisdiction 21; Air Travel 50; Sea Port 5; Intelligence Disseminated 0
- Note: Statistics on declarations made under the Customs Law (freight) or the Post Office Ordinance (parcels) were not available.
- The two cases disseminated in 2008 were forwarded to the Director of Income Tax for criminal investigation purposes.

- Overall amounts declared (Sterling converted 2008 / Sterling converted 2009; Export / Import):
  - British Pound: 420,128.87 / 355,860.00 ; 134,202.00 / 185,950.00
  - US Dollar: 52,064.00 / 24,438.00 ; 3,050.00 / 47,458.00
  - Euro: 367,511 / 159,944.00 ; 72,280 / 100,590.00
  - Bullion: 0.00 / 0.00 ; 531,631.00 / 0.00
  - Repatriated: 250,000.00 / 250,000.00 ; 0.00 / £2,500,000
  - Total: 669,575.00 / 434,382.00 ; 741,163.32 / 2,833,998.00
- Note: “Repatriated” means corresponding bank to bank dispatches under cash declaration forms.
- One instance of cash seizure: in 2005, a sum of £14,950, sent by post and spread over several batches, was seized under the DTL and ultimately confiscated.

- Dissemination of Cash Declaration information (selected items):
  - 2008: No. of disseminations 1 — International–U.K. — U.K. traveler arrived to purchase gold bullion. (Transaction was refused and U.K. HMRC authorities notified)
  - 2008: No. of disseminations 2 — External — Disseminations to Guernsey Income Tax
  - 2009: No. of disseminations 1 — International–South Africa — South Africa FIU regarding 11 independent declarations received concerning cash & travelers checks exported from SA

### Adequacy of customs resources, standards, and training
- Customs service structure and resourcing:
  - Autonomous body with operational independence; Chief Officer reports to the Home Department of the States of Guernsey.
  - Staff: 92 full-time employees.
  - Four divisions: Law Enforcement, Immigration, Customs and Excise, and Corporate.
  - Law enforcement division budget: approximately £5 million; 87 percent comprises staff costs.
  - Law enforcement division branches: Detection, Operations, Professional Standards, and the FIU.
- Staff standards and integrity:
  - Well-developed recruitment process including assessment day and formal interviews.
  - Financial Investigators: enhanced security clearance; nationally accredited through the National Police Improvement Agency; NVQ level 3 Investigation.
  - Regular appraisals and continuous professional development to maintain standards.
  - Professional Standards Branch measures and assesses staff performance and conduct.
  - All customs service members bound by confidentiality agreements and covered by tipping off offences, data protection, and computer misuse provisions.
- Training:
  - Comprehensive training strategy linked to the U.K.’s national occupational standards.
  - Officers undertake nationally-accredited training courses and ongoing personal development.
  - Specialist financial investigation and intelligence training provided to FIU personnel with ongoing training events and typologies.

### Implementation, effectiveness, and legal divergences
- Cash Controls Law 2007 brought the Bailiwick in line with EC Regulation 1889/2005 and expands definition of “cash” via Cash Controls Law Ordinances 2009 and 2010 to include bullion and postage stamps.
- Controls effectively implemented: frequency of declarations and STRs filed by the Post Office resulted in a sizable amount seized and confiscated.
- Systematic controls conducted at airports, ferry terminals, private yachts, other boats, and ad hoc within the Post Office.
- No instances of non- or false declaration reported; none of the declarations have given rise to further action (except two tax-related cases in 2008) or been used in support of investigations.
- Legal framework gaps and divergences:
  - Non-canalized movements of cash are not incorporated within Cash Controls legislation (no requirement to complete a cash declaration form).
  - Customs Law and Post Office Ordinance differ from Cash Controls Law and FATF standards:
    - Post Office Ordinance items are referred to as “dutiable goods, small packets or letter packets,” which poorly maps to “cash” or bearer negotiable instruments.
    - Under Customs Law and Post Office Ordinance, no obligation to forward declarations of cash exceeding €10,000 to the FIS; forwarding only occurs when suspicion exists or as a result of risk assessment exercises.
    - Post Office Ordinance does not provide authority to make further enquiries nor provisions on temporary restraint measures.
  - Divergent sanction levels:
    - Cash Control Law: imprisonment up to two years, unlimited fine, and forfeiture.
    - Customs Law: fine maximum £5,000 and forfeiture.
    - Post Office Ordinance: only forfeiture.
    - No objective justification for these differences; Post Office Ordinance sanction considered disproportionally and ineffectively low.
  - Authorities’ position: customs contend the Ordinance is an “assigned matter” and Customs Law penalties will apply, but Post Office Ordinance is not categorized as a “Customs Law,” making application controversial and open to legal challenge.

### Corrective actions and recommendations
- After the on-site visit, corrective action: Post Office (Postal packets) (Amendments) Regulations 2010 came into effect on 28 July 2010, bringing the mail declaration system in line with the cash importation regime by freight:
  - Under these Regulations, cash over £50 is considered to constitute “goods” for purposes of the Post Office Ordinance and the customs and excise laws; the term “dutiable” is removed.
  - Sanctions for breach of Post Office Ordinance declaration requirements raised to a maximum of two years imprisonment and an unlimited fine.
  - Customs enquiry and restraint powers also apply.
- Further corrective action recommended:
  - Bring all cross-border transportation of cash above the specified threshold by any means under the uniform declaration regime of the Cash Control Law to provide a firm legal basis and full alignment with international standards.
- Specific recommendations and comments:
  - Legislative steps to align cross-border cash declaration control related to mail with the comprehensive approach of the Cash Controls Law 2007, particularly regarding authority to enquire, temporary restraint measures, and adequate and uniform sanctions.
  - Although limiting FIS notification to suspicious incidents for freight and post parcels formally complies with standards, from an effectiveness perspective it is recommended to adopt a uniform approach for all cross-border cash transportations.

### Compliance with FATF Special Recommendation IX
- Rating: SR.IX LC
- Summary of factors underlying rating:
  - (Before 29 July 2010) Cash control system in relation to post parcels deviated from international standards (e.g., authority to make further enquiries, temporary restraint, and low sanctions).
  - No unified regime for all cross-border cash transportation (effectiveness).

*Source: Excerpt from the provided IMF country report content unit.*

### 3. PREVENTIVE MEASURES—FINANCIAL INSTITUTIONS

### 3. PREVENTIVE MEASURES—FINANCIAL INSTITUTIONS

### Customer Due Diligence and Record Keeping

- The chapter addresses preventive AML/CFT measures applicable to financial services businesses (FSBs) in the Bailiwick, focusing on Customer Due Diligence (CDD), record keeping, legal foundations, and enforcement mechanisms.

### Risk of money laundering or terrorist financing

- The financial services industry in the Bailiwick is subject to a significant risk of money laundering, particularly in the layering and integration stages.
- Factors contributing to elevated risk:
  - A substantial portion (indeed in many sectors the large majority) of relationships are conducted on a non face-to-face basis with non-residents of the Bailiwick.
  - Many business relationships are conducted through introducers and intermediaries, some located in the Bailiwick and many in other jurisdictions with varying levels of regulation and supervision.
  - Private banking represents a significant proportion of the Bailiwick's business.
  - The prevalent use of legal persons and trusts, particularly as holding vehicles for personal investment assets, can create complexities in identifying beneficial owners and parties with significant ownership or control interests.
- To address elevated risk, the Bailiwick has substantially strengthened AML/CFT preventive measures applicable to financial institutions.

### Legal Framework

- Primary legislation:
  - Proceeds of Crime Law (POCL) — defines “money laundering,” specifies businesses considered to be FSBs, and provides the Policy Council mandate and powers to set obligations and requirements for FSBs.
  - Section 15 of the Disclosure Law (DL) — provides that the GFSC may implement rules and issue guidance for FSBs relating to disclosure of information and money laundering generally.
  - Both the POCL and the DL have been adopted by the Bailiwick’s legislative body and sanctioned by the Privy Council; they constitute primary legislation for this assessment.
- FSB Regulations:
  - Issued by the Policy Council under Section 49 of the POCL in December 2007.
  - Impose basic requirements on FSBs including corporate governance, risk assessment, CDD, monitoring of transactions and activity, reporting of suspicion, employee screening, training, and record keeping.
  - Regulation 17: breaches are subject to criminal sanctions:
    - On conviction on indictment: imprisonment not exceeding a term of five years or a fine or both.
    - On summary conviction: imprisonment for a term not exceeding six months or a fine not exceeding £10,000 or both.
  - FSB Regulations are secondary legislation but considered “law or regulation” within the FATF definition because they were issued under specific power in primary legislation, approved by the States of Guernsey, and contain mandatory provisions enforceable with sanctions.

### Scope of FSB Regulations and Schedule 1 businesses

- FSB Regulations apply to “financial services businesses” as defined by reference to Schedule 1 to the POCL and include activities carried on “by way of business for or on behalf of a customer.”
- Listed businesses in Schedule 1 (selected highlights from the list provided):
  - Lending (including consumer credit, mortgage credit, factoring with or without recourse, financing of commercial transactions (including forfeiting), advancing loans against cheques).
  - Financial leasing.
  - Operating a money service business (including money or value transmission services, currency exchange (bureau de change) and check cashing).
  - Buying, selling or arranging buying or selling of bullion or postage stamps, subject to monetary thresholds and exceptions.
    - Exception thresholds and linked transaction definitions reference £10,000.
  - Facilitating or transmitting money or value through an informal money or value transfer system or network.
  - Issuing, redeeming, managing, or administering means of payment (including credit, charge and debit cards, checks, travelers’ checks, money orders, bankers’ drafts and electronic money).
  - Providing financial guarantees or commitments.
  - Trading in money market instruments, foreign exchange, interest rate or index instruments, commodity futures, transferable securities or other negotiable instruments or financial assets.
  - Participating in securities issues and provision of related financial services.
  - Providing settlement or clearing services for financial assets.
  - Advice to undertakings on capital structure, industrial strategy, mergers or purchases (subject to exceptions for lawyers and accountants).
  - Money broking, money changing, portfolio management, safe custody, services for safekeeping or administration of cash or liquid securities.
  - Credit unions, accepting repayable funds other than deposits, accepting deposits in the course of “deposit-taking business” as defined in the Banking Supervision Law.
  - “Controlled investment business” as defined in the Protection of Investors Law.
  - “Insurance business” as defined in the Insurance Business Law or activities requiring GFSC insurance licensing under the Insurance Managers and Insurance Intermediaries Law.
  - “Regulated activities” as defined in the Regulation of Fiduciaries Law when licensed by the GFSC.
  - Otherwise investing, administering, or managing funds or money on behalf of other persons.
- Part II exceptions (incidental or other activities) exclude certain activities from FSB regulation, including:
  - Incidental actuarial business where separate remuneration is not provided, the advice is not itself business falling within Part I, and the business is incidental to the main purpose.
  - In-house legal, accountancy or actuarial advice provided to a Part I business, or professional services to a client carrying on such a business.
  - Restricted activities of dealing, advising, and promotion for Schedule 2 to the Protection of Investors Law carried out by persons not incorporated/registered in the Bailiwick, not maintaining a physical presence, carried out from countries/territories listed in Appendix C to the Handbook, subject to AML/CFT requirements consistent with FATF Recommendations, and supervised by an overseas regulatory authority.
  - Certain insurance businesses meeting conditions including being licensed solely to carry on general insurance business under the Insurance Business Law, not incorporated or registered in the Bailiwick, not maintaining a physical presence, not managed in or from within the Bailiwick, and subject to authorization and supervision by the United Kingdom Financial Services Authority.
  - A business not a regulated business where cumulative conditions are met (selected numeric thresholds and conditions):
    - Total turnover of that business, plus any other Part I business by the same person, does not exceed £50,000 per annum.
    - No occasional transactions involving more than £10,000 where no business relationship has been proposed or established.
    - Turnover of such business does not exceed 5 percent of the total turnover of the person carrying on such business.
    - The business is ancillary and directly related to the main activity and provided only to customers of the main activity and not offered to the public.
    - Money or value is not transmitted or such transmission is not facilitated by any means.
    - The business is not carried on by a person who also carries on a regulated business.
- Assessors concluded the scope of coverage of regulation is in material respects consistent with the FATF definition of “financial institution.”

### FSB Handbook and enforceable rules

- GFSC issued the Handbook for Financial Services Businesses on Countering Financial Crime and Terrorist Financing (FSB Handbook) in December 2007 pursuant to Section 49(7) of the POCL; it was updated as recently as July 2010.
- The FSB Handbook contains:
  - Level One: Rules (in shaded boxes) — assessed as “other enforceable means.”
  - Level Two: Guidance — presented as “should” or “may” and considered guidance, not mandatory.
- Rationale for Rules being “other enforceable means”:
  - The Rules set out how GFSC requires FSBs to meet the Regulations; the term “must” is used where provisions are mandatory and subject to prosecution (for contravention of FSB Regulations), regulatory sanction, and other applicable sanctions.
  - Section 49(7) of the POCL authorizes the GFSC to “make rules, instructions and guidance for the purposes of the regulations under subsection (3).”
  - Section 49(8) requires courts to take compliance with such rules, instructions, and guidance into account when considering compliance with the Regulations.
  - GFSC authorized to issue public statements or impose discretionary financial penalties under Sections 11C and 11D of the Financial Services Commission Law when an FSB “has contravened in a material particular a provision of, or made under, the prescribed laws.”
  - Minimum licensing criteria under each regulatory law require compliance with those laws and any rules and instructions “issued under any other enactment as may be applicable to the institution” (which includes the Rules). Failure to meet minimum licensing criteria can lead to revocation of license, imposition of conditions, directions, notices, or prohibition orders.
  - Enforcement powers under the Registered FSB Law also apply to registered FSBs.
- Possible sanctions for noncompliance with Rules (imposed by the GFSC) include:
  - Imposition of conditions in respect of FSBs, their controllers and staff.
  - Discretionary penalties up to £200,000 and public statements in respect of FSBs, their controllers and senior management.
  - Suspension and cancellation of licenses and registrations.
- The Rules are treated as enforceable by private sector participants and have been referenced by the GFSC in enforcement actions.

### CDD (Recommendations 5–8) — Description and Analysis

- FSB Regulations provide the basic framework for compliance with FATF Recommendation 5:
  - Regulation 4 requires Customer Due Diligence (CDD) measures when:
    - establishing a business relationship;
    - carrying out an occasional transaction;
    - there is suspicion of money laundering or terrorist financing;
    - there are doubts about the veracity or adequacy of previously obtained identification data.
  - Regulation 7(1) provides for CDD measures to be carried out before or during the course of establishing a business relationship or before carrying out an occasional transaction.
  - Regulation 7(2) permits verification of identity to be completed following establishment of a business relationship provided that:
    - it is completed as soon as reasonably practicable thereafter;
    - the need to do so is essential not to interrupt the normal conduct of business; and
    - appropriate and effective policies, procedures, and controls are in place which operate so as to manage risk.

*Source: _cr1112 - 3. PREVENTIVE MEASURES—FINANCIAL INSTITUTIONS*

### 519.      Regulation 4 requires identification and verification of the customer or any person

### Regulation 4: Customer Due Diligence Requirements

### Core CDD requirements (Regulation 4 and related Rules)
- Regulation 4 requires:
  - identification and verification of the customer or any person purporting to act on behalf of the customer and verification of his authority so to act;
  - identification and reasonable measures to verify identity of the beneficial owner and underlying principal;
  - in the case of a legal person or legal arrangement, measures to understand the ownership and control structure of the customer;
  - a determination as to whether the customer is acting on behalf of another person and taking of reasonable measures to identify and verify the identity of that other person;
  - information on the purpose and intended nature of each business relationship; and
  - a determination to be made as to whether the customer, beneficial owner and any underlying principal is a politically-exposed person.
- Regulation 5 requires enhanced CDD in higher-risk circumstances, including relationships in which the customer or any beneficial owner or underlying principal is a politically-exposed person (―PEP‖), correspondent banking relationships, and relationships requiring adequate measures where the customer was not a Bailiwick resident physically present when the business relationship was entered into or the occasional transaction carried out.
- Rules in chapters 2 and 11 of the FSB Handbook address measures to prevent the misuse of new technologies.
- The FSB Handbook Rules supplement the Regulations and include:
  - the identification and assessment of risk;
  - CDD;
  - the treatment of high-risk relationships;
  - circumstances when reduced or simplified CDD may be applied;
  - the monitoring of transactions and activity; and
  - existing customers.
- GFSC issues notices, instructions and warnings; Business from Sensitive Sources Notices and instructions are mandatory and require FSBs to implement or review procedures, exercise greater caution, require enhanced CDD, and give special attention to business connected with countries or territories identified in the notices and instructions.

### Prohibition of anonymous accounts (c. 5.1)
- FSB Regulation 8: an FSB must not set up anonymous accounts or accounts in fictitious names, and must maintain accounts in a manner which facilitates the meeting of the requirements of the regulations.
- FSB Regulation 4(1): for any business relationship established prior to the effectiveness of the FSB Regulations in December 2007 that involved an anonymous account or an account in a fictitious name, the CDD requirements must be undertaken as soon as possible after such effectiveness and in any event before such account could be used again in any way.
- GFSC Rules in chapter 8 of the FSB Handbook require FSBs to have policies, procedures, and controls in place in respect of existing customers that are appropriate and effective and which provide for its customers to be identified.
- Assessors’ findings:
  - Private sector FSBs reported they do not permit anonymous accounts or accounts in fictitious names, nor do they provide numbered accounts.
  - One bank uses a number on correspondence for security but discloses the customer’s name in its records.
  - Assessors found the criteria have been effectively implemented.
- Conclusion: current legal provisions are consistent with the requirements of the standard.

### When is CDD required? (c. 5.2)
- 5.2(a): FSB Regulations 4(1) and 4(2)(a) require CDD when establishing a business relationship.
  - A “business relationship” is defined as a continuing relationship to facilitate carrying out transactions (a) on a frequent, habitual, or regular basis, and (b) where the monetary value of any transactions to be carried out in the course of the arrangement is not known on entering into the arrangement.
- 5.2(b): FSB Regulations 4(1) and 4(2)(b) require CDD when carrying out an occasional transaction.
  - For Regulation 4(2)(b), an occasional transaction is defined as “any transaction involving more than £10,000... where no business relationship has been proposed or established and includes such transactions carried out in a single operation or two or more operations that appear to be linked...”.
- 5.2(c): Guernsey, Alderney, and Sark implemented Wire Transfer Ordinances based on European Regulation 1781/2006:
  - Section 2(5) requires that, where transfer is not made from an account, the payer’s payment service provider must verify information on the payer where (a) the amount transferred exceeds €1,000, or (b) the transaction is carried out in two or more operations (i) that appear linked and (ii) which together exceed €1,000.
- 5.2(d): FSB Regulations 4(1) and 4(2)(c) require CDD where the FSB knows or suspects or has reasonable grounds for knowing or suspecting that a party to a business relationship is engaged in money laundering or terrorist financing, or that it is carrying out a transaction on behalf of a person engaged in money laundering or terrorist financing.
- 5.2(e): FSB Regulations 4(1) and 4(2)(d) require CDD where the FSB has doubts about the veracity or adequacy of previously obtained customer identification data.
- Assessors’ conclusion: preventive measures obligations for undertaking CDD established by the FSB Regulations and Wire Transfer Ordinances are in line with the criterion and generally implemented by FSBs.
- Implementation note: FSBs reported clear understanding and systems/controls to ensure CDD is performed when required.

### Identification measures and verification sources (c. 5.3)
- FSB Regulations 4(1) and 4(3) require each customer to be identified and his identity verified using identification data.
- Regulation 19 definitions:
  - “customer” means a person or legal arrangement seeking to form or having formed a business relationship with an FSB, or seeking to carry out or having carried out an occasional transaction with an FSB;
  - “identification data” means documents which are from a reliable and independent source.
- Rules in chapter 4 of the FSB Handbook specify identification and verification for:
  - individuals (including additional measures for non face-to-face relationships or occasional transactions);
  - legal bodies or legal arrangements;
  - introduced business relationships; and
  - timing of identification and verification.
- Section 4.4 requires collection of identification data on an individual, which includes:
  - legal name, any former names and any other names used;
  - principal residential address;
  - date and place of birth;
  - nationality;
  - any occupation, public position held and, where appropriate, the name of the employer;
  - an official personal identification number or other unique identifier contained in an unexpired official document (e.g., passport, identification card, residence permit, social security records, driving license) that bears a photograph of the customer;
  - and verification of the individual's legal name, address, date and place of birth, nationality and official personal identification number.
- Section 4.5 requires “adequate measures” to identify and verify non-face-to-face customers, including additional documents, independent contact, or third party introduction.

### Identification of legal persons and arrangements (c. 5.4)
- 5.4(a): FSB Regulations 4(1)(a) and 4(3)(b) require any person purporting to act on behalf of the customer to be identified and his identity and authority to act to be verified.
- 5.4(b): Section 4.3 of the FSB Handbook requires for legal bodies or legal arrangements:
  - verify the legal status of the legal person or legal arrangement;
  - obtain information on the customer’s name, the name of trustees (for trusts), legal form, address, directors (for legal persons), and provisions regulating the power to bind the legal person or arrangement.
- Section 4.6 for legal persons requires:
  - identify and verify the legal body (including name, any official identification number, date and country or territory of incorporation if applicable);
  - identify and verify any registered office address and principal place of business where risk is other than low;
  - identify and verify individuals ultimately holding a 25 percent or more interest in the capital or net assets of the legal body;
  - identify and verify individuals, including beneficial owners, underlying principals, directors, authorized signatories or equivalent, with ultimate effective control over the capital or assets of the legal body;
  - verify the legal status of the legal person.
- Verification examples in guidance (Section 4.6) include obtaining:
  - a copy of the Certificate of Incorporation;
  - a company registry search, if applicable, including confirmation legal body has not been, and is not in the process of being, dissolved, struck off, wound up or terminated;
  - a copy of the Memorandum and Articles of Association;
  - a copy of the Directors’/Shareholders’ register.
- Documents that are copies must be certified by company secretary, director, manager, or equivalent officer.
- Where legal person or any beneficial owner or underlying principal presents a high risk, FSB must consider additional verification checks.
- For legal arrangements, Section 4.6 requires:
  - identify and verify the underlying principals and beneficial owners (settlor(s), any protector, and any beneficiary with a vested interest or likely to benefit);
  - verify legal status and name and date of establishment of the trust;
  - verify identity of the trustees.

### Identification of beneficial owners and underlying principals (c. 5.5; 5.5.1 & 5.5.2)
- Regulations 4(1)(a) and 4(3)(c) require FSBs to identify the beneficial owner and take reasonable measures to verify such identity using identification data.
- Regulation 19 definition of “beneficial owner”:
  - (a) the natural person who ultimately owns or controls the customer, and
  - (b) a person on whose behalf the business relationship or occasional transaction is to be or is being conducted;
  - in the case of a trust or other legal arrangement, to mean (i) any beneficiary in whom an interest has vested, and (ii) any other person who appears likely to benefit from that trust or other legal arrangement.
- 5.5.1: Regulations 4(1)(a) and 4(3)(d) require the FSB to determine whether the customer is acting on behalf of another person and, if so, take reasonable measures to obtain sufficient identification data to identify and verify that other person.
- 5.5.2: Regulations 4(1)(a) and 4(3)(c) require for customers that are legal persons or legal arrangements that the FSB take reasonable measures to understand the ownership and control structure of the customer and identify beneficial owners and underlying principals (natural persons who own or control and who exercise ultimate effective control).
- Section 4.6 of the FSB Handbook contains further Rules and guidance regarding these requirements.

### Information on purpose and intended nature of business relationship (c. 5.6)
- FSB Regulation 4(3)(e) requires all FSB to obtain information on the purpose and intended nature of each business relationship.
- Rules in Section 3.5 require FSBs, when assessing the risk of a proposed business relationship or occasional transaction, to take into consideration information on the purpose and intended nature, including the possibility of legal persons and legal arrangements forming part of the relationship or transaction.

### Ongoing due diligence and monitoring (c. 5.7; 5.7.1 & 5.7.2)
- FSB Regulation 11 requires ongoing and effective monitoring of any existing business relationship, which includes:
  - (a) reviewing identification data to ensure it is kept up to date and relevant, in particular for high-risk relationships or customers in respect of whom there is high risk;
  - (b) scrutiny of any transactions or other activity.
- Rules in Section 9.2 require scrutiny of transactions and activity throughout the business relationship to ensure transactions are consistent with the FSB’s knowledge of the customer, their business, source of funds, and source of wealth.
- Rules in Section 9.4 require ongoing CDD to ensure awareness of any changes in the development of the business relationship.
- The extent of ongoing CDD measures must be determined on a risk-sensitive basis and FSBs must bear in mind risk may change as the business relationship develops.
- FSB Regulation 11(c) requires identification data to be recorded and stored to facilitate ongoing monitoring; extent and frequency of monitoring to be risk-sensitive including whether relationship is high-risk.
- Assessors’ observations:
  - CDD and verification measures (natural and legal persons and arrangements) are extensive and in line with the standard, including use of independent source documents, data, and other relevant identification data.
  - Obligations to include scrutiny of transactions for consistency and to update documentation when necessary based on risk are in other enforceable means rather than in law or regulation.
  - FSBs reported no particular difficulty obtaining required information and verification documentation; familiarity with identifying and verifying legal persons, arrangements, beneficial owners and underlying principals, sometimes requiring work through multiple layers of legal persons and trusts.
  - FSBs use a combination of manual (for highest risk) and computerized methods of monitoring customer activity on a risk-sensitive basis.
  - Assessors concluded Bailiwick institutions have implemented the required CDD measures in an effective manner.

### Risk—enhanced due diligence for higher-risk customers (c. 5.8)
- FSB Regulation 3 and Rules in chapter 3 of the FSB Handbook require an FSB to undertake a risk assessment of any proposed business relationship or occasional transaction.
- Based on the assessment, the FSB must decide whether to accept each business relationship or any instructions to carry out any occasional transactions.
- The risk assessment determines, on a risk basis:
  - the extent of identification information (and other CDD information) to be obtained;
  - how that information will be verified; and
  - the extent to which any resulting business relationship will be monitored.

*IMF assessment text: _cr1112 - 519. Regulation 4 requires identification and verification of the customer or any person*_

### 552.      An FSB must have documented procedures which allow it to demonstrate how the

### _cr1112 - 552.      An FSB must have documented procedures which allow it to demonstrate how the

### High-risk recognition and enhanced CDD requirements
- FSB must have documented procedures to demonstrate how the assessment of each business relationship or occasional transaction has been reached, taking into account the nature and complexity of its operation. (Para. 59)
- Rules require regard to the attractiveness to money launderers of complex products and services in reputable and secure wealth management environments, recognition, management and mitigation of risks from relationships with high net-worth customers, and consideration of factors that increase vulnerability of wealth management: wealthy customers, private banking customers (added by amendment effective June 25, 2010), powerful customers, multiple accounts, complex accounts and movement of funds. (Para. 59)
- FSB Handbook provides high-risk indicators:
  - Customer indicators: complex ownership structures; PEPs; involvement of an introducer from a country or territory which does not have an adequate AML/CFT infrastructure; requests to adopt undue levels of secrecy with a transaction. (Para. 61)
  - Product/service indicators: complex structures of legal persons and/or legal arrangements; hold mail or retained mail arrangements; significant and/or frequent cash transactions; high-value balances or investments disproportionately large to that particular customer, product or service set; bearer shares and other bearer instruments. (Para. 61)
- FSB Regulation 5 requires enhanced CDD where:
  - the customer or any beneficial owner or underlying principal is a PEP;
  - a correspondent banking relationship, or similar relationship involving provision of services amounting to financial services business between FSBs;
  - customer is established or situated in a country or territory that does not apply or insufficiently applies the FATF Recommendations;
  - the FSB considers the relationship to be high-risk, taking into account instructions, notices or warnings issued by the GFSC; or
  - the FSB has otherwise assessed the relationship as high-risk. (Para. 554)
- Enhanced CDD measures include:
  - obtaining senior management approval for establishing or continuing a business relationship (including existing relationships with a PEP);
  - taking reasonable measures to establish source of funds and of the wealth of the customer and beneficial owner and underlying principal;
  - carrying out more frequent and more extensive ongoing monitoring in accordance with Regulation 11;
  - obtaining additional identification data; verifying additional aspects of the customer’s identity; obtaining additional information to understand purpose and intended nature of each business relationship. (Para. 555)

### Treatment of high-risk relationships and scope of enhanced CDD
- Chapter 5 of the FSB Handbook addresses treatment of relationships assessed as high risk and contains rules for PEPs, correspondent relationships, countries/territories that do not or insufficiently apply the FATF Recommendations, other high-risk countries/territories, and legal persons able to issue bearer instruments. Enhanced CDD measures required under FSB Regulation 5 apply where a relationship or transaction is assessed as high risk due to customer nature, business relationship or location, delivery channel, or product/service features. (Para. 556)

### Application of simplified/reduced CDD measures
- General rule: business relationships and occasional transactions are subject to full CDD measures, including identification and verification of customer, beneficial owners and underlying principals. Circumstances may permit simplified/reduced CDD where risk assessed as low (example: local resident retail customer purchasing a low-risk product where purpose and intended nature understood by the FSB), where identity information is publicly available, or where adequate checks/controls exist elsewhere in national systems. (Para. 557)
- FSB Regulation 6(1) permits an FSB to:
  - (a) apply reduced or simplified CDD measures or
  - (b) treat an intermediary as if it were the customer,
  - but only (i) in accordance with chapter 6 of the FSB Handbook, and (ii) provided the customer and every beneficial owner and underlying principal is established or situated in the Bailiwick or a country or territory listed in Appendix C to the FSB Handbook.17 (Para. 558)
- FSB Regulation 6(3): simplified or reduced CDD shall not be applied where the FSB knows or suspects or has reasonable grounds for knowing or suspecting that any party to a business relationship or any beneficial owner or underlying principal is engaged in money laundering or terrorist financing, or where the risk is other than low. (Para. 558)
- Chapter 6 Rule 6.2 requires:
  - review of CDD documentation when the FSB becomes aware of circumstances affecting assessed risk;
  - documentary evidence retained reflecting reason for decision to apply reduced/simplified CDD;
  - recognition that simplified/reduced CDD does not remove responsibility to ensure CDD level is proportionate to risk; simplified/reduced CDD must not be applied where FSB believes any aspect of relationship or transaction could be other than low (for example by virtue of country/territory or value). (Para. 559; Paras. 180–182)

### Specific instances where simplified/reduced CDD may be utilized (Chapter 6 list)
- 1. Guernsey resident customer physically present when establishing relationship or undertaking transaction: required identification data limited to name, address, date and place of birth, and nationality (occupation and official personal identification number are not required); only name and either address or date and place of birth need to be verified. (Para. 561.1)
- 2. Legal bodies quoted on a regulated market or collective investment schemes regulated by the GFSC: FSB must obtain documentation that the legal body is quoted or regulated by the GFSC, and identify and verify individuals with authority to operate the account or give instructions. (Para. 561.2)
- 3. Customers identified as an Appendix C business that are not acting for underlying principals and where purpose and intended nature of the relationship is understood: verification of identity of the business is not required. (Para. 561.3)
- 4. Where customer, beneficial owner, and any underlying principal have been identified and product/service is low risk, receipt of funds may be considered satisfactory means of verifying identity, provided conditions are met:
  - all funds received from an Appendix C business and from an account in the name of the customer or underlying principal;
  - payments only to an account in the customer’s name;
  - no payments from or to third parties;
  - no cash withdrawals other than by the customer or underlying principal on a face-to-face basis where identity can be verified and reasons for significant cash withdrawals can be verified. (Para. 561.4)
- 5. Insurance intermediaries for commercial and personal lines of general insurance that have previously identified a customer prior to a payment being made may verify identity appropriate to assessed risk; intermediary must understand business relationships to recognize suspicious transactions or activity. (Para. 561.5)
- 6. FSB involved in investor liaison of a non-Guernsey collective investment fund may rely on fund administrator to have performed CDD on the investor if:
  - the fund administrator is an Appendix C business regulated and supervised for investment business;
  - the fund administrator provides written confirmation that it conducts necessary CDD procedures on investors, has appropriate risk-grading procedures to differentiate high and low-risk relationships, and will notify the financial services business of any investor who is a PEP;
  - the Guernsey business has a program for testing and reviewing the administrator’s CDD procedures. (Para. 561.6)
- Two additional concessions permitting reduced/simplified CDD are in Chapter 4 of the FSB Handbook. (Para. 562)
  - Section 4.7: certain employee benefit, share option, or pension schemes where employer contributions by salary deduction may consider the employer, trustee, or administrator the customer who must be identified and verified, not individual employees/participants. (Para. 563)
  - Section 4.9: when an FSB acquires a business with established relationships or a block of customers, it may rely on vendor-obtained information where vendor is an Appendix C business, purchasing FSB finds vendor’s CDD policies satisfactory and has obtained identification data for each customer; acquiring FSB must remedy identified deficiencies. Assessors note the concession terms are in guidance rather than GFSC Rules, though terms appear reasonable. (Para. 564)
- Assessors concluded concessions permitting reduced or simplified CDD generally fall within standards, except for a concession previously permitting receipt of funds as verification for identity which was removed in the June 2010 updated Handbook and is no longer relevant. (Para. 565)

### Treating an intermediary as the customer
- Sections 6.5.1 and 6.5.2 set criteria for establishing an intermediary relationship allowing the intermediary to be treated as the customer such that customers of the intermediary are not identified unless the FSB considers it appropriate. Before establishing such relationship, FSB must undertake a risk assessment to determine whether the intermediary should be treated as customer or as an introducer subject to introduced business requirements (see Recommendation 9 discussion). (Para. 566)
- CDD procedures must be undertaken on the intermediary to ensure intermediary is either:
  - (1) an Appendix C business (other than a trust and corporate service provider);
  - (2) a person licensed under the Regulation of Fiduciaries Law; or
  - (3) a firm of lawyers or estate agents operating in Guernsey and pooled funds used for purchase or sale of Guernsey real estate received from a Guernsey bank or a bank operating from an Appendix C jurisdiction.
- The intermediary must provide written confirmation that:
  - (i) appropriate risk-grading procedures are in place to differentiate CDD requirements for high and low-risk relationships;
  - (ii) adequate assurance that intermediary conducts appropriate and effective CDD procedures for its customers, including enhanced CDD for PEP and other high-risk relationships;
  - (iii) sufficient information to enable the FSB to understand purpose and intended nature of the business relationship; and
  - (iv) account will only be operated by the intermediary who has ultimate, effective control over the financial product or service. (Para. 567)

### Eligible products/services and intermediaries that may be considered as the customer
- Only business relationships established to provide one or more listed products/services are eligible for treating an intermediary as the customer. Examples include:
  - Investment of life company funds to back the company’s policyholder liabilities where the life company opens an account. If account has a policy identifier, the bank must require an undertaking by the life company that they are the legal and beneficial owner of the funds and that the policyholder has not been led to believe he has rights over a bank account in Guernsey. Assessors view it appropriate to identify the life company as the customer in this situation. (Product: Investment of life company funds; Intermediary: The life company) (Para. 568 table)
  - Insurance policies where there is no cash-in value and where professional and independent third parties are satisfied before payments are made (does not apply to life or other investment-related insurance). (Intermediary: The regulated insurance broker) (Para. 568 table)
  - Reinsurance to an insurer issuing policies on a commercial basis only where reinsurance contract arranged exclusively between reinsurer and recognized regulated insurer. (Intermediary: The insurer) (Para. 568 table)
  - A Guernsey licensed insurer offering insurance products to another regulated financial services business as part of its relationship within Insurance Business Law. (Intermediary: The regulated financial services business) (Para. 568 table)
  - Investments via discretionary or advisory investment managers of customers’ monies into a collective investment scheme either authorized or registered by the GFSC where funds (and any income) may only be returned to the bank account from which they originated. (Intermediary: The regulated financial services business, i.e. the discretionary or advisory investment manager) (Para. 568 table; footnote reference 20)
  - A POI licensee with another regulated financial services business undertaking discretionary management, giving advice, advisory management or executing transactions where funds (and any income) may only be returned to the bank account from which they originated. (Intermediary: The regulated financial services business) (Para. 568 table; footnote reference 21)
  - Client accounts held by banks in the name of a licensed fiduciary or a professional firm where holding of funds in the client account is on a short-term basis necessary to facilitate a transaction. Assessors suggest narrowing duration and permitting use for only certain transactions (e.g., real estate); Section 4.12 states if conditions not satisfied, bank must identify each client with an interest in pooled account. (Intermediary: The professional firm or financial services business) (Para. 568 table)
- Definition: “Intermediary” means (a) a financial services business, or (b) a firm of lawyers, or estate agents, operating in Guernsey, which is considered as being the customer of a financial services business when establishing a business relationship, or undertaking an occasional transaction, in accordance with chapter 6 of the Handbook.19 (Footnote definition; Para. 569–570)

*Source: _cr1112 - 552. An FSB must have documented procedures which allow it to demonstrate how the (IMF PDF content).*

### 569.      Regulation 6(2) of the FSB Regulations provides that the application of reduced or

### _cr1112 - 569.

### Risk—Application and Limits of Simplified/Reduced CDD (c. 5.11)
- Regulation 6(2) of the FSB Regulations: simplified or reduced CDD may only be exercised provided that the customer and every beneficial owner and underlying principal is established or situated in the Bailiwick or a country or territory listed in Appendix C to the FSB Handbook.
- Appendix C reflects countries or territories the GFSC considers to have standards to combat money laundering and terrorist financing consistent with the FATF Recommendations and where regulated financial services businesses are supervised for compliance.
- Regulation 6(3) prohibits simplified or reduced CDD where the FSB knows or suspects or has reasonable grounds for knowing or suspecting that any party to a business relationship or any beneficial owner or underlying principal is engaged in money laundering or terrorist financing, or where the risk is other than low.
- Reduced/simplified CDD may only be applied where the relevant business relationship or occasional transaction has been assessed as low risk.
- By amendment effective June 21, 2010, Regulation 6(3) was clarified to state that treating an intermediary as customer is subject to the same requirements as applying reduced or simplified CDD.
- Where reduced or simplified CDD is applied, documentary evidence must be retained reflecting the reason for the decision.

### Risk-Based Application of CDD and Consistency with Guidance (c. 5.12)
- Regulation 3: general requirements for conducting a risk assessment to determine extent of identification information and verification, and extent of monitoring.
- Regulation 6(2): application of simplified/reduced CDD only in accordance with requirements in chapter 6 of the FSB Handbook; chapters 4 and 6 detail customer/transaction/product types considered low risk.
- Assessors' observation: rules generally provide a sound basis for identifying situations requiring enhanced due diligence and methods for performing it, but requirements are not extended to:
  - non-resident customers,
  - private banking,
  - trusts that are personal asset holding vehicles.
- Assessors noted these categories are potentially higher risk (per the Methodology) and constitute a significant part of the Bailiwick's financial institutions' customer base; assessors questioned full consistency with Recommendation 5.
- Reduced/simplified CDD concessions allowing an FSB to treat an intermediary as its customer are limited to seven specific products or services and are subject to safeguards, including:
  - risk assessment of the intermediary,
  - required assurances that the intermediary conducts risk-grading procedures on its customers and appropriate and effective CDD.
- After the on-site visit and effective June 21, 2010, the Bailiwick amended FSB Handbook provisions regarding two specific products to require funds (and any income) may only be returned to the bank account from which they originated.

### Implementation Issues and Amendments
- Assessors noted potential ambiguity whether Regulation 6(3)'s prohibition on reduced/simplified CDD applied to intermediary relationships; intention of authorities was to apply the prohibition to intermediaries as well.
- Regulation 6 was amended by the Bailiwick to clarify the application to intermediary relationships, effective June 21, 2010.
- Implementation findings:
  - FSBs interviewed are sensitive to higher-risk sectors (private banking, non-face-to-face customers) and have generally taken risk levels into account for CDD and ongoing monitoring.
  - Institutions using intermediary concessions (insurance and investment sector representatives) were knowledgeable of requirements: intermediary risk assessment and required confirmations.

### Timing of Verification of Identity — General Rule and Exceptional Circumstances (c. 5.13; 5.14 & 5.14.1)
- Regulation 7(1): identification and verification of any person or legal arrangement (including customer and beneficial owner) must be carried out before or during establishment of a business relationship or before carrying out an occasional transaction.
- Regulation 7(2): verification may be completed following establishment of a business relationship provided:
  - it is completed as soon as reasonably practicable thereafter;
  - the need to do so is essential not to interrupt the normal conduct of business;
  - appropriate and effective policies, procedures and controls are in place to manage risk.
- Rule in Section 4.13 of the FSB Handbook requires that when post-establishment verification is used, controls must include:
  - establishing that it is not a high-risk relationship;
  - monitoring by senior management to ensure verification is completed as soon as reasonably practicable;
  - ensuring funds received are not passed to third parties;
  - establishing procedures to limit the number, types and/or amount of transactions that can be undertaken.
- Assessors concluded the provisions meet the standard for verification obligations and for failure to satisfactorily complete CDD.
- Implementation: institutions generally completed CDD before commencing relationships; one institution (investor-focused) permits post-commencement verification in compliance with Regulation and Rule.

### Failure to Complete CDD — Before and After Commencement (c. 5.15; 5.16)
- Regulation 9: where an FSB cannot comply with CDD requirements:
  - for proposed business relationships or occasional transactions, the FSB must not enter or carry out the transaction and must consider whether to file an STR;
  - for existing business relationships, the FSB must terminate the relationship and consider whether an STR must be filed.
- Rules in Section 4.14 of the FSB Handbook require assessment of circumstances where CDD cannot be completed within a reasonable time, and ensure appropriate action per Regulation 9.
- Rules require that where funds have been received, they are returned to the source and not to a third party.
- Implementation: the one FSB interviewed that does not complete CDD before commencing relationships reported that in rare situations where it cannot complete CDD it terminates the relationship and consults the FIS while holding the funds.

### Existing Customers and CDD Requirements (c. 5.17; 5.18)
- June 2004 GFSC statement on anti-money laundering standards for existing customers:
  - For statement purposes, existing customers were those taken on before January 1, 2000.
  - For customers taken on after January 1, 2000, FSBs are required by law to verify identity of all customers.
  - GFSC expected FSBs to adopt FATF Recommendation 5 standard; required review of all existing business relationships to assess risk, prioritize high-risk customers for obtaining due diligence information appropriate to risk, and ensure lower-risk customers' relationships are understood and appropriate information is held.
- Regulation 4: CDD requirements must be carried out in relation to business relationships established prior to the Regulations to the extent steps have not already been carried out, at appropriate times on a risk-sensitive basis.
- Chapter 8 of the FSB Handbook: rules/guidance for CDD on existing customers, requiring policies/procedures/controls to:
  - identify customers;
  - assess risk of customer base;
  - ensure level of CDD is appropriate to assessed risk;
  - ensure high-risk relationships (e.g., PEPs) have sufficient CDD to allow risk to be managed;
  - apply policies based on materiality and risk.
- GFSC Instruction Number 6 (November 2009) requires each FSB Board to:
  - review policies/procedures/controls for existing customers to ensure FSB Regulations 4 and 8 and chapter 8 Rules are met;
  - by close of business on March 31, 2010, take necessary action to remedy deficiencies and satisfy itself that CDD information appropriate to assessed risk is held for each business relationship.
- Regulation 4(1)(b): full identification and verification must be carried out for pre-Regulations business relationships where an anonymous account is maintained or an account known or reasonably suspected to be in a fictitious name, as soon as possible and in any event before the account is used again.
- Assessors' implementation findings:
  - Institutions were still updating CDD records to current requirements, reported using risk-based approach, had completed higher-risk customers, used transaction events to update records, and were well along updating entire customer base.
  - Institutions reported no existing anonymous accounts or accounts in fictitious names.

### Foreign PEPs — Identification, Risk Management, Source of Wealth/Funds, and Ongoing Monitoring (c. 6.1–6.4)
- Regulation 4(3)(f): FSBs must determine whether any customer, beneficial owner or underlying principal is a politically-exposed person (PEP).
- Regulation 5(2)(b) defines PEP as “a person who has, or has had at any time, a prominent public function or who has been elected or appointed to such a function in a country or territory other than the Bailiwick, including ‘an immediate family member... and a close associate of such person.’”
- Regulation 5(1): enhanced CDD measures are required where the customer, beneficial owner or underlying principal is a PEP; additional measures are discussed under criteria 6.2–6.5.
- Chapter 5 of the FSB Handbook addresses high-risk relationships (including PEPs); Section 5.3 contains Rules requiring FSBs, when carrying out CDD, to determine whether customer/beneficial owner/underlying principal is a PEP by:
  - assessing countries posing highest risk of corruption (one source: Transparency International Corruption Perception Index);
  - establishing current and former holders of prominent public positions in those countries;
  - determining, as far as reasonably practicable, whether customers/beneficial owners/underlying principals have any connections with such individuals.
- Recommended information sources: UN, European Parliament, U.K. Foreign and Commonwealth Office, Group of States Against Corruption, and commercially-available databases.
- Regulation 5(2)(a): enhanced CDD steps include obtaining senior management approval to establish or continue a business relationship or occasional transaction involving a PEP.
- Regulation 5(2)(a)(iii): enhanced CDD includes taking reasonable measures to establish the source of any funds and of the wealth of the customer, beneficial owner, and underlying principal.
- Rules in Section 5.3.1:
  - source of funds: activity generating the funds for a business relationship or occasional transaction;
  - source of wealth: activities which have generated the total net worth of a person, both within and outside a business relationship;
  - guidance emphasizes understanding source of funds and source of wealth as important CDD aspects, especially for PEPs;
  - FSBs must consider risk implications of source of funds/wealth and the geographical sphere of activities that generated them.

*Source: _cr1112 - 569.*

### 598.      FSB Regulation 5(2)(a)(iv) also provides that enhanced CDD means carrying out more

### _cr1112 - 598.      FSB Regulation 5(2)(a)(iv) also provides that enhanced CDD means carrying out more

### Enhanced CDD and Politically Exposed Persons (PEPs)
- FSB Regulation 5(2)(a)(iv) requires enhanced CDD to include "carrying out more frequent and more extensive ongoing monitoring in accordance with the requirements of Regulation 11," with monitoring on a risk-sensitive basis, including whether or not the relationship is high risk.  
- The FSB Regulations’ definition of PEPs does not extend to persons holding prominent public functions domestically (Additional Element c. 6.5).  
- Ratification of the Merida Convention was extended to Guernsey in November 2009 (Additional Element c. 6.6).  
- Implementation findings from assessors:
  - Financial institutions show a high degree of sensitivity to PEP risks and the need for enhanced due diligence when opening and maintaining PEP relationships.
  - Institutions accepting PEPs knew the precise number of PEP relationships, were familiar with GFSC requirements, and described implementation practices including use of group and commercial databases and, in some cases, investigative agencies.
  - Practices observed: senior management approval for establishing relationships, review processes, and determination of source of funds and source of wealth.

### Cross-Border Correspondent Accounts and Similar Relationships (Recommendation 7)
- FSB Regulation 5 contains explicit provisions requiring enhanced CDD on correspondent banking relationships. Chapter 5 of the FSB Handbook prescribes additional Rules for high-risk relationships, including correspondent banking.
- Section 5.4 of the FSB Handbook requires FSBs to take additional steps for correspondent relationships, including to:
  - gather sufficient information about a respondent institution to understand fully the nature of the respondent’s business;
  - determine from publicly available information the reputation of the institution and the quality of supervision, including whether it has been subject to a money laundering or terrorist financing investigation or regulatory action;
  - assess the respondent institution’s AML/CFT policies, procedures and controls, and ascertain that they are adequate, appropriate and effective;
  - obtain board or senior management approval before establishing new correspondent relationships;
  - document the respective AML/CFT responsibilities of each institution;
  - where payable-through accounts exist, ensure (a) the respondent FSB has performed required CDD obligations including for its customers with direct access to accounts and (b) the respondent FSB can provide relevant customer identification data upon request to the correspondent FSB.
- Assessors’ findings:
  - No Guernsey bank maintains a cross-border correspondent banking or similar relationship for a bank abroad; GFSC confirmed no bank in Guernsey maintains such a relationship.

### Misuse of New Technology for ML/TF (Criterion 8.1)
- Chapter 2 Rules require FSB Boards to maintain policies, procedures, and controls so the Board can meet compliance review obligations and guard against technological developments and new methodologies in money laundering and terrorist financing schemes (Para. 27).
- Chapter 11 Rules require ongoing employee training to include information on current money laundering and terrorist financing methods, trends, and typologies (Para. 328).
- Chapter 4 addresses CDD procedures and contains Rules in addition to Regulations.

### Risk of Non Face-to-Face Business Relationships (Criteria 8.2 & 8.2.1)
- FSB Regulation 5(4) requires adequate measures to compensate for risks when the customer is not a Guernsey resident physically present at relationship initiation or occasional transactions.
- Section 4.5 of the FSB Handbook provides Rules and guidance; adequate measures include:
  - requiring additional documents beyond face-to-face requirements;
  - developing independent contact with the customer and third parties responsible for source of funds or company registrations;
  - third party introduction; or
  - requiring the first payment to be through an account in the customer’s name with a bank situated in a country/territory listed in Appendix C to the FSB Handbook.
- Where original documentation is not practical, FSBs must obtain certified copies of identification data. Section 4.5 lists acceptable certifiers: judges and civil servants, embassy and consulate officers, lawyers and notaries, and actuaries and accountants who are members of recognized professional bodies.
- Section 4.5.2 Rules:
  - Consider suitability of certifier based on assessed risk and level of reliance on certified documents.
  - Exercise caution with certified copies from high-risk countries or unregulated entities.
  - Where certified copies accepted, FSB must satisfy itself the certifier is appropriate, certify that original documentation was seen, sign and date the copy, and provide contact information for the certifier.
- Implementation findings:
  - Institutions interviewed considered non face-to-face business to be the norm; for many institutions it is.
  - Assessors felt such relationships may warrant a higher-risk classification despite generally effective systems.

### Recommendations and Compliance (Summary)
- Recommendation:
  - The authorities should expand the list of higher-risk customers to which enhanced due diligence must be applied and consider including private banking and non-resident customers.
- Compliance ratings and factors:
  - R.5: LC — List of customers to which EDD must be applied omits higher-risk categories relevant to Guernsey.
  - R.6: C
  - R.7: C
  - R.8: C

### Third Parties and Introduced Business (Recommendation 9)
- Legal framework:
  - FSB Regulation 10 permits elements of CDD to be carried out by introducers in specified circumstances.
  - Chapter 4 of the FSB Handbook provides Rules and guidance for introduced business relationships.
- Requirement to immediately obtain certain CDD elements (c. 9.1):
  - FSB Regulation 10(1) allows an FSB to accept a "written confirmation of identity and other matters" from an introducer when Regulation 10(2) conditions are met, covering CDD requirements in Regulation 4(3)(a) to (e) (Criteria 5.3 to 5.6).
  - Section 4.10 Rules require immediate written confirmation via certificate or summary sheet(s) containing the elements of CDD.
  - Handbook Appendices A and B contain forms of "General Introducer Certificate" and "Fiduciary Introducer Certificate" that, when completed, contain required information but not the copies of identification data.
- Availability of identification data from third parties (c. 9.2):
  - FSB Regulation 10(1) requires the introducer to make available copies of identification data and any other relevant documentation upon request and without delay.
  - Section 4.10 Rules require FSBs to take adequate steps to ensure introducers will supply certified copies or originals upon request without delay and to have a program of testing to ensure introducers can meet this requirement (Para. 137, Para. 140).
  - Recognizes introduced business can be high risk; FSBs must use a risk-based approach when relying on introducer certificates.
- Middle introducer exception (Section 4.10.2):
  - A financial services business may accept introduced business where the middle institution has received confirmation from the original introducer and the original introducer (not the middle introducer) holds the required identification copies, if:
    - (a) the original introducer is regulated for the type of business being introduced;
    - (b) both introducers operate from Guernsey, Jersey, or the Isle of Man;
    - (c) confirmation provided has been signed by both original and middle introducer committing to provide copies upon request and without delay; and
    - (d) the relying FSB has a program of testing to ensure documentation can be made available without delay.
  - Assessors noted the concession is convenient and limited, but does not comply literally with Recommendation 9 requiring the relied-upon institution to be in possession of underlying documentation.
  - In practice, assessors found none of the FSBs met with utilized the "middle introducer" concession or were aware of it. The concession was eliminated when a revised FSB Handbook was issued in June 2010.
- GFSC Instruction and supervisory actions:
  - In November 2009, GFSC issued Instruction Number 4 focused on introduced businesses, highlighting issues with secrecy jurisdictions and requiring boards to review compliance and testing programs.
  - The Instruction required action by end of February 2010 to remedy deficiencies or discontinue introducer relationships.
- Regulation and supervision of third parties (c. 9.3):
  - Regulation 10 paragraph 2 defines two categories of third parties on which an FSB may rely:
    - "Appendix C business" which must be either (a) a financial services business supervised by the Commission or (b) a business carried on from (i) a country listed in Appendix C to the Handbook which would be an FSB if carried on from Guernsey or (ii) a lawyer or accountant in the United Kingdom, Jersey or the Isle of Man, and in either (i) or (ii), must (A) be regulated for that purpose, (B) be subject to AML/CFT requirements consistent with the FATF Recommendations, and (C) be supervised for compliance with such requirements by the Commission or an overseas regulatory authority.
    - Appendix C lists 29 countries (30 in the FSB Handbook updated July 2010) considered to have standards consistent with the FATF Recommendations.
  - The FSB relying on a third party must still satisfy itself that the conditions are met for the particular overseas institution.
  - Section 4.10 Rules require FSBs to satisfy themselves that introducers have appropriate risk-grading procedures and conduct appropriate and effective CDD, including enhanced CDD for PEPs and other high-risk relationships.
  - Assessors concluded:
    - The definition of "Appendix C business" with Section 4.10 Rules is largely consistent with Criteria 9.3.
    - Inclusion of lawyers and accountants in the United Kingdom, Jersey, or the Isle of Man is not warranted because such professionals have not been subject to AML/CFT requirements consistent with FATF Recommendations and "supervised for compliance" for a sufficient time to justify reliance; the extent of such supervision has not been assessed.
  - Paragraph 2(b) of Regulation 10 (reliance on overseas branch or group member) originally permitted reliance where the ultimate parent is an Appendix C business and the group has "effective policies, procedures and controls on countering money laundering and terrorist financing."
    - Assessors found that absent direct subjecting to FATF-consistent requirements, a group member is not effectively "regulated and supervised" for compliance within the meaning of Recommendation 9.
    - After the on-site visit, Bailiwick amended Regulation 10(2)(b) effective July 28, 2010, to permit reliance on an overseas branch or group member so long as the ultimate parent is an Appendix C business and the conduct of the third party is subject to requirements to prevent money laundering and terrorist financing consistent with those of the FATF, and supervised for compliance by either the GFSC or an overseas regulatory authority. Assessors concluded that with this amendment, reliance permitted by Regulation 10(2)(b), together with the requirements of

*Source: IMF country report content as provided.*

### Section 4.10 of the FSB Handbook, is consistent with Recommendation 9, although the

### _cr1112 - Section 4.10 of the FSB Handbook, is consistent with Recommendation 9, although the

### Adequacy of Application of FATF Recommendations (c. 9.4)
- FSBs permitted to rely on introducers that are Appendix C businesses: the GFSC has listed a number of jurisdictions (as of July 2010) that it considers to have standards consistent with the FATF Recommendations and where FSBs are supervised for compliance, but the Commission’s basis for determining inclusion on this list is not stated (Para. 622).
- The GFSC’s determination of Appendix C jurisdictions is based upon several factors, including:
  - FATF membership;
  - reports and assessments by the FATF and other bodies of compliance with the FATF standards;
  - the amount of drug trafficking and financial crime in various jurisdictions;
  - the extent to which non-FATF jurisdictions have been assessed as having compliant AML/CFT regimes (Para. 622).

### Ultimate Responsibility for CDD (c. 9.5)
- FSB Regulation 10(3) provides that where reliance is placed upon the introducer, the responsibility for complying with the relevant provisions of the CDD requirements of the FSB Regulations remains with the relying FSB (Para. 623).
- Section 4.10 of the FSB Handbook reinforces that ultimate responsibility for CDD remains with the relying FSB (Para. 623).

### Implementation and effectiveness (Reliance on Third Parties / Introducers)
- Use and understanding:
  - Certain financial institutions find the authority to rely on third party introducers useful and efficient and utilize it to a significant degree; those institutions generally understand requirements and perform required risk assessment and periodic spot testing (Para. 624).
  - Other institutions, even when receiving business from third parties, elect to do the full CDD themselves rather than adhere to formal requirements imposed by Regulation 9 (Para. 624).
- Factors impacting effectiveness (Paras. 625–626):
  - Amendment to Regulation 10(2) permits reliance on another group member that is not an “Appendix C business” if such group member itself satisfies criteria 9.3; this requires FSBs to determine that the third party’s jurisdiction imposes requirements consistent with FATF standards and supervises for compliance.
  - GFSC must determine that reliance by an FSB in such cases is appropriate.
  - Assessors believe this raises an effectiveness issue.
  - Withdrawal of the ability to utilize the “group introducer” concession raises an effectiveness issue.
  - Inclusion within the potential scope of the concession for lawyers and accountants in Guernsey, Jersey and the United Kingdom may not be warranted because they have been subject to AML/CFT regulation for only two to three years and the effectiveness of implementation and supervision has not been tested or assessed (Para. 626).

### Recommendations and Comments (related to R.9)
- The authorities should not include lawyers and accountants in Guernsey, Jersey, the Isle of Man and the United Kingdom as Appendix C businesses, as they have not been subject to, nor supervised for compliance with, AML/CFT regulation and supervision for a sufficient period (Para. 3.3.2).

### Compliance with Recommendation 9 — Rating and underlying factors
- Rating: R.9 LC (Para. 3.3.3).
- Summary of factors underlying rating:
  - The ability of FSBs to determine that a group member not listed in Appendix C is subject to adequate requirements and supervised for compliance (per recent amendments) raises an effectiveness issue.
  - Inclusion of lawyers and accountants in Guernsey, Jersey, the Isle of Man, and the United Kingdom as Appendix C businesses is not appropriate given insufficient period of AML/CFT regulation and supervision and lack of assessment of such supervision.
  - The removal from Appendix C of a jurisdiction that is included in a recent public FATF statement as having deficiencies raises an effectiveness issue regarding existing introducer relationships.

---

### Financial Institution Secrecy or Confidentiality (R.4) — Legal framework and implementation
- No statutory financial secrecy provisions under Guernsey law that would inhibit FATF implementation; however, FSBs apply a strict common law duty of confidentiality subject to Tournier principles (Para. 627).
- Tournier principles: disclosure permitted where required by statute, public duty to disclose, disclosure is in the financial institution’s interest, or there is express or implied customer consent (Para. 627).
- Reporting and disclosure provisions:
  - Sections 1–3 and 6 of the DL make it an offense for FSB and PB (including nominated officers and authorized agents) not to report knowledge or suspicion that another person is engaged in money laundering; these are primary reporting provisions to the FIS (Para. 629).
  - Sections 12, 15, 15A, and 38 TL contain similar obligations with respect to terrorist financing; TL obligations apply to all persons, not only service businesses (Para. 629).
  - POCL, DTL, and TL stipulate that reporting suspicions is not a breach of confidentiality, secrecy or other disclosure restriction (Para. 629).
- Data protection and exemptions:
  - Section 29 of the Data Protection Law restricts disclosure of personal data but contains exemptions including disclosure for prevention, detection or investigation of crime and apprehension or prosecution of offenders; disclosure necessary for Law Officer functions (Section 31); disclosure required by law (Section 35) (Para. 630).
- Access by law enforcement and GFSC:
  - Court orders (“customer information order”) pursuant to Sections 48A POCL, 67A DTL or 37 TL are required for law enforcement access to confidential client information, overriding confidentiality (Para. 631).
  - Account monitoring orders: Sections 48H POCL, 67H DTL and 39 TL (Para. 631).
  - GFSC may access confidential information under Section 21(2) Financial Services Commission (Bailiwick of Guernsey) Law 1987 for its functions, criminal proceedings or to assist supervisory authorities outside Guernsey; Section 49B(6) POCL gives GFSC broad powers to enter premises, examine supervised person and require information (Para. 632).
  - Sections 21A and 21B allow GFSC to cooperate and share information with foreign supervisory and law enforcement authorities, including sharing any information, without limitations (Para. 632).
  - Prior to disclosure GFSC must consider use of appropriate gateway(s), ensure Data Protection Law compliance, and require a member/officer at Assistant Director level or above to be satisfied on the legal gateway and ensure an audit trail evidencing the gateway used (Para. 633).
- Sharing among FSBs and with competent authorities:
  - No explicit provision permitting sharing of confidential information between FSBs to fulfill R.7, R.9, and SR.VII; in practice, customer information is shared among financial institutions via introducer arrangements and intra-group access, but each institution must conduct its own CDD and risk assessment before establishing a relationship (Para. 634).
  - Wire transfers: Wire Transfer Ordinance requires customer/originator information to accompany a wire transfer; Bailiwick’s lack of financial secrecy laws permits sending customer/originator identification details (Para. 634).
  - Cross-border correspondent relationships are not applicable in the context of Guernsey (Para. 634).
- Implementation and effectiveness:
  - Financial secrecy does not impede effective implementation of FATF Recommendations; competent authorities, supervisory, law enforcement (including the FIS), prosecutorial and judicial authorities are allowed to obtain information and documentation kept by FSB or PB and other entities subject to AML/CFT requirements (Paras. 628, 635).
  - No impediments prohibiting fiduciaries or lawyers and accountants from sharing information with other businesses or competent authorities; client information sharing is prevalent in the legal sector where introducer certificates are widely used (Paras. 636–637).
- Recommendations and Comments: None (Para. 3.4.2).
- Compliance with Recommendation 4:
  - Rating: R.4 C (Para. 3.4.3).

---

### Record-keeping and wire transfer rules (R.10 & SR.VII) — Legal framework and implementation
- Recordkeeping legal framework:
  - FSB Regulation 14 contains requirements for maintaining records including transactions, CDD information, suspicious transaction reports, and other AML/CFT matters (Para. 638).
  - Wire transfer requirements are addressed under three essentially identical Wire Transfer Ordinances enacted by Guernsey, Alderney, and Sark under the European Communities (Implementation) Law (Para. 638).
  - Additional requirements in the FSB Handbook (Para. 638).
- Record keeping and reconstruction of transaction records (c. 10.1 and 10.1.1):
  - FSB Regulation 14(1): FSB must keep a transaction document and any CDD information, or a copy, for the minimum retention period (Para. 639).
  - FSB Regulation 19 defines:
    - “transaction document” as a record of a transaction carried out by a financial services business with a customer or introducer;
    - minimum retention period for a transaction document as five years starting from the date that both the transaction and any related transaction were completed, or such other longer period as the GFSC may direct (Para. 639).
  - FSB Handbook Section 12.2 Rules require recording of all transactions (domestic and international) with sufficient information to enable reconstruction of individual transactions to provide, if necessary, evidence of criminal activity. Required documentation must include:
    1. the name and address of the customer, beneficial owner and underlying principal;
    2. if a monetary transaction, the currency and amount of the transaction;
    3. account name and number or other information by which it can be identified;
    4. details of the counterparty, including account details;
    5. the nature and date of the transaction (Para. 640).
- Record keeping for identification data, files and correspondence (c. 10.2):
  - FSB Regulation 14 requires keeping transaction document and any CDD information or copy for the minimum retention period (Para. 641).
  - FSB Regulation 19 defines CDD information as identification data, and any account files and correspondence relating to the business relationship or occasional transaction.
  - Identification data are documents from a reliable and independent source.
  - Minimum retention period for CDD information: five years starting from the date where a customer’s established business relationship with the FSB ceased, or where an occasional transaction was completed, or such longer period as the GFSC may direct (Para. 641).
- Availability of records to competent authorities in a timely manner (c. 10.3):
  - FSB Regulation 14(4): documents and CDD information may be kept in any manner or form provided they are readily retrievable and must be made available promptly to any police officer, the GFSC, the FIS, or any other person where requested pursuant to the Regulations or relevant enactment (Para. 642).
  - Chapter 12 of the FSB Handbook requires FSBs to have appropriate and effective policies, procedures, and controls to prepare and keep records for the stipulated period in a readily retrievable form so they are available promptly to domestic competent authorities (Para. 643).
  - FSBs must periodically review ease of retrieval and condition of records and consider implications where documentation is held overseas or by third parties or where reliance on introducers/intermediaries exists; FSBs must not enter into arrangements where access to records is likely to be restricted (Paras. 643–643).
- Implementation and effectiveness:
  - Assessors determined FSBs retain required records (including CDD information and transaction records) for the minimum retention period and are able to make them available as required; no issues noted regarding timely delivery of records to GFSC, FIS, or law enforcement (Para. 644).
  - Risk where an FSB relies upon an introducer in another jurisdiction to maintain underlying documentation: third party may be legally prohibited or may experience delays in supplying records (Para. 644).
  - Bailiwick Instruction issued in November 2009 requires FSBs to ensure where introducers were accepted from secrecy jurisdictions or jurisdictions widely thought of as secrecy jurisdictions, risks are mitigated by obtaining copies of identification data on a sample basis (Para. 644).

*Source: _cr1112 - Section 4.10 of the FSB Handbook, is consistent with Recommendation 9, although the*

### 645.      In addition to the FSB Regulations and the Rules and guidance in the FSB Handbook,

### _cr1112 - 645.      In addition to the FSB Regulations and the Rules and guidance in the FSB Handbook,

### Wire Transfer Ordinances (WTO) and scope
- FSBs must comply with the relevant Wire Transfer Ordinance (WTO).
- WTOs were made under the European Communities (Implementation) Law, with separate WTOs for Guernsey, Alderney, and Sark.
- The Bailiwick is in monetary union with the United Kingdom; majority of transfers between the United Kingdom and the Crown Dependencies use the U.K. Bankers’ Automated Clearing Services (BACs).
- BACs does not provide for the inclusion of full originator information as required by regulation (EC) No. 1781/2006 for cross-border funds transfers; a derogation was negotiated to treat transfers between the United Kingdom and the Crown Dependencies as domestic EU transfers.
- The U.K. Treasury was granted a derogation by the European Commission on December 8, 2008, under Article 17.1 of EU Regulation 1781/2006 to allow Member States to establish agreements with territories outside the EU with which they share a monetary union and payment and clearing systems.
- Guernsey concluded the necessary agreement with the United Kingdom in August 2008.
- Transfers within the U.K. Payment Area (the United Kingdom, Guernsey, Jersey and the Isle of Man; referred to as the British Islands) are treated as domestic transfers under SRVII; transfers between Guernsey and other EU Members are treated as cross-border transfers requiring full payer information.
- The WTOs provide that transfers between Guernsey and the United Kingdom (and Jersey and the Isle of Man) must be accompanied by the originator’s account number or, where there is no such account number, a unique identifier.

### WTO requirements for payer information and verification
- Section 1: WTO applies to transfers of funds in any currency sent or received by a payment service provider established in Guernsey, Alderney, or Sark.
- Section 2: PSP must ensure transfers of funds (other than transfers within the British Islands) are accompanied by complete information on the payer.
  - Complete information consists of the name, address, and account number of the payer.
  - Exceptions:
    - The address may be substituted with date and place of birth (where relevant), customer identification number, or national identity number.
    - Where the payer does not have an account number, the PSP shall substitute it with a unique identifier allowing the transaction to be traced back to the payer.
- PSP of the payer must verify the complete information before transferring any funds.
  - Verification must be on the basis of documents, data or other information obtained from a reliable and independent source.

### Deeming verification and account-opening linkages
- For transfers from an account, PSP may deem verification to have taken place if:
  - (a) it has complied with relevant FSB Regulations relating to identity verification in connection with account opening and retention of information from that verification, or
  - (b) the payer is an existing customer and it is appropriate to deem verification to have taken place, taking into account the risk of money laundering or terrorist financing.

### Messaging systems, identifiers, and special rules
- Section 7.3 Rules in the FSB Handbook:
  - For a payer that is a company, transfer must include the address at which the company’s business is conducted.
  - For a payer that is a trustee, transfer must be accompanied by the address of the trustee.
  - When messaging systems such as SWIFT MT202 are used on behalf of another financial services business, transfers must be accompanied by customer identification information necessary to meet WTO requirements.
  - Where a PSP is itself the payer (acting as principal), the WTO requirement to provide name, address, and account number may be met by provision of the Bank Identifier Code (BIC); an account number must be included where available.
  - Where a Business Entity Identifier (BEI) accompanies a transfer, the account number must always be included.

### Inclusion of Originator Information in Cross-Border Wire Transfers (c. VII.2)
- Section 2 (reiterated): PSP must ensure non-British Islands transfers are accompanied by complete information (name, address, account number), with same substitution and unique identifier provisions as described above.
- Section 4: For batch file transfers from a single payer where any PSP of the payee is situated outside the British Islands:
  - The Section 2 requirement need not apply to individual bundled transfers provided:
    - the batch file contains the complete information on the payer, and
    - the individual transfer carries the account number of the payer or a unique identifier.

### Inclusion of Originator Information in Domestic Wire Transfers (c. VII.3)
- Section 3(1): Where both payer PSP and payee PSP are situated in the British Islands, a transfer need only be accompanied by:
  - (a) the account number of the payer, or
  - (b) where there is no such account number, a unique identifier allowing the transaction to be traced back to the payer.
- Subsection (2): The PSP of the payer shall, upon request from the PSP of the payee, make available complete information on the payer within three working days excluding the day on which the request was received.

### Maintenance of Originator Information ("Travel Rule") (c. VII.4)
- Section 8: Any intermediary PSP must ensure any information received on the payer that accompanies a transfer is kept with that transfer.
- Section 9: Where payer PSP is outside the British Islands and the intermediary PSP is within:
  - An intermediary PSP may use a payment system with technical limitations, except that where it is aware required payer information is missing or incomplete, it must notify the PSP of the payee that information is missing/incomplete through (i) a payment or messaging system, or (ii) another agreed procedure.
  - Section 9(4) and (5): Where an intermediary PSP uses a system with technical limitations, it shall, upon request from the PSP of the payee, make available to the PSP of the payee all information on the payer which it has received, within three working days (excluding the day on which the request was received), and it must keep records of any information on the payer received by it for five years from the date of the transfer in question.

### Risk-Based Procedures for Transfers Not Accompanied by Originator Information (c. VII.5)
- Section 5: PSP of a payee must detect whether payer information fields have been completed using admissible characters/inputs in the messaging/payment system and have effective procedures to detect missing payer information:
  - i. for transfers where the PSP of the payer is situated in the British Islands, the information required for such transfers, and
  - ii. for transfers where the PSP of the payer is situated outside the British Islands (other than batch file transfers), either:
    - (A) complete information on the payer, or
    - (B) where relevant, the information required under section 9 (technical limitations).
- Rules in Section 7.4 of the FSB Handbook:
  - PSPs must have appropriate and effective policies, procedures, and controls subjecting incoming payment transfers to an appropriate level of post-event random sampling to detect non-compliant payments.
  - Sampling level must be appropriate to the risk of the financial services business being used in connection with money laundering and terrorist financing.
  - Considerations include: value of the transaction; country or territory of the payer; history of previous transfers with the PSP of the payer (e.g., prior failures to comply).
- Section 6(1): If a PSP of a payee becomes aware that payer information is missing or incomplete when receiving a funds transfer, the PSP must (subject to other relevant AML/CFT requirements or Commission guidance) either:
  - reject the transfer, or
  - request complete payer information from the PSP, or
  - take such other steps as the Commission may direct by Order.
- Rules require that where missing/incomplete information is discovered subsequent to processing (via random checking or monitoring), the PSP must seek complete payer information and/or take any other action the Commission may direct.
- If complete information is not provided within a reasonable time frame, the PSP must consider, on a risk-based approach, the most appropriate course of action.
- Section 7(1): Where payer information accompanying a transfer is missing or incomplete, the PSP of the payee must take this into account in assessing whether the transfer or related transaction is suspicious and whether a disclosure is required under the DL or the TL.

### GFSC Instruction Number 3 (November 11, 2009) and remediation deadline
- Instruction Number 3 (made under Section 49(7) of the Proceeds of Crime Law and issued by the GFSC on November 11, 2009) required boards of financial services businesses acting as recipients of wire transfers to:
  - review policies, procedures, and controls on detection of missing payer information and actions to be taken to ensure they meet Sections 5, 6, and 7 of the Ordinance and the Rules in the FSB Handbook appropriately and effectively;
  - ensure documented evidence of action taken where information on the payer is missing or incomplete is retained; and
  - by the close of business on January 29, 2010, have taken any necessary action to remedy any deficiencies.
- Action taken under these instructions is reviewed during on-site inspections and by other means as necessary.

### Monitoring of implementation (c. VII.6)
- Section 49B(1) of the POCL: GFSC’s officers, servants, or agents may on request enter premises in the Bailiwick owned, leased, or otherwise controlled or occupied by the business to determine whether an FSB has complied with any regulations.
- Section 49B(2): If the GFSC exercises entry rights, they may require officers of the FSB to:
  - produce for examination any documents held by the business, at the premises or at GFSC offices;
  - produce copies of any documents in a legible form for GFSC to take away; and
  - answer questions for the purpose of verifying compliance with any regulations under Section 49 and any rules, instructions, and guidance of the GFSC under that section.
- The Site Visits Ordinance grants power for GFSC officers to make site visits under the Banking Supervision Law and request documents and answers to verify compliance with minimum licensing criteria (which include compliance with the WTO); it also applies to registered FSBs under the Registered FSBs Law (including money transmitters).
- Section 11(1) of the WTO: Provisions of Sections 25, 26(1), and 26A of the Banking Supervision Law apply to PSPs in relation to information the GFSC may reasonably require for monitoring or ensuring WTO compliance.
- GFSC utilizes a risk-based monitoring approach; provision of money transfer services is a high risk factor used in scheduling on-site inspections.
- Monitoring compliance with the WTO is part of AML/CFT monitoring, including on-site and off-site assessments; on-site teams understand WTO requirements and PSP activities/risks.
- Section 11(2) of the WTO: Sections 28 and 29 of the Banking Supervision Law apply in relation to an offence under the WTO, enabling the use of Banking Supervision Law information-seeking powers for WTO compliance monitoring.

### Application of sanctions (c. VII.7: applying c.17.1–17.4)
- Section 12: Any PSP who, without reasonable excuse, fails to comply with WTO requirements is guilty of an offense and on summary conviction is liable to:
  - imprisonment for a term not exceeding six months, or
  - a fine not exceeding level five on the uniform scale (£10,000), or
  - both.
  - On conviction on indictment the penalty is liable to imprisonment for a term not exceeding five years, a fine, or both.
- Section 13: Where an offense is alleged to have been committed by an unincorporated body, proceedings shall be brought in the name of that body and not its members; where proved to have been committed with consent, connivance, or attributable neglect of specified officers or partners, those individuals as well as the body are guilty and may be proceeded against and punished accordingly.
- Section 14(1): Where an offense is committed by a company and proved to have been committed with consent, connivance, or attributable neglect of specified officers (director, chief executive, controller, manager, secretary, or similar), those individuals as well as the company are guilty and may be proceeded against and punished accordingly.
- Section 14(2): Where affairs of a company are managed by its members, subsection (1) applies to a member in connection with management functions as if he were a director.
- Section 15: GFSC may make rules, instructions and guidance for WTO purposes; courts shall take those rules, instructions and guidance into account in determining compliance with the WTO.
- Sections 11C and 11D of the Financial Services Commission Law and the Registered FSBs Law provide GFSC powers to:
  - issue public statements,
  - impose discretionary financial penalties where a FSB has contravened in a material particular a provision of the WTO,
  - impose conditions and suspend or revoke licenses and registrations.
- GFSC’s sanction powers applicable to WTO breaches are described further under Recommendation 17.

*Source: _cr1112 - 645. In addition to the FSB Regulations and the Rules and guidance in the FSB Handbook,*

### 668.      There is no requirement in place to require all incoming or outgoing cross-border

### _cr1112 - 668.      There is no requirement in place to require all incoming or outgoing cross-border

### Cross-border transfers and originator information (paras. 668–671)
- There is no requirement in place to require all incoming or outgoing cross-border transfers under EUR/USD 1,000 to contain full and accurate originator information. (Para. 668)
- Assessors find that the WTO provisions together with the applicable Rules in the FSB Handbook are fully consistent with the criteria. (Para. 669)
- Implementation findings from industry interviews:
  - Guernsey banks and money transmitters operating under the EU derogation provide full originator information for all transfers outside of the British Islands; transfers within the British Islands are treated as domestic and put through the U.K. payment system and do not require full originator information. (Para. 670)
  - On incoming transfers with incomplete originator information, banks reported they will hold up completing the transfer and request missing information, though such occurrences were not understood to be frequent. (Para. 671)
  - Banks perform post-event monitoring ranging from review of every transfer (smaller-volume banks) to random sampling (higher-volume banks); they request full originator information in certain cases, consider whether failures to include full originator information are suspicious and should be reported, and keep records of foreign banks that repeatedly fail to include full information and may refuse transfers from them. (Para. 671)

### Compliance ratings for travel/transfer recommendations
- R.10: C
- SR.VII: C
- No recommendations or comments were issued for this section. (Section 3.5.2)

### Monitoring of transactions and relationships (R.11 and R.21) — Legal framework and rules (paras. 672–679)
- FSB Regulation 11 requires "ongoing and effective monitoring" of business relationships, including:
  - Reviewing identification data to keep it up to date and relevant, particularly for high-risk relationships. (Para. 674)
  - Scrutiny of transactions and activity with particular attention to (i) complex transactions, (ii) transactions which are both large and unusual, and (iii) unusual patterns of transactions with no apparent economic or lawful purpose. (Para. 674)
  - Ensuring identification data recording/storage facilitates ongoing monitoring. (Para. 674)
  - Extent and frequency of monitoring shall be risk-sensitive and consider whether the relationship is high-risk. (FSB Regulation 11(2)) (Para. 674)
- Chapter 9 Rules of the FSB Handbook require risk-based monitoring, with greater scrutiny for high-risk relationships and additional caution for transactions involving jurisdictions specified in Business from Sensitive Sources Notices. (Para. 675)
- Section 9.2 of the FSB Handbook requires examination of background and purpose for complex/unusual/large transactions and written recording of such findings. (Para. 676)
- Section 12.2 of the FSB Handbook requires records of unusual/complex and high-risk transactions to include the FSB’s own reviews. (Para. 677)
- FSB Regulation 14 requires retention of transaction documents and CDD information for the minimum retention period defined in Regulation 19 as five years starting from date both the transaction and any related transaction were completed, or longer if GFSC directs. Documents and CDD information must be readily retrievable and made available promptly to police, the FIS, the GFSC, or other requestors. (Para. 678)
- Assessors noted prior absence of an auditor-access requirement for findings regarding unusual transactions, but:
  - Effective June 21, 2010, Regulation 14(4) was amended to specifically require documents and CDD information be made available to auditors. (Para. 679)
  - Effective June 2010, the FSB Handbook was amended to require that records be made available to auditors. (Para. 679)

### Implementation and effectiveness of monitoring (paras. 680–689)
- Financial institutions reported development of risk-based monitoring systems (manual, computerized, or mixed) to identify large and unusual transactions and patterns; institutions review such transactions and keep review records for required periods. (Para. 680)
- Enhanced due diligence for customers established or located in countries not applying or insufficiently applying FATF Recommendations is required by FSB Regulation 5(1)(c). (Para. 673; 681)
- Section 5.5 of the FSB Handbook:
  - Sets Rules specific to relationships with countries/territories that do not or insufficiently apply FATF Recommendations and requires appropriate and effective policies, procedures, and controls to give special attention to such relationships and transactions. (Para. 682)
  - Requires FSBs to consult the GFSC’s website regularly for Business from Sensitive Sources Notices, advisory notices, instructions, and warnings; instructions identifying jurisdictions with deficiencies are issued on a regular basis. (Para. 683)
  - Requires awareness of concerns about weaknesses in other countries’ AML/CFT systems and consideration of materials issued by FATF, FATF-style regional bodies, MONEYVAL, Asia Pacific Group, Offshore Group of Banking Supervisors, Transparency International, IMF, World Bank, and group entity experience. (Para. 684)
- Section 5.5 requires FSBs to identify transactions with no apparent economic or visible lawful purpose, examine background and purpose, and record findings in writing to assist domestic competent authorities. Prior to amendment there was no requirement that such findings be available to auditors; effective June 21, 2010, Regulation 14(4) amendment and June 2010 FSB Handbook amendment addressed auditor access. (Para. 685; 687)
- GFSC issues Business from Sensitive Sources Notices and instructions to require enhanced CDD and special attention; Instruction Numbers 8 and 9 are cited as examples related to U.K. Treasury Order exposures and FATF statement of February 2010. (Para. 686)
- Implementation observations:
  - Financial institutions are particularly sensitive to risks from customers in high-risk jurisdictions and were aware of the Instructions pertaining to the FATF statements of February 2010; most Bailiwick institutions rely on Group Head Offices to inform them of such risks in practice. (Para. 688)
  - Assessors noted Instruction Number 9 could have more accurately summarized the FATF Statement, which addresses several categories of jurisdictions ranging from those subject to a call for countermeasures to others described as having AML/CFT deficiencies. (Para. 689)
- Compliance ratings:
  - R.11: C
  - R.21: C
- No recommendations or comments were issued for this section. (Section 3.6.2)

### Suspicious Transaction Reports and reporting regime (R.13-14, 19, 25 and SR.IV) — Legal framework and implementation (paras. 690–696)
- Historical context:
  - In Guernsey’s last evaluation, reporting under the POCL and the DTL was criticized because reporting was treated as a defense for prosecution for money laundering (indirect reporting) rather than making failure to report an offense; in December 2007 the DL came into effect and is consistent with the TL so reporting obligation in both laws now takes the form of a non-disclosure violation. (Para. 690)
- DL and TL create reporting obligations that apply to all non-FSBs and effectively mirror FSB obligations; these are discussed under Recommendation 16. (Para. 691)
- GFSC Instruction Number 2 (November 2009) required FSBs to:
  - Review the timeliness of handling suspicion reports made by staff to the MLRO and STRs made to the FIS to identify lessons on promptness and ensure prompt handling of future reports. (Para. 692)
  - Draw up lists of each customer with more than one disclosure to the FIS, include number of STRs, and assess whether the relationship should be continued; if continued, retain documented comprehensive reasoning. Necessary actions had to be taken by close of business on February 26, 2010. (Para. 692)
- Details of the disclosure regime implementation and supporting statistics are set out under Recommendation 26. (Para. 693)
- Key elements of DL reporting obligations:
  - Under Section 1 of the DL, it is an offense for a person not to make a required disclosure of knowledge, suspicion, or reasonable grounds for suspicion that another is engaged in money laundering when that information comes in the course of a financial services business; disclosure must be made to a nominated officer or to a prescribed police officer and must comply with regulations made by the Home Department under Section 11 of the DL. (Para. 694)
  - Under Section 2 of the DL, it is an offense for a nominated officer not to make a required disclosure to a prescribed police officer; the requirement to report to a prescribed police officer (the FIS Division of the FIU) was made by amendment effective April 28, 2010; corresponding amendment to the Disclosure Regulations effective May 17, 2010. (Para. 694)
- Limited exemptions under the DL:
  - No offense if the person has a reasonable excuse for not making an STR. (Para. 695)
  - Exemption for information coming to a professional legal adviser in privileged circumstances does not apply to information communicated to further a criminal purpose. (Para. 695)
  - No offense if the person does not know or suspect and has not been trained by employer as required by regulations. (Para. 695)
  - Courts must consider whether the person followed GFSC rules or guidance published under Section 15 of the DL when determining offenses for failing to report. GFSC issued Rules and guidance in chapter 10 of the FSB Handbook. (Para. 695)
- TL parallel provisions:
  - Sections 15 and 15A of the TL contain offenses for failure to report knowledge, suspicion, and reasonable grounds for suspicion of terrorist financing, mirroring DL Sections 1 and 2, with the same limited exemptions and court consideration of following GFSC guidance. (Para. 696)

*Source: _cr1112 - 668.      There is no requirement in place to require all incoming or outgoing cross-border transfers under EUR/USD 1,000 to contain full and accurate originator information.*

### 697.      A recent amendment to the TL, to specify that reports must be made to a prescribed

### _cr1112 - 697.      A recent amendment to the TL, to specify that reports must be made to a prescribed

### Reporting framework and recent amendments
- Amendment to the TL requiring reports to be made to a prescribed police officer (defined as the FIS division of the FIU) became effective April 28, 2010.
- TL authorizes issuance of regulations in Section 15C corresponding to Section 11 of the DL.
- Regulation 1(1) of the Terrorism and Crime Regulations amended effective May 17, 2010 to replicate TL provisions on submission of reports to the FIS division of the FIU.
- Under Section 11, the Home Department may prescribe by regulations the manner in which a report under Sections 1 to 3 has to be made; Regulation 1(1) of the Disclosure Regulations requires STRs to be made in accordance with a form appended to the Regulations and specifies submission to the FIS division of the FIU.

### Definitions and scope of reporting
- Money laundering: defined in Section 17 of the DL to include money laundering offenses in the POCL and the DTL plus ancillary offenses.
- Terrorist financing: defined in Section 79 of the TL to include offenses set forth in the TL.
- Reporting obligations under the DL and TL apply to proceeds of all predicate offenses for money laundering under Recommendation 1.
- Terrorist property (Section 7(1)) includes:
  - money or other property likely to be used for the purposes of terrorism (including any resources of a proscribed organization),
  - proceeds of the commission of acts of terrorism,
  - proceeds of acts carried out for the purposes of terrorism.
- Section 7(2): reference to proceeds of an act includes any property which wholly or partly, and directly or indirectly, represents the proceeds of the act (including payments or other rewards); reference to an organization’s resources includes any money or other property applied or made available, or to be applied or made available, for use by the organization.
- Elements covered by Section 5 of the Terrorism (UN Measures) (Channel Islands) Order 2001 are not subject to reporting because the Order is not referenced in Section 79 of the TL.

### Penalties
- Under Section 5 of the DL: offenses in Sections 1 and 2 punishable with up to five years’ imprisonment and an unlimited fine.
- Under Section 15B of the TL: offenses in Sections 15 and 15A punishable with up to five years’ imprisonment and an unlimited fine.
- Tipping-off offenses (DL and TL) carry:
  - maximum of six months’ imprisonment and/or a fine of up to £10,000 on summary conviction,
  - maximum of five years’ imprisonment and/or an unlimited fine if convicted on indictment.
- Note: DL and TL amendments effective July 28, 2010 removed certain defenses; TL amendment removed the defense of having a reasonable excuse.

### FSB/GFSC rules and internal procedures
- GFSC Rules (chapter 10 of the FSB Handbook) require FSBs to establish policies, procedures, and controls to:
  - ensure each suspicion is reported to the MLRO (including suspicion during the CDD process);
  - ensure the MLRO promptly considers each internal report and determines if it meets criteria for reporting; if so, MLRO reports it to the FIS;
  - ensure all employees know to whom and in what format suspicions must be reported;
  - document and retain reasons when the MLRO decides not to make an STR to the FIS;
  - require the MLRO to inform the FIS immediately when subsequent relevant information or documentation is received after an STR has been made to the FIS.
- Assessors noted internal reporting and review processes in Chapter 10 could delay reporting and merit review for timeliness.
- GFSC Instruction Number 2 (November 2009) required FSBs to review timeliness of handling suspicion reports to the MLRO and disclosures to the FIS since December 15, 2007.

### STRs related to terrorism and terrorist financing (c. 13.2)
- Terrorist financing defined in Section 79 includes terrorist financing offenses in Sections 8 to 11 of the TL and all ancillary offenses; applies to funds that are or may be used for terrorism and to terrorist property.
- Reporting exceptions: elements covered by Section 5 of the Terrorism (UN Measures) (Channel Islands) Order 2001 are not reportable under TL Section 79.

### No reporting threshold (c. 13.3)
- No threshold specified in DL or TL.
- Definitions in Section 17 (DL) and Section 79 (TL) explicitly state coverage irrespective of the value of property.
- GFSC Rules Section 10.2 of chapter 10: each suspicion must be reported to the MLRO regardless of amount.

### Reporting of attempted transactions
- Definitions include attempts, but reporting of attempted transactions is not explicitly stated in DL and TL reporting sections and must be inferred.
- FSB Handbook guidance does not specifically state obligation to report suspicious attempted transactions.
- Industry and FIU practice: FSBs reported suspicious attempted transactions and FIU has received such reports.
- Authorities should consider amending legislation and guidance to explicitly require reporting of suspicious attempted transactions.

### Reporting involving tax matters (c. 13.4, c. IV.2)
- Neither DL nor TL contains exceptions for tax or other fiscal matters.
- Fiscal offenses such as tax evasion or fraud are criminal conduct under POCL and thus predicate offenses for money laundering; captured by Section 17 of the DL.
- GFSC Rules Section 10.2: each suspicion must be reported to the MLRO regardless of whether it is thought to involve tax matters.

### Reporting of all criminal acts (c. 13.5)
- Money laundering for disclosure obligations (Section 17 DL) references money laundering offenses in the POCL and the DTL.
- POCL money laundering offenses apply to proceeds of criminal conduct as defined in Section 1 of that law (any conduct which is an indictable offense within the Bailiwick or which would be an indictable offense if committed inside the Bailiwick).
- DTL money laundering offenses apply to all drug-related crimes within the ambit of the Vienna Convention.

### Implementation and effectiveness
- Financial institutions interviewed were very familiar with obligations on detection and reporting of suspicious transactions, including training, internal reporting procedures, designation of MLRO and nominated officer (management level), and responsibilities for reviewing internal reports and reporting when appropriate.
- Assessors observed potential delays from internal reporting and review processes; recommend reviewing and possibly simplifying procedures to improve timeliness.
- GFSC issued Instruction Number 2 (November 2009) to review timeliness of handling suspicion reports to MLRO and disclosures to FIS for lessons learned.

### STR statistics (STRs received in the last four years, by type of organization)
- Sector — 2006 — 2007 — 2008 — 2009
- Community banking — 152 — 121 — 86 — 95
- Fiduciary — 87 — 109 — 112 — 151
- Private banking — 72 — 102 — 133 — 170
- Deposit gatherers — 101 — 339 — 75 — 53
- Insurance — 70 — 28 — 9 — 20
- Post office — 52 — 19 — 27 — 31
- Investments & securities — 11 — 20 — 37 — 42
- Other — 0 — 0 — 3 — 0
- Regulator — 5 — 10 — 9 — 9
- Accountants — 3 — 3 — 5 — 14
- Bureaux de change — 1 — 0 — 0 — 0
- Legal professionals — 0 — 3 — 9 — 21
- HVG dealers — 0 — 3 — 0 — 0
- Stockbroker — 1 — 0 — 0 — 0
- Estate agents — 0 — 0 — 2 — 2
- e-gambling sector — 0 — 3 — 9 — 18
- Financial advisors — 0 — 0 — 0 — 0
- Company registry — 0 — 0 — 3 — 1
- Total STRs — 555 — 760 — 519 — 627

### Protection for making STRs (c. 14.1)
- Sections 1(13) and 2(8) of the DL and 15(13) and 15A(8) of the TL protect financial institutions and their directors, officers, and employees who make reports of suspicious transactions in good faith.
- Sections 4 of the DL and 40(3) and 40(4) A of the TL prohibit tipping off any other person that a report has been made, subject to conditions.
- Protection applies to legal and natural persons; does not require knowledge of precise nature of suspected underlying criminal activity or that illegal activity has occurred.
- March 24, 2010 amendments to Sections 2(8) of the DL and 15A(8) of the TL specify STRs in good faith are protected.

### Prohibition against tipping off (c. 14.2) and defenses
- DL Section 4: offense if, knowing or suspecting that a required disclosure has been or will be made (or related information communicated), person discloses to any other person information likely to prejudice subsequent investigation, or not in public domain and unreasonable to disclose.
- TL Sections 40(3) and 40(4)(a): substantively equivalent; TL includes an additional defense that the person had a reasonable excuse for the disclosure.
- Tipping-off offenses penalties described above.
- Amendments on March 24, 2010 added alternative grounds (disclosure not in public domain and unreasonable); July 28, 2010 amendments removed defenses that the person did not know or suspect prejudicial effect or that it was not unreasonable to disclose. TL removed defense of reasonable excuse.
- Assessors: scope of tipping-off offense not fully consistent with Recommendation 14; TL Section 40(5)(b) defense of reasonable excuse is also not consistent with the standard.

### Confidentiality of reporting staff (c. 14.3)
- Current practice per the U.K. National Intelligence Model, FIU dissemination guidance, and internal staff handbook: intelligence from STRs is sanitized to protect the source; disseminations subject to risk assessment including criteria on personal risks; disseminations require authorization by a senior officer.
- Prescribed STR submission form amended to remove reporter details; footnote requests contact details in a covering letter to safeguard reporter identity.

### Consideration of reporting currency transactions above a threshold (c. 19.1–19.3)
- Authorities have considered implementing threshold-based currency transaction reporting for several years; most recently considered by the Bailiwick AML/CFT Advisory Committee in September 2009 and earlier meetings in December 2005, March 2007, September 2008.
- Authorities prefer suspicion-based framework, considering threshold reporting resource intensive and potentially diverting focus from existing system; view differing approach from the United Kingdom as unhelpful.
- Computerized database and proper use elements: Not applicable.

### Feedback and guidance for financial institutions (c. 25.2)
- FIS provides feedback and guidance on STRs case-by-case, on its website, and via presentations and meetings.
- GFSC’s AML/CFT Handbooks on GFSC website also contain STR guidance.
- 2006: FIS introduced a feedback focus group (industry representatives) and a feedback project requiring FIS personnel to review all reports in a stipulated 12-month period and provide written feedback on a case-by-case basis.
- Constraint on feedback: just under 80 percent of STRs received between 2003 and 2009 related to entities located in other jurisdictions, limiting FIS ability to provide outcomes because FIS depends on overseas jurisdictions to provide final results; feedback is explicitly requested in dissemination caveats but often not provided.
- Law enforcement and regulatory authorities provide joint and separate feedback sessions and briefings for industry.

*Source: _cr1112 - 697.      A recent amendment to the TL, to specify that reports must be made to a prescribed*

### 724.       General feedback at an overview level is provided annually by the publication of

### _cr1112 - 724.       General feedback at an overview level is provided annually by the publication of

### Feedback mechanisms and outreach
- Annual reports by the FIS, the police force, and the customs service outline respective objectives and achievements and provide general overview feedback.
- Focused feedback:
  - FIS participation in feedback sessions, often alongside representatives from the GFSC, the Attorney General’s Chambers, and other law enforcement agencies, to raise awareness of reporting issues and trends.
  - General and sector-specific feedback provided directly to MLROs at such events.
  - Presentations arranged by the FIS to industry, the judiciary, and law enforcement on disclosure-related issues, sometimes with external speakers (most recently, Head of the FIU presentation in January 2010 to the Guernsey Association of Compliance Officers).
  - “In excess of 100” key compliance personnel from FSBs in Guernsey attended the January 2010 presentation, which included some high level analysis of STRs in 2009.
- Case-by-case feedback:
  - Routinely provided where possible via letters, phone conversations, and personal visits; data is collated to provide quantitative assessment.
  - Case file notes reflect routine case-by-case feedback.
  - Feedback project (introduced 2006) provided written feedback outlining the disclosure, any developments since the report, dissemination, follow-up assistance, and specific outcomes.

### Feedback projects, sanitized cases, and databases
- Sanitized local case studies:
  - Made available to reporting institutions during presentations and within the FIS’s annual report.
  - Since 2005, FIS pivotal role in the Egmont TWG sanitized cases project.
  - FIS working with IT and Operational Working Group on a joint trends and indicators database to incorporate needs of various working groups.
- 2004 feedback-project results:
  - Total of 591 STRs from 120 different financial services businesses reviewed.
  - FIS received responses from 65 institutions.
  - From respondents: 16 additional lines of enquiry identified; FIS informed of 51 accounts closed and/or relationships concluded.
  - Reporters were asked to provide views and areas for improvement; overall comments positive; inclusion of disclosing institutions’ reference recommended for future feedback.
  - Secondary benefit: identification of further lines of enquiry and additional open source information.
- 2005 feedback-project results:
  - 650 reports reviewed; 202 responses received.
  - Of responses: approximately 30 percent indicated that the account was subsequently closed; of the accounts remaining open, a further 10 percent revealed that the original suspicion had been negated following receipt of additional information; a further 20 percent were currently free from any suspicious activity.
- Planned improvements:
  - New database due to be introduced in May (year context: project planned later in 2010 following database introduction in May).
  - New database will incorporate features to assist in providing reporting institutions with quicker and more responsive feedback.

### Targeted consultation and sector engagement
- Consultations initiated on specific issues:
  - High-value goods dealers in respect to introduction of regulations and reporting thresholds.
  - Enquiries with banking sector representatives regarding cash imports/exports.
  - FIS correspondence to sectors on specific modus operandi issues (e.g., cash deposits by local drug traffickers).
- GFSC role:
  - Joint feedback with FIS to FSBs via briefings.
  - Individual FSBs receive feedback following on-site inspections.
  - Instructions issued by the GFSC in November 2009 constitute feedback on both local and international AML/CFT issues.
- AGCC role:
  - eGambling licensees receive FIS feedback as other reporting businesses and additional information about trends and potential concerns from the AGCC.

### Statistics and reporting scope (R.32)
- Statistics on STRs maintained as detailed under Recommendations 13, 26, 30, and 32.
- No statistics maintained for currency transactions above a certain threshold because the Bailiwick does not have a reporting system for all currency transactions above a threshold.

### Recommendations and compliance points (selected)
- R.13:
  - Consider amending DL and TL and/or relevant guidance to explicitly require the reporting of attempts, or issuing guidance to clarify the requirement.
  - Review STR process to determine whether timeliness could be improved by revising and possibly simplifying the procedure.
- SR IV:
  - The reporting requirement in the TL should be amended to also extent to conduct under Section 5 of the Terrorism (UN Measures) (Channel Islands) Order 2001.
- Compliance ratings (summary):
  - R.13 C
  - R.14 C
  - R.19 C
  - R.25 C
  - SR.IV LC
    - Note: The reporting requirement under the TL does not extend to Section 5 of the Terrorism (UN Measures) (Channel Islands) Order 2001.

### Internal controls, compliance, audit, and foreign branches (R.15 and R.22) — key legal and operational details
- Legal and regulatory framework:
  - FSB Regulations and FSB Handbook provide framework for compliance with Recommendation 15 and related criteria, including internal policies, procedures, controls, compliance management arrangements, and screening procedures.
  - DL and TL provide for disclosure and tipping off requirements; Disclosure Regulations and the Terrorism and Crime Regulations prescribe form and manner of reporting.
- MLRO and nominated officer requirements:
  - FSB Regulation 12 requires an FSB to appoint a person of at least management level as the MLRO and provide the name and title to the GFSC and the FIS “as soon as is reasonably practicable and, in any event, within fourteen days starting from the date of that person’s appointment.”
  - A nominated officer must be appointed to receive STRs in the absence of the MLRO and ensure relevant employees are aware of that nominated officer.
  - FSB Regulation 12(d), 12(e), 12(f) and FSB Handbook rules require MLRO/nominated officer to have access to relevant information and CDD records and that appropriate procedures and controls are established and maintained.
- Board responsibility and compliance review:
  - FSB Regulation 15 requires the Board to be responsible for compliance policy, extent and frequency of reviews, and ensuring review discussions are recorded in board minutes.
  - FSB Handbook Section 2.3 requires the Board to consider sample testing of effectiveness and adequacy of policies, procedures, and controls.
- Independent audit function:
  - FSB Regulation 15 and FSB Handbook rules allow consideration of a separate audit function, but there is no specific requirement to maintain an adequately resourced and independent audit function to test compliance with AML/CFT procedures, policies, and controls.
  - Recommendation: authorities should establish a direct obligation for FSBs to maintain an adequately resourced and independent audit function to test compliance with AML/CFT policies, procedures, and controls.
- Employee training and screening:
  - FSB Regulation 13(2) requires comprehensive ongoing training covering Regulations, Handbook, personal obligations, criminal liability, implications of non-compliance, and policies/procedures/controls.
  - FSB Handbook Section 11.4 details required training topics including CDD, reporting of suspicion, sanctions, MLRO identity/responsibilities, vulnerabilities of products/services, and current ML/TF techniques and typologies.
  - FSB Regulation 13(1) and FSB Handbook Section 11.2 require procedures for hiring to ensure high standards of probity and competence, including references, regulatory action history, and criminal record checks.
- Independence of compliance officer:
  - FSB Regulation 12 and FSB Handbook Section 2.4 require MLRO (and deputy MLROs) to report directly to the Board and have regular contact to ensure statutory obligations are met.
- Implementation and effectiveness findings:
  - Institutions confirmed written AML/CFT policies and procedures, appointment of MLROs and nominated officers, periodic training, and screening procedures.
  - Assessors viewed screening procedures as adequate.
  - Majority of institutions are part of financial groups that provide periodic audits through corporate audit divisions despite no specific local legal requirement.
- Foreign branches and subsidiaries (R.22):
  - FSB Regulation 15(d) requires foreign branches or subsidiaries that are FSBs to comply with (i) FSB Regulations and (ii) any requirements under the law of that country or territory consistent with the FATF Recommendations, to the extent local law permits.
  - FSB Regulation 15(2) requires an FSB to notify the Commission if a foreign branch or subsidiary is not allowed to comply with any requirement in the Regulations.
  - Consistency of group-level CDD: no requirement in law/regulation/enforceable means for group-level policy application; Amendment effective June 21, 2010:
    - Regulation 15(d) amended to specifically require that, if AML/CFT requirements of Guernsey and host countries differ, branches or subsidiaries should be required to apply the higher standard, to the extent the law of the host country allows.
  - Implementation: FSBs visited were aware of requirements on their branches, including obligation to comply with the higher standard as permitted by law.
- Compliance ratings for these areas:
  - R.15 LC
    - Reason: There is no requirement to maintain an adequately resourced independent audit function to test compliance with AML/CFT policies, procedures and controls.
  - R.22 C

*Source: _cr1112 - 724.       General feedback at an overview level is provided annually by the publication of*

### 754.      Shell banks cannot be established in the Bailiwick.  Section 6(2) of the Banking

### _cr1112 - 754. Shell banks cannot be established in the Bailiwick. Section 6(2) of the Banking

### Prohibition on shell banks and licensing criteria
- Section 6(2) of the Banking Supervision Law: the GFSC shall not grant a banking license unless satisfied that, in relation to the applicant and any person who is or is to be a director, controller or manager of the applicant, the criteria specified in Schedule 3 are fulfilled.
- Minimum criteria for licensing (Schedule 3 to the Banking Supervision Law) include:
  - requirement for there to be two Guernsey residents sufficiently independent of each other effectively directing the business;
  - banks must maintain accounts and other records of business in the Bailiwick.
- Section 31 of the Banking Supervision Law requires licensed banks to make audited accounts available in their offices in the Bailiwick.
- Authorities confirmed there are no shell banks in the Bailiwick; assessors found no reason to determine otherwise.
- Distinction: “administered banks” are licensed banks that have outsourced their operations in the Bailiwick to another Guernsey bank; administered banks and administering banks:
  - are subject to the full range of AML/CFT and prudential requirements;
  - have operations and activity in the Bailiwick (conducted by the administering bank’s staff rather than their own employees);
  - maintain records that are audited; and
  - pay taxes.

### Correspondent banking and shell-bank-related prohibitions (Rec. 18)
- FSB Regulation 8(2)(a): an FSB must not enter into, or continue, a correspondent banking relationship with a shell bank.
- FSB Regulation 8(2)(b): an FSB must take appropriate measures to ensure it does not enter into, or continue, a correspondent banking relationship where the respondent bank is known to permit its accounts to be used by a shell bank; measures must include sufficient diligence to know (to a reasonable degree) whether the respondent bank permits its accounts to be used by shell banks.
- Compliance with Recommendation 18: Rating R.18 C.
- Recommendations and Comments: None.

### Supervisory and oversight system — legal framework and sanctions
- Available sanctions for failure to comply with AML/CFT requirements: criminal, civil, and administrative.
- Criminal sanctions are set out in: the POCL, the DTL, the TL, the DL and the FSB Regulations.
- Civil and administrative sanctions may be applied by supervisory authorities pursuant to the FSB Regulations and the regulatory laws.
- GFSC is the overall regulatory authority for AML/CFT in Guernsey; powers set out and exercised through financial regulatory laws including:
  - Banking Supervision Law;
  - Protection of Investors Law;
  - Insurance Business Law;
  - Insurance Managers and Insurance Intermediaries Law;
  - Regulation of Fiduciaries Law.
- All financial services businesses (FSBs) under the GFSC are subject to AML/CFT regulation and supervision of the relevant provisions of the Disclosure Law (DL), the Terrorism and Crime Law (TL), the Drug Trafficking Law (DTL), the Proceeds of Crime Law (POCL), the Wire Transfer Ordinances (WTO) and the FSB Regulations.
- GFSC has issued AML/CFT regulations and a Handbook (FSB Handbook) that includes rules, guidance and instructions to FSB for effective implementation; these are supervised and enforced by GFSC supervisory divisions.
- Section 49 of the Proceeds of Crime (POC) Law empowers the GFSC to make rules, instructions and guidance for AML/CFT; Section 49B provides powers to conduct on-site inspections and obtain information and documents during such inspections.
- Site Visits Ordinance provides for on-site inspections to ascertain compliance with the Banking Supervision Law and the Protection of Investors Law and related instruments; powers can be used to monitor registered FSB compliance with AML/CFT obligations.

### GFSC designation, functions, and supervised population
- Section 2(2) of the Financial Services Commission Law establishes GFSC functions, including obligation to counter financial crimes and the financing of terrorism.
- Pursuant to Section 49(7) of the POC Law, GFSC empowered to make rules, instructions and guidance for FSB regulation to ensure FSBs adequately comply with requirements to detect and prevent money laundering and financing of terrorism.
- GFSC’s AML/CFT supervisory program includes offsite monitoring/surveillance and onsite activities.
- GFSC is responsible for supervision of the following number of financial institutions (as at 31 December 2009):
  - Banks (Deposit taking and lending; Acceptance of deposits; Lending; Transfer of money; Issuing and managing means of payment; Financial guarantees and commitments; Money and currency changing): 44; Deposits – £114.7 billion.
  - Insurers, insurance managers and insurance intermediaries (Life and general insurance; Underwriting and placement of life insurance and other investment related insurance; Underwriting and placement of non-life insurance): 699 insurers; 21 insurance managers; 40 insurance intermediaries; Gross assets – £21.0 billion; Gross written premiums – £3.3 billion.
  - Investment firms and funds (Individual and collective portfolio management, investment advice and broking; Participating in securities issues and provision of services relating to such issues): 661 licensed institutions; 884 Guernsey collective investment schemes; 1 stock exchange; Assets under management or administration – £184.2 billion.
  - Registered non-regulated financial service businesses (Lending, financial leasing and other non-Core Principle activities …): 43; described as Small.
  - Money service businesses (Money and currency changing and transfer of money): 35 (29 included in figures for banks and 6 included in registered non-regulated financial services businesses); described as Small.

### GFSC supervisory approach and operational practices
- GFSC administers the FSB Regulations and the FSB Handbook in addition to regulatory laws; AML/CFT responsibilities interlinked with prudential/regulatory responsibilities so minimum criteria for licensing include compliance with AML/CFT obligations (see e.g., Banking Supervision Law Section 8 and Schedule 3 Criterion 3).
- GFSC’s approach to supervision is risk-based and covers both prudential and AML/CFT supervision.
- Supervisory cycle includes off-site surveillance and on-site inspections; GFSC developed detailed examination procedures captured in its operational manual.

Risk-based approach to supervision
- Risk-based approach components:
  - identification of risk exposures (inherent risks) within customers, products and services, transactions, geographical location and delivery channels;
  - identification and evaluation of risk mitigants;
  - evaluation of controls;
  - determination of estimated net risk position (residual risk).
- Analysis conducted through an internally developed supervisory risk matrix applied to all FSBs; results drive frequency of off-site surveillance and on-site inspections.

Off-site surveillance
- Off-site surveillance includes frequent evaluation of financial and non-financial information received from each FSB to ensure compliance; frequency and information requested based on risk profile.
- Example reporting frequencies:
  - an institution rated “high risk” required to submit frequent financial and non-financial reports (ranging from monthly to quarterly);
  - an institution rated “low risk” required to submit such information semi-annually.
- Off-site analysis can lead to enforcement actions and corrective action requirements.

On-site inspections
- No statutory predetermined timeframe for on-site inspections; GFSC internal policy: three-year rolling cycle.
- Practical scheduling by risk rating:
  - high risk: visited every year;
  - medium risk: visited within an 18-24 months cycle;
  - low risk: visited every three years.
- The annual inspection plan allows flexibility for more frequent or targeted inspections if risk profile changes.
- The GFSC conducts thematic on-site inspections as needed or on request from other competent authorities (e.g., the FIU).
- Inspections cover a full range of risks and areas and are supported by a comprehensive inspection manual.
- Planning process for AML/CFT on-site inspections includes off-site surveillance results, FIU contact, prudential supervisor contact, review of previous reports and supervisory strategy, and follow-up of previous findings and corrective actions.
- Typical on-site AML/CFT inspection resourcing and duration:
  - comprised of three to four experienced supervisors;
  - spend an average of three to four days on-site;
  - these averages exclude additional pre- and post-on-site inspection time.

### On-site inspection activity and coverage (selected figures)
- Number of on-site inspections conducted by the GFSC during the last four years (by sector and year):
  - Banking: 2006 – 44; 2007 – 20; 2008 – 17; 2009 – 16 (15 Banks and 1 Bureau de Change); total entities covered by inspections: 2,563 (2006), 461 (2007), 425 (2008), 1,210 (2009), 729 (unspecified).
  - Fiduciary: 2006 – 197; 2007 – 43; 2008 – 40; 2009 – 27; 23 (additional line item).
  - Insurance (including insurers, insurance managers, intermediaries): 2006 – 699 insurers (which includes 21 insurance managers) 40 insurance intermediaries; inspections across years included 30, 28, 31, 33 with captive managers also covering varying numbers of captives/PCCs (127, 210, 131, 202 respectively).
  - Investment Business (including stock exchange): 661 licensed institutions; 884 Guernsey collective investment schemes; 1 stock exchange; inspections by year included 14, 12, 32, 48 with fund administrators inspections covering specified numbers of funds and administered licensees.
  - Registered financial services businesses: counts and inspections noted (43, n/a, n/a, 8, 7) with notes on inspections covering multiple registrations/entities.
  - Prescribed Businesses: 35 (29 included in figures for banks and 6 included in registered financial services businesses); inspections during Oct–Dec and subsequent periods noted as 4 and 14 with coverage notes.
- Total entities covered by inspections reported: 2,563; 461; 425; 1,210; 729 (as listed in the source).

### Enforcement actions and sanctioning activity
- GFSC empowered to impose sanctions on FSB and PB for noncompliance with AML/CFT laws, regulations, and handbooks.
- Enforcement powers (sanctions and refusals) used by GFSC by year and division:
  - 2006: Banking 0; Fiduciary 1; Insurance 0; Investment 0; Policy and International Affairs n/a.
  - 2007: Banking 0; Fiduciary 3; Insurance 1; Investment 0; Policy and International Affairs n/a.
  - 2008: Banking 2; Fiduciary 2; Insurance 1; Investment 3; Policy and International Affairs 0.
  - 2009: Banking 0; Fiduciary 7; Insurance 2; Investment 3; Policy and International Affairs 6.
  - Totals: Banking 2; Fiduciary 11; Insurance 4; Investment 6; Policy and International Affairs 6.

### GFSC powers to monitor, inspect, and compel production
- GFSC powers to monitor and ensure compliance by all FSB with AML/CFT obligations are adequate under the various laws and regulations.
- Section 49B of the POC Law empowers GFSC to enter any premises in the Bailiwick to determine whether an FSB has complied with the FSB Regulations, the FSB Handbook and instructions; GFSC may require production of documents and answers to questions.
- Site Visits Ordinance provides a tiered inspection approach:
  - Section 1: inspections with the licensee’s agreement;
  - Section 2: inspections with notice but without the agreement of the licensee;
  - Section 3: where GFSC suspects notice would result in document removal/tampering/falsification/destruction, GFSC may enter premises on request without notice.
- The Ordinance requires licensees to produce documents for examination and to answer questions.
- Section 67 of the Insurance Business Law and section 44 of the Insurance Managers and Insurance Intermediaries Law allow GFSC on-site inspection after making arrangements with the licensee for regulatory or public protection/reputation reasons.
- Section 49(B) of the POCL grants GFSC broad powers to enter premises and require officers and agents of an FSB to produce documents and copies and to answer questions to verify compliance with AML/CFT requirements.
- For consistency, the Site Visits Ordinance was amended to apply to the insurance industry, effective July 28, 2010.

*Source: IMF assessment text provided in the input content unit.*

### 777.      Compliance with the wire transfer provisions of the FSB Regulations and the FSB

### _cr1112 - 777.      Compliance with the wire transfer provisions of the FSB Regulations and the FSB

### On-site inspection framework and scope
- Compliance with the wire transfer provisions of the FSB Regulations and the FSB Rules is subject to on-site inspections under:
  - the on-site provisions of the Proceeds of Crime Law and the Site Visits Ordinance;
  - the Site Visits Ordinance and the Registered FSBs Law for registered FSBs;
  - all FSB subject to the Wire Transfer Ordinances are subject to on-site inspections under the Site Visits Ordinance or the regulatory laws.
- Specific statutory powers referenced:
  - Section 49B of the Proceeds of Crime Law authorizes the GFSC to require, during an inspection, FSB to produce legible copies of documents for examination at the premises of the business or at the GFSC offices.
  - GFSC may require FSB to answer questions during an inspection to verify compliance with regulations under Section 49 and associated rules, instructions and guidance.

### Powers to compel production, questioning and access
- Sanctions for obstructing or failing to comply with GFSC inspection powers under Section 49B:
  - On summary conviction: imprisonment for a term of up to 6 months or a fine of up to £10,000 or both.
  - On conviction on indictment: imprisonment of up to two years or a fine or both.
- Additional statutory powers to obtain information and documents from FSB concerning AML/CFT compliance exist under:
  - section 25 of the Banking Supervision Law;
  - Sections 27 and 30 of the Protection of Investors Law;
  - section 68 of the Insurance Business Law;
  - Section 45 of the Insurance managers and Insurance Intermediaries Law;
  - section 18 of the Registered FSBs Law.
- It is an offense under these laws for an FSB not to provide information and documents reasonably requested by the GFSC.
- Bailiff powers:
  - Warrants can be granted for a police officer and any other person named (such as a GFSC representative) to use reasonably necessary force to enter premises, search them and require questions to be answered where, for example, a financial services business has failed to comply with a GFSC notice or where documents might be removed, tampered with or destroyed.
- GFSC’s compulsion and access powers are not predicated on obtaining a court order.

### Adequacy of supervisory resources (R.30)
- GFSC staffing and organization:
  - The GFSC has 97 staff and 4 consultants.
  - Recruiting at time of onsite included a Legal Counsel and an Assistant Director; the Assistant Director role in the Fiduciary Division is relevant to AML/CFT and intended to enhance on-site inspection capacity.
  - The GFSC is divided into seven Divisions: 1) Director General’s Division; 2) Banking Division; 3) Investment Business Division; 4) Insurance Division; 5) Fiduciary Division; 6) Policy and International Affairs Division; and 7) Finance and Operations Division.
- Division responsibilities for AML/CFT supervision:
  - Banking Division: banking sector AML/CFT supervision.
  - Investment Business Division: investment sector AML/CFT supervision.
  - Insurance Division: insurance sector AML/CFT supervision.
  - Policy and International Affairs Division: registered financial services businesses and registered prescribed businesses.
  - Fiduciary and Intelligence Services Division: trust and company service provider sector.
  - Each Division conducts on-site inspections for entities it supervises.
- Financial position and premises:
  - 2009 total income: £10.1 million.
  - 2009 expenditure: £10.95 million.
  - Reserves at December 31, 2009: £1.3 million.
  - Authorities forecast income and expenditure for 2010 at £11.3 million.
  - GFSC operated from two premises and planned to vacate and move to one site in or around September 2010.
- Staff recruitment, vetting and integrity safeguards:
  - Recruitment includes interviews, three satisfactory references and criminal conviction checks.
  - Section 21(1) of the Financial Services Commission Law requires identifying information to be kept confidential by the GFSC, subject to gateways enabling GFSC functions (including AML/CFT) and prevention, detection, investigation and prosecution of crime.
  - Wrongful disclosure penalties:
    - On conviction on indictment: imprisonment for up to three years or a fine or both.
    - On summary conviction: a fine of up to £10,000 or imprisonment of up to three months or both.
  - New staff and annual acknowledgements required of confidentiality provisions; staff handbook contains confidentiality text.
  - Staff handbook addresses conflicts of interest, personal account dealing, disclosure procedures, prohibited investments and conflicts registers. Commissioners have separate published guidance and a standing agenda item for conflict disclosure.
- Training and international engagement:
  - Compulsory ongoing training for combating ML and FT provided to GFSC staff, including:
    - an on-line program purchased from a specialist off-island firm of AML/CFT trainers;
    - specialist U.K. trainer sessions for new and follow-up training;
    - training from representatives of the Attorney General’s Chambers, the FIS and GFSC staff.
  - Since 2007 routine training topics included: scope of legislation, requirements for FSBs and PBs, typologies, suspicion, terrorist financing and prosecutions.
  - Attendance at external conferences encouraged; GFSC officers have organized/attended regular joint training sessions within the Bailiwick for all bodies with AML/CFT responsibilities.
  - The Policy and International Affairs Division provides significant resource: senior officers participate in and contribute to AML/CFT work with FATF, the IAIS, the IMF, MONEYVAL, the OGBS and the FSI and provide briefings to GFSC senior management.
- Authorities’ assessment of resourcing:
  - Authorities indicated staff resources were frequently reviewed and, at the time of the onsite, were adequate to fulfill AML/CFT functions with recruitment of an additional assistant director in the Fiduciary Division to enhance on-site inspections.

### Sanctions, enforcement powers and scope (c. 29.4; c. 17.1–17.4)
- Legal basis and scope:
  - Financial regulatory laws, the POC Law and the Disclosure Law provide sanctioning powers to the GFSC for violations of AML/CFT legal and regulatory requirements.
  - Sanctioning powers extend to directors and officers of financial institutions (FIs).
- Types and historical use of powers:
  - GFSC has a broad range of powers to sanction financial institutions for noncompliance and has frequently used powers such as imposing regulatory conditions on licensees, including winding down business activities.
  - Prior to May 24, 2010 no financial sanctions had been imposed by the GFSC for violations of AML/CFT law, regulations, and rules.
  - On May 24, 2010 financial sanctions were imposed on three individuals: £14,000 on one individual and £7,000 on each of the other two individuals; these were related to noncompliance with the FSC Law, the Fiduciary Law, the FSB (AML/CFT) Regulations, and the Handbook for FSBs.
  - Authorities indicated indirect financial penalties have been applied by:
    - imposing conditions prohibiting undertaking any new business for a specified period;
    - imposing conditions requiring specific training to be undertaken;
    - appointing inspectors with costs borne by the institution.
- Range and examples of supervisory measures (selection across 2007–Up to April 30, 2010):
  - 2007 examples:
    - Orderly wind-down of business where GFSC had not licensed due to AML and fiduciary approach; business relocated outside Guernsey September 2007.
    - Orderly wind-down and surrender of license after discovery of circumvention of internal controls on cash distribution; relocated outside Guernsey September 2007.
    - Condition: no new business pending full file review by directors; appointment of inspectors; led to license refusal and closure.
    - Referral of a Managing Director to Law Officers and Law Enforcement over involvement in companies handling proceeds of an investment fraud; subsequent appointment of inspectors and money laundering charge awaiting trial.
  - 2008 examples:
    - Condition requiring identification of all customers, risk assessment and appropriate CDD or account closure; licensee met condition.
    - License conditions requiring submission of improved AML/CFT procedures; directions covering closure of business; business relocated outside Guernsey in 2008.
    - Condition preventing appointment of further directors outside Guernsey to maintain Commission jurisdiction; condition complied with.
    - Conditions restricting new business following onsite findings; company surrendered insurance intermediary license.
    - Conditions imposed to rectify deficient documented processes and client due diligence; remedial action taken and monitored; follow-up onsite reviews conducted.
  - 2009 examples:
    - Statutory directions re wind-down ordered to close by February 28, 2009 with no new business; directions complied and licensee dissolved on September 2009.
    - Multiple license conditions imposed requiring new AML/CFT procedures, file reviews, moratoria on new business, external reviews of high risk relationships, improved risk assessment and client review programs; conditions generally complied with or ongoing monitoring in place.
    - Condition imposed that licensee cease payout of life insurance proceeds unless full identification and verification obtained; condition complied with.
    - Conditions addressing deficiencies in transferred CDD following fund administration transfers; licensee required to rectify outstanding issues and provide reports; Commission reviewing final reports to assess compliance.
  - Up to April 30, 2010 examples:
    - Conditions requiring independent review of compliance with Regulations and Handbook; condition being complied with.
    - Conditions preventing acceptance of new business while AML/CFT issues resolved; condition being complied with.
    - Conditions requiring client review programmes and independent assistance to bring procedures into compliance; conditions being complied with.
    - Conditions addressing suspicion reporting procedures and AML/CFT training for staff; registered entities met conditions within required timeframes.

*Italic: Content derived from the IMF assessment chapter titled "_cr1112 - 777.      Compliance with the wire transfer provisions of the FSB Regulations and the FSB"*

### 794.      Violations of the AML/CFT framework may trigger the application of criminal, civil, and

### _cr1112 - 794. Violations of the AML/CFT framework may trigger the application of criminal, civil, and

### Criminal sanctions
- Money laundering convictions on indictment (Pursuant to Sections 38(4), 39(6) and 40(10) of the POCL, Section 62(1) of the DTL and Section 17 of the TL):
  - punishable by imprisonment for a term not exceeding 14 years and/or an unlimited fine.
- Summary convictions for money laundering:
  - imprisonment for a term not exceeding 12 months (in cases of ML based on the TL the applicable sanction is six months) and or a fine not exceeding £10,000.
- Terrorism financing offenses (Pursuant to Section 17 of the TL):
  - on conviction on indictment: imprisonment for a term not exceeding 14 years, or to an unlimited fine or to both;
  - on summary conviction: imprisonment for a term not exceeding six months, to a fine not exceeding £10,000 or both.
  - Additional measures: criminal courts may oblige convicted terrorist financers to pay compensation to the victims (Section 1 Compensation Law) and order forfeiture of property and instrumentalities.
- Failure to file an STR (Pursuant to Sections 1, 2 and 3 of the DL and Sections 12, 15 and 15A of the TL):
  - offense where a person (including legal person) has knowledge, suspicion, or reasonable grounds for suspicion that another person is engaged in ML or TF.
- Tipping off offenses (Section 4 of the DL and Section 40 of the TL; related provisions: Section 5 of the DL, Section 41 of the POCL, Section 15B of the TL, and Section 61 of the DTL):
  - summary conviction: imprisonment for a term not exceeding six months or a fine not exceeding £10,000;
  - conviction on indictment: imprisonment for a term not exceeding five years or to an unlimited fine or both.
- FSB Regulation 17:
  - any natural or legal person who violates any requirement of the FSB Regulations may be held criminally liable and be sanctioned on conviction to imprisonment for up to five years or an unlimited fine or both;
  - penalties on summary indictment: imprisonment for up to six months or a fine of up to £10,000.

### Civil sanctions
- Injunctions by the Royal Court (Pursuant to Section 35 of the Banking Supervision Law, Section 33 Protection of Investors Law, Section 76 Insurance Business Law, and Section 53 Insurance Managers and Insurance Intermediaries Law) on application of the GFSC:
  - may restrain a natural or legal person from contravening provisions of the indicated laws, including unlawful or fraudulent conduct of business.
  - note: provisions not directly targeted at money laundering offenses but could be used where ML suspected alongside other unlawful activity.
- Application of criminal statutes to legal persons:
  - criminal sanctions under the POCL, DTL and TL apply to all “persons” as defined in the Interpretation law (Sections 51(2) POCL, 69(2) DTL and 79(3) TL).
  - Section 49E POCL: legal persons and their officers, managers, directors, secretaries or other persons may be held responsible for POCL offences if established that the person acted negligently or based on consent or connivance.
- Enforcement bodies:
  - criminal sanctions applied by the Royal Court Guernsey upon application by the AG;
  - civil sanctions applied by the Royal Court of Guernsey upon application by the GFSC.

### Administrative sanctions (GFSC powers)
- GFSC authority to impose administrative sanctions on licensed financial services businesses under the Financial Services Commission Law and regulatory laws for AML/CFT violations.
- Public statements and discretionary financial penalties (Sections 11C and 11D of the Financial Services Commission Law):
  - GFSC may issue public statements regarding the type of violation and the names of individuals and businesses involved.
  - discretionary financial penalties of up to £200.000 for violations of any provision of, or made under, the prescribed laws (would include violations of the FSB Regulations or the Rules).
- Range of conditions GFSC may impose on FSBs for breaches of the FSB Regulations or Rules (pursuant to regulatory laws):
  - restriction of the scope of business;
  - prohibition to solicit business in a specified place or from persons of a specified description;
  - prohibition to enter into certain transactions or class of transactions;
  - removal of any director, controller, partner, manager, general representative or employee;
  - provision of information and documents to the GFSC (e.g., third party compliance report);
  - prohibition, restriction or limitation on the carrying out of business.
  - Conditions can be applied to individuals as well as businesses and a breach thereof may be criminally sanctioned.
- Power to revoke licenses (under other provisions of the regulatory laws):
  - GFSC may revoke the license of an FSB where minimum licensing criteria have not been fulfilled; a minimum condition of licensing is compliance with the FSB Regulations and the FSB Rules.
- Historical use of sanctions (assessors’ review of GFSC activity from 2007 up to April 2010):
  - GFSC actively used powers to sanction financial institutions, directors and officers for non compliance on numerous occasions;
  - prior to May 24, 2010, no financial sanctions had been imposed by the GFSC for violations of the AML/CFT law, regulations, and rules;
  - financial sanctions of May 24, 2010: imposed on three individuals in the amount of £14,000 (on one individual) and £7,000 (on the other two) related to noncompliance with the FSC Law, the Fiduciary Law, the FSB (AML/CFT) Regulations, and the Handbook for FSBs.
  - authorities note indirect financial penalties via: (i) conditions prohibiting undertaking any new business for a specified period; (ii) conditions requiring specific training; (iii) appointment of inspectors with costs borne by the institution.
- Scope of administrative sanctions:
  - may be applied to both legal persons licensed as financial service businesses and, to the extent applicable, to controllers, directors, partners and senior managers (penalties under section 17 of the FSB Regulations apply to individuals as well as FSBs).
  - GFSC powers under the Financial Services Commission Law can be applied directly to controllers, directors, partners and senior management.
- Assessment of penalty magnitude:
  - assessors consider the current discretionary financial penalties under Section 11D of the FSC Law (up to £200.000) not dissuasive and proportionate given the size of the financial system in Guernsey;
  - recommendation: authorities should consider enhancing the discretionary financial penalties regime and establishing a sanctions regime proportionate to the severity of the violation or level of non compliance.

### Market entry; Fit and Proper criteria; Licensing and registration
- General market entry (GFSC role):
  - GFSC manages regulatory framework for all FSBs, including granting and revoking licenses, and control over ownership and investments.
  - all regulated FSBs require authorization from the GFSC to operate in Guernsey.
  - strict licensing requirements include vetting of owners, directors and officers for technical competence, solvency, and integrity (including criminal background checks with local police and, if outside Guernsey, with the U.K. law enforcement agencies).
- Minimum criteria and revocation powers (Banking Supervision Law; Protection of Investors Law; Insurance Business Law; Insurance Managers and Insurance Intermediaries Law; Registered FSBs Law):
  - only FSBs that meet minimum criteria for licensing may be licensed; FSBs that fail to continue to meet criteria can have licenses revoked.
  - FSBs registered under the Registered FSBs Law are subject to fit and proper criteria and GFSC powers to prevent registration or revoke registration if criteria not satisfied.
- Fit and proper considerations (each regulatory law requires licensees and persons who are, or are to be, directors, controllers, partners or managers to be fit and proper):
  - considerations include:
    - (a) probity, competence, experience and soundness of judgement for fulfilling responsibilities;
    - (b) diligence with which responsibilities are or likely to be fulfilled;
    - (c) whether interests of depositors or potential depositors are or likely to be threatened by holding the position;
    - (d) educational and professional qualifications, membership of relevant bodies and evidence of continuing professional education or development;
    - (e) knowledge and understanding of legal and professional obligations to be assumed;
    - (f) policies, procedures and controls for vetting clients and customers and record of compliance with provisions in Fraud Investigation Law, the POCL, the DTL, the TL, the DL, the WTO, any legislation implementing European Community or United Nations sanctions applicable in the Bailiwick, or any other enactment prescribed by regulation of the GFSC;
    - (g) policies, procedures and controls to comply with any rules, codes, guidance, principles and instructions issued by the GFSC.
  - additional considerations given to previous conduct and activities, including evidence of:
    - (a) committed any offence, particularly involving fraud, other dishonesty or violence;
    - (b) contravened regulatory laws or enactments relating to money laundering or terrorist financing (including GFSC rules, instructions and guidance) or any enactment designed for protecting members of the public against financial loss;
    - (c) engaged in business practices appearing deceitful, oppressive or otherwise improper or reflecting discredit on method of conducting business; or
    - (d) associated with business practices or conduct casting doubt on competence and soundness of judgment.
- Appointment and notification requirements:
  - requirement for FSB to give prior notice before effecting any appointment of a director (Section 22A Banking Supervision Law, Section 28A Protection of Investor Law notice, Section 11(6) Insurance Business Law, Section 27(5) Insurance Managers and Insurance Intermediaries Law and Section 7(3) Registered FSB Law).
  - no person may become a shareholder controller or indirect controller of a bank unless notified and no objection by GFSC (Section 14 Banking Supervision Law); GFSC may require additional information and may object to controllers who are not fit and proper.
  - GFSC powers include objecting to and removing existing controllers; offences for becoming or remaining a controller without meeting notification/objection requirements.
  - Section 17 Banking Supervision Law: GFSC power to restrict transfer of shares, restrict voting rights and apply to court to require sale of shares; similar powers in Protection of Investors Law, Insurance Business Law and Insurance Managers and Insurance Intermediaries Law.
- Personal questionnaires and removal powers:
  - for FSBs subject to Basel Core Principles, Objective and Principles of Securities Regulation and Insurance Core Principles the GFSC obtains personal questionnaires from directors, chief executives and controllers.
  - GFSC can require removal of individuals not meeting fit and proper criteria.
- Minimum licensing criteria for the business:
  - business must be carried on:
    - (a) with prudence and integrity,
    - (b) with professional skill appropriate to the nature and scale of its activities, and
    - (c) in a manner which will not tend to bring the Bailiwick into disrepute as an international finance centre.

### Licensing or registration of Value Transfer/Exchange Services (MVTS) (c. 23.5)
- Historical regulatory coverage:
  - prior to FSB regulations, persons providing money or value transfer service or money or currency changing service were subject to AML/CFT requirements through regulations for financial services businesses made under the POCL (superseded by the FSB Regulations).
- FSB Regulations requirements:
  - require MVTS to include notification of basic information to the GFSC including prior information on directors and beneficial ownership.
  - GFSC maintains a non-public registry of such businesses.
  - provisions strengthened in 2007 by the FSB Regulations and the Registered FSBs Law.
- Registration obligations (Sections 15A and 15B of the FSB Regulations):
  - apply to persons covered by the Banking Supervision Law, the Protection of Investors Law, the Insurance Business law, the Insurance Managers and Intermediaries Law and the Regulation of Fiduciaries Law;
  - require a natural or legal person regulated under those laws who operates a money service business (including MVTS and/or currency exchange (bureau de change)), facilitating or transmitting money or value through an informal or value transfer system or network, money broking, money changing to be registered with the GFSC.

*Source: _cr1112 - 794. Violations of the AML/CFT framework may trigger the application of criminal, civil, and (excerpts).*

### 820.      Persons conducting MVTS or a money or currency changing service and who are

### _cr1112 - 820.      Persons conducting MVTS or a money or currency changing service and who are

### Licensing and registration requirements for MVTS and money/currency changing services
- Persons conducting MVTS or a money or currency changing service and who are licensed under the regulatory laws are subject to the minimum criteria for licensing under those laws. (para. 820)
- Under Section 2 of the Registered FSBs Law, an FSB carrying on or holding itself out as carrying on business in or from within the Bailiwick must be registered with the GFSC. (para. 822)
- Exemptions to registration under Section 2 include where:
  - the total turnover of that business, plus that of any other financial services business carried on by the same person, does not exceed £50,000 per annum,  
  - no occasional transactions are carried out in the course of such business, that is to say, any transaction involving more than £10,000, where no business relationship has been proposed or established, including such transactions carried out in a single operation or two or more operations that appear to be linked,  
  - the turnover of such business does not exceed 5% of the total turnover of the person carrying on such business,  
  - the business is ancillary, and directly related, to the main activity of the person carrying on the business,  
  - in the course of such business, money or value is not transmitted or such transmission is not facilitated by any means,  
  - the main activity of the person carrying on the business is not that of a financial services business, and  
  - the business is provided only to customers of the main activity of the person carrying on the business and is not offered to the public. (para. 822)
- Registration can be refused under Section 5 of the Registered FSBs Law for non-compliance with informational requirements, provision of false or misleading information, or contraventions/offences under AML/CFT legislation or the FSB Handbook. (para. 823)
- It is an offence under Section 17 of the FSB Regulations and Section 2(2) of the Registered FSBs Law not to be registered where required. Penalties under Section 33(2) for failure to register:
  - on conviction on indictment: imprisonment for a term of up to two years or to a fine or both,  
  - on summary conviction: imprisonment for a term of up to 3 months or to a fine of up to £10,000 or to both. (para. 824)
- At the time of the onsite visit, the GFSC maintained a register under sections 15A and 15B of the FSB Regulations and there were only two such entities operating in Guernsey. (para. 821)

### GFSC powers, supervision, and enforcement
- The GFSC is empowered to make rules, instructions and guidance under Section 49(7) of the POCL to implement the FSB Regulations for prevention of money laundering and terrorist financing. (para. 825)
- Pursuant to Section 15 of the DL, the GFSC can make rules and issue guidance and instructions in respect of disclosure of information or ML/FT; the power to issue instructions took effect from 24 March 2010. The DL requires the court to take into account rules, guidance or instructions issued under Section 15 when considering non-disclosure offences. (para. 826)
- The GFSC has on-site inspection powers (Section 49B of the POCL, Site Inspections Ordinance, Registered FSBs Law Sections 17 and 18) including powers to obtain information and documents, require reports from persons with relevant professional skill, and require directors, controllers, senior officers or beneficial owners to furnish information to assess fitness and propriety. Failure to comply without reasonable excuse is an offense and subject to penalties in section 9 of the Site Visits Ordinance. (paras. 832–834)
- The GFSC has monitored AML/CFT compliance since the 2007 framework; in November 2009 it issued a series of instructions to FSBs on: corporate governance and internal controls; suspicion reporting; wire transfers; introduced business; screening of employees; existing customers; and business from sensitive sources. (para. 829)

### Prudential and AML/CFT integration; inspections and guidance
- All FSBs under GFSC responsibility are subject to prudential supervision, internal control and recordkeeping requirements appropriate to their operations and risks, and must have audit programs; external annual audits include elements of AML/CFT. (para. 830)
- Licensing criteria under regulatory laws require consideration of contraventions related to money laundering or terrorist financing when assessing fit and proper status. (para. 831)
- GFSC began AML/CFT on-site inspections in 1999 (banks), extended in 2002 to additional FSBs, and included registered FSBs in the formal on-site inspection program for prudential and AML/CFT matters from 2007. (paras. 828–829)
- The GFSC uses a detailed questionnaire and verification procedures for AML/CFT inspections, reviews procedures, books and records, and sample testing. Deficiencies are remedied by written remediation requirements and sanctions where appropriate. Since December 2007 sanctions have been applied against two businesses providing money value transfer and/or currency exchange services. (para. 835)

### Scope of application and sector-specific treatment
- Money and value transfer services are subject to the same AML/CFT requirements as other FSBs under Section 49 of the Criminal Justice (Proceeds of Crime) Law. (para. 848)
- Section 12 of the Registration of Non-Regulated Financial Services Businesses Law requires the GFSC to maintain and publish a list of all registered financial services, clearly identifying those conducting money and value transmission services. (para. 849)
- Compliance with FATF Recommendations: MVTS operators are subject to requirements on identification, monitoring, record-keeping, internal reporting and training; TL and DL reporting obligations apply to terrorist financing and money laundering suspicions respectively. (para. 850)
- Hotel and shops offering limited money or currency changing services have been exempted on the basis that ML/FT risk is low; exemptions reflect that such transactions are occasional and limited. GFSC reminded hotels in January 2010 of obligations if they no longer fall within exemptions. Hotels and shops are not exempt from registration and the AML/CFT framework if they provide MVTS. At the time of the visit, neither hotels nor other shops were providing MVTS. (para. 837)

### Guidance materials and industry support
- The FSB Handbook (and PB Handbook for prescribed businesses) contains rules and guidance across AML/CFT obligations, including corporate governance, risk based approach, customer due diligence, high/low risk relationships, wire transfers, existing customers, monitoring transactions, reporting suspicion, employee screening and training, and record keeping. (paras. 838–840)
- Chapter 7 of the FSB Handbook addresses Wire Transfer Ordinances and FSB Regulations; Chapter 10 covers suspicion reporting requirements in the DL and TL and disclosure regulations; Chapter 13 and Appendix G provide industry-specific guidance, suspicious features, activities, descriptions of ML/FT and case studies. (paras. 840–841)
- The GFSC has placed case study material on its website linked to FATF and Egmont typologies. The stated goal of GFSC guidance is to make FSB measures as effective as possible in combating ML and FT. (para. 842)

### Implementation, effectiveness, and identified weaknesses
- The supervisory framework enables the GFSC to effectively monitor compliance by financial services businesses with AML/CFT laws, regulations, rules, and guidance. (para. 843)
- Inspections use a detailed questionnaire, sample testing, and follow-up enforcement actions requiring remediation, including training or record reviews by specified dates. (para. 844)
- The current discretionary financial penalties available to the GFSC under Section 11D of the FSC Law have a maximum of £200,000 for violations of any provision of the prescribed laws; this maximum is considered not dissuasive and proportionate. (para. 844)
- GFSC has identified shortcomings during onsite visits and issued enforcement actions and sanctions where appropriate; corrective actions under monitoring programs are reviewed periodically and verified in follow-up onsite inspections. (paras. 845–846)
- The supervisory framework for MVTS is assessed as effective in allowing the GFSC to monitor compliance by the MVTS sector. (para. 847)

### Recommendations, compliance ratings and key enforcement figures
- Recommendation (para. 3.10.2):
  - The authorities should consider enhancing the discretionary financial penalties regime and establishing a sanctions regime that is dissuasive and proportionate to the severity of the violation or level of non compliance.
- Compliance ratings (para. 3.10.3):
  - R.17: LC
    - Current discretionary financial penalties available to the GFSC are not considered dissuasive and proportionate. The maximum financial fine of £200,000 for violations of any provision of the prescribed laws is considered too low.
  - R.23: C
  - R.25: C
  - R.29: LC
    - Current discretionary financial penalties available to the GFSC are not considered dissuasive and proportionate. The maximum financial fine of £200,000 for violations of any provision of the prescribed laws is considered too low.
- Enforcement and registration snapshot:
  - At the time of the onsite visit, there were only two entities operating in Guernsey subject to sections 15A and 15B of the FSB Regulations. (para. 821)
  - Since December 2007 sanctions applied against two businesses providing money value transfer and/or currency exchange services. (para. 835)

*Source: Excerpts from the supplied IMF assessment text (paras. 820–850 and related paragraphs).*

### 851.      Pursuant to Section 49B of the POCL, the GFSC can conduct on–site inspections and

### _cr1112 - 851.      Pursuant to Section 49B of the POCL, the GFSC can conduct on–site inspections and

### Money and Value Transfer Services (MVTs) — Supervision and Inspections
- Pursuant to Section 49B of the POCL, the GFSC can conduct on–site inspections and obtain information to monitor compliance with the FSB regulations. (Paragraph 851)
- There are currently only two MVTs operating in Guernsey. (Paragraph 852)
- One MVT:
  - Was the subject of three on-site inspections since September 2008.
  - The initial on-site raised concerns about corporate governance, procedures and AML compliance.
  - Subsequent visits confirmed these concerns have been addressed. (Paragraph 852)
- The other MVT was inspected in October 2008 with no significant issues being raised. (Paragraph 852)

### Agents (List of Agents — c. VI.4)
- Section 16 (5) of the FSB Regulations requires any financial services business conducting money and value transfer services to maintain a list of agents which must be made available to the GFSC on demand. (Paragraph 853)
- There were two agents operating in Guernsey at the time of the assessment. (Paragraph 853)

### Sanctions for Non-Compliance (applying c. 17.1-17.4 in R.17) (c. VI.5)
- Failure to comply with Guernsey’s AML/CFT requirements includes criminal and administrative sanctions. (Paragraph 854)
- Details of sanctions are outlined in:
  - the POCL (Section 49),
  - the TL (Section 15 B),
  - the DL (Section 5),
  - the FSB Regulations (Section 17). (Paragraph 854)
- All criminal violations are subject to fines, imprisonment or both. (Paragraph 854)
- The Registration of Non-Regulated Financial Services Businesses Law, Sections 8 and 9, give the GFSC the authority to suspend or revoke registration. (Paragraph 854)
- Sanctions apply to both natural and legal persons. (Paragraph 854)

### Adequacy of Resources — MVT Registration, Licensing and Supervisory Authority (R.30)
- MVTs are subject to supervision by the GFSC’s Policies and International Affairs Division. (Paragraph 855)
- There are 3 officers and 2 contractors that conduct on-site inspections of MVTs, prescribed businesses and other non-regulated financial businesses. (Paragraph 855)
- There was one MVT (with two agents) operating in the Bailiwick at the time of the assessment and both have been subject to an on-site inspection. (Paragraph 855)

### Best Practices and Additional Elements (c. VI.6)
- Guernsey has concentrated efforts on meeting essential criteria and ensuring MVTs are registered with the GFSC, meet the FSB Regulations and the FSB Handbook, are subject to on-site inspections and are subject to the GFSC’s enforcement powers. (Paragraph 856)
- Guernsey has implemented many practices from the best practices paper that correspond to AML/CFT requirements for MVTs. (Paragraph 857)
- MVT registration and supervisory features:
  - MVTs are required to be registered and are subject to a “fit and proper” test during registration. (Paragraph 857)
  - They are required to provide the address from which they operate. (Paragraph 857)
  - Efforts to identify MVTs have been undertaken and all MVTs are believed to have been identified. (Paragraph 857)
  - The GFSC is responsible for ensuring compliance in the MVT sector and sanctions can be applied if an MVT does not register or fails to comply with AML/CFT requirements. (Paragraph 857)

### Effectiveness and Implementation
- The legislative framework is in line with the standard. (Paragraph 858)
- The GFSC is designated specifically to register money and value transmitters. (Paragraph 858)
- MVTs are required to register with the GFSC and the GFSC maintains a public registry where MVTs are listed. (Paragraph 858)
- Given the apparent small size of the sector it would appear reasonable that MVTs are part of the non-regulated financial services business registry administered by the GFSC. (Paragraph 859)
- The scope of requirements extended to MVTs is extensive and resources allocated to the supervision of the sector are adequate. (Paragraph 859)

### Recommendations and Compliance Rating
- 3.11.2. Recommendations and Comments: None. (Paragraph 3.11.2)
- 3.11.3. Compliance with Special Recommendation VI — Rating: SR.VI C (Rating and summary of factors underlying rating provided) (Paragraph 3.11.3)

### Preventive Measures — DNFBPs: Overview and Legal Framework
- Section examines preventative measures for Designated Non-Financial Businesses and Professions (DNFBPs): legal profession, accountants, real estate agents, Dealers in Precious Metals and Stones (DPMS), and Trust and Company Service Providers (TCSP). Throughout the section Prescribed Businesses (PB) refers to businesses subject to the Prescribed Business Regulations. (Paragraph 860)
- PB Regulations and related framework:
  - POCL provides framework for obligated entities. (Paragraph 861)
  - Specific requirements are in:
    - Proceeds of Crime (Financial Services Business) Regulations for TCSPs and bullion dealers,
    - Proceeds of Crime (Legal Professionals, Accountants and Real Estate Agents) Regulations (PB Regulations). (Paragraph 861)
  - Requirements include obligations to conduct CDD, monitor transactions, keep records, develop policies and procedures, screen employees, establish an audit function and train employees. (Paragraph 861)
  - GFSC has published two handbooks targeted at each regulation setting out rules and guidance; rules are enforceable under Section 49A (4) (e) of the POCL and subject to sanctions pursuant to Sections 12, 13 and 14 of the PB Law. (Paragraph 862)
  - GFSC issued a public statement on May 25, 2010 imposing fines for breach of FSB regulations and FBS handbook rules on three individuals who were directors of a former licensed fiduciary. (Paragraph 862)
  - Guidance in handbooks presents ways of complying; PBs may adopt alternative measures if they can demonstrate compliance with regulations and rules. (Paragraph 863)

### Scope of Coverage and Exemptions
- TCSPs and bullion dealers are included in the definition of a financial services business in Schedule 1 to the POCL and are subject to the same AML/CFT requirements as banking, insurance and investment sectors, with the exception of persons acting as a director of six companies or less. (Paragraph 864)
- Dealers in precious metals and stones other than bullion dealers are prohibited from conducting cash transactions above £10,000 and are therefore not considered a DNFPB for the purposes of the standard. (Paragraph 865)
- PB Regulations do not require registration with the GFSC if the PB’s total turnover does not exceed £50,000 per annum, does not carry out occasional transactions involving more than £10,000, services are provided only to customers resident in the Bailiwick, and funds received are drawn on a bank operating from or within the Bailiwick. If exempt from registration, the PB is also exempt from AML/CFT requirements other than STR reporting. (Paragraph 866)
- Lawyers, notaries and accountants are subject to PB Regulations only when they undertake certain prescribed activities (listed as six types of activity). Requirements do not apply when a lawyer is employed by public authorities or undertakings that do not by way of business provide legal services to third parties. (Paragraph 867)
- Estate agencies are subject to PB Regulations when acting on behalf of others in acquisition or disposal of real property for the purposes of effecting introductions and securing disposal or acquisition; estate agencies exclude legal and accountancy services even if involved in real estate transactions. (Paragraph 868)

### Casinos and eGambling — Legal and Regulatory Context
- Several laws govern establishment of casinos: 1971 Guernsey Gambling Law, 2002 Sark Gambling Law, Guernsey Hotel Casino Concession of 2001, and Alderney Gambling Law, eGambling Regulations and eGambling Ordinance. (Paragraph 869)
- No land casinos in the Bailiwick at time of assessment. (Paragraph 869)
- There were 44 eGambling license holders in Alderney as of December 31, 2009. (Paragraph 869)
- Alderney eGambling Regulations outline AML/CFT requirements for eCasinos including CDD, transaction monitoring, recordkeeping, policies and procedures, employee screening, audit function and training. (Paragraph 870)
- Two categories of eGambling licenses:
  - Category 1: enables holder to conduct operations associated with eGambling, including player registration, management of player funds and offering gambling. (Paragraph 871)
  - Category 2: allows holder to provide approved games to customers of Category 1 licensees. (Paragraph 871)
- Category 1 conducts all CDD activities; Category 2 does not have CDD nor a direct contractual relationship with the customer. Until July 2, 2010 Category 2 license holders did not have requirements to effectively monitor gambling transactions. Both categories must report suspicious transactions, conduct business risk assessments and establish appropriate policies and procedures. (Paragraph 872)
- Category 2 license holders do not have identification information on customers and share gambling information with the Category 1 licensee. Category 1 is responsible for monitoring financial transactions it facilitates as well as gaming activity facilitated by Category 2. Category 2 licensees are now obligated to monitor gambling transactions and communicate to Category 1 any transactions that do not have any economic or lawful purpose. (Paragraph 872)
- Assessment notes:
  - Category 1 appears to have necessary information to adequately monitor both financial transactions and gaming activity that might lead to ML/TF suspicion, but comprehensiveness of monitoring is unclear. (Paragraph 873)
  - Risks identified in eCasino industry: conducting minimal gaming activities, requesting reimbursement through a different payment mechanism than used to initiate transactions, payment mechanisms that allow transactions between players, and player collusion in “open table” scenarios. (Paragraph 874)
  - No specific legislative or regulatory provision requires payments to be made through the initial payment mechanism; player-to-player transactions and use of wire transfers are not prohibited. Controls are at the discretion of the AGCC. (Paragraph 874)
  - At time of assessment no “open table” games being offered by Alderney eCasinos although framework does not prohibit them. (Paragraph 874)
  - At time of assessment most licensees held both Category 1 and 2 licenses; AGCC expects greater segregation of licenses over next few years. (Paragraph 875)
  - For the assessment, only Category 1 licensees are considered eCasinos. Criterion 12.1 a) states a casino should comply with requirements when customers engage in financial transactions equal to or above USD/€3,000; financial transactions do not refer to gambling transactions that involve only casino chips or tokens. (Paragraph 876)
  - Although eCasino customers can purchase virtual chips and tokens through Category 1 licensees they cannot redeem these chips or tokens or otherwise transfer value to another player. (Paragraph 877)
  - Category 2 licensees are considered not to be casinos for FATF methodology purposes because they do not facilitate financial transactions or transfer of value and do not have a direct relationship with customers. Recent revisions require Category 2 to report transactions lacking economic or lawful purpose to Category 1, supporting on-going monitoring from both perspectives. (Paragraph 878)

### Adequacy of Legal Framework — Observations and Exceptions
- Criteria determining obligations imposed on real estate agents, lawyers and accountants are in line with the standard; exception with respect to legal privilege is in line with the standard. (Paragraph 879)
- Other exemptions mostly in line with the standard, except:
  - exemptions extended to the eCasino sector, and
  - the exception allowing an individual to be the director of six companies without being licensed as a TCSP. (Paragraph 879)
- Exception not to require a PB to register when turnover < £50,000, only dealing with Bailiwick residents and no transactions > £10,000 is considered reasonable given low risk. (Paragraph 880)
- Exemption to DPMS via a cash restriction prohibiting transactions of £10,000 or more reduces risk and limits AML/CFT obligations to STR reporting; threshold is below EUR/USD 15,000 designated by the standard. (Paragraph 881)
- Legislative/regulatory framework exists for land-based casinos though none present; letters from Chief Minister and Minister of the Home Department confirmed AML/CFT requirements would be extended to land based casinos if established. (Paragraph 882)
- Licensing exemption for persons acting as a director of six companies or less is not in line with the standard; the activity falls within FATF definition of a TCSP. Unclear how many individuals are subject to this exemption or the size of assets they manage; absence of supervisory oversight may impact quality of beneficial ownership information, though other safeguards under Recommendation 33 ensure beneficial ownership information is available. (Paragraph 883)

### CDD Measures for DNFBPs in Set Circumstances (Applying c. 5.1-5.18 in R.5 to DNFBP) (c. 12.1)
- Section 8 of the PB Regulations prohibits the use of anonymous accounts. (Paragraph 884)
- CDD requirements for prescribed businesses are outlined in Section 4 of the Proceeds of Crime (Legal Profession, Accountants and Real Estate Agents) Regulation. (Paragraph 885)
- Clients shall be identified and their identity verified when:
  - (1) establishing a business relationship;
  - (2) carrying out occasional transactions;
  - (3) when there is a suspicion of money laundering or terrorist financing;
  - (4) when there is doubt about the veracity or adequacy of previously obtained information. (Paragraph 886)
- Section 3 of the PB Regulations requires:
  - (a) the client shall be identified and his identity verified using identification data;
  - (b) any person purporting to act on behalf of the client shall be identified and his identity and authority to act shall be verified;
  - (c) the beneficial owner and underlying principal shall be identified and reasonable measures shall be taken to verify such identity using identification data and such measures shall include measures to understand the ownership and control structure of the client;
  - (d) a determination as to whether the client is acting on behalf of another person and if so, take reasonable measures to obtain sufficient identification data to identify and verify the identity of that other person;
  - (e) information shall be obtained on the purpose and intended nature of each business relationship;
  - (f) determine whether the client, beneficial owner and underlying principal is a PEP. (Paragraph 887)

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr1112.pdf*

### 888.      For the purposes of these sections underlying principal means, in relation to a business

### _cr1112 - 888.      For the purposes of these sections underlying principal means, in relation to a business

### Definitions and scope
- Underlying principal means, in relation to a business relationship or occasional transaction, any person who is not a beneficial owner but who (a) is a settlor, trustee or a protector of a trust which is the customer, or client, or the beneficiaries of which are the beneficial owners, or (b) exercises ultimate effective control over the customer. (Paragraph 888)

### Identification and verification requirements for non-individual clients (Section 4.6 PB Handbook)
- Where a legal body (not a collective investment scheme regulated by the GFSC or a legal body quoted on a regulated market) is the client, beneficial owner or underlying principal, a PB must:
  - identify and verify the identity of the legal body. The identity includes name, any official identification number, date, and country or territory of incorporation, if applicable (ie. if the data has been created, in the instance of an identification number for example);
  - identify and verify any registered office address and principal place of business (where different from registered office) where the risk presented by the legal body is other than low;
  - identify and verify the individuals ultimately holding more than a 25 percent interest in the capital or net assets of the legal body;
  - identify and verify the individuals with ultimate effective control over the capital or assets of the legal body, including beneficial owners, underlying principals, directors or equivalent; and
  - verify the legal status of the legal body. (Paragraph 889)
- Exemptions exist for legal bodies quoted on the stock market and collective investment schemes regulated by the GFSC; assessment team views these exemptions as applied to lower risk products and in line with the standard. (Paragraph 890)
- Best methods to verify identity listed in guidance (Section 4.4.2 PB Handbook): current passport, current national identity card or armed forces identity card. (Paragraph 891)

### Ongoing monitoring and scrutiny of transactions
- Prescribed businesses required to conduct ongoing and effective monitoring under Section 11 of PB regulations. Ongoing monitoring shall include:
  - (1) reviewing identification data to ensure it is kept up to date particularly for high-risk customers;
  - (2) scrutinize any transaction or activity paying attention to complex transactions, transactions which are both large and unusual patterns of transactions which have no apparent economic or lawful purpose.
- Requirement to ensure identification data is recorded and stored to facilitate ongoing monitoring of each business relationship. (Paragraph 892)
- Section 7.2 requires PBs to scrutinize transactions to ensure consistency with institution’s knowledge of the customer, their business and risk profile, and where necessary the source of funds. (Paragraph 893)

### Implementation and effectiveness of CDD measures
- CDD requirements in regulations and rules are extensive and meet the criteria set out by the standard; reporting entities have a good understanding and have implemented robust CDD programs with immediate controls to ensure CDD measures are completed. (Paragraph 894)
- Use of anonymous accounts is prohibited by FSB regulations; assessment team confirmed anonymous accounts were not used. (Paragraph 895)
- The concession allowing lower risk legal bodies to be exempt from identifying and verifying any registered office address and principal place is line with the standard; entities must document why the entity is lower risk and concession is rarely applied. (Paragraph 896)
- Requirement to identify and verify individuals with ultimate effective control is in line with the standard though defined more broadly than required. (Paragraph 897)
- Beneficial ownership information requirement is well understood particularly in the fiduciary sector; many fiduciaries have dedicated personnel to conduct due diligence. Processes exist to keep ongoing relationship information up to date and monitor transactions. Reputational risk is a primary concern for industry. (Paragraph 898)

### Risk-based approach and risk assessment requirements
- PB can adopt a risk-based approach to CDD to balance cost burden with realistic assessment of ML/TF threat; Section 3 of PB Handbook provides guidance on identifying and assessing risk and mitigation measures. (Paragraph 899)
- Section 3 of PB Regulations and Chapter 3 of PB Handbook require PB to undertake a risk assessment of any proposed business relationship or occasional transaction and, based on assessment, decide whether to accept the relationship and determine extent of identification/verification and monitoring. (Paragraph 900)
- Section 5 of PB Regulations requires enhanced CDD where the client or any beneficial owner or underlying principal is a politically exposed person (PEP), or when:
  - (i) the client is established or situated in a country or territory that does not apply, or insufficiently applies, the FATF Recommendations;
  - (ii) the PB considers it to be a high risk relationship, taking into account notices, instructions or warnings issued by the GFSC; or
  - (iii) the business relationship or occasional transaction has been assessed as a high-risk relationship. (Paragraph 901)
- Section 6 permits reduced or simplified CDD in strictly limited circumstances (Chapter 6 PB Handbook) including:
  - face-to-face Guernsey resident clients physically present when establishing a relationship or undertaking a transaction;
  - legal bodies quoted on a regulated market;
  - collective investment schemes regulated by the GFSC;
  - clients identified as an Appendix C business and not acting for underlying principals. (Paragraph 902)
- Reduced/simplified CDD limits obligations to obtaining legal name, any former names, principal residential address, and date, place of birth and nationality. (Paragraph 903)
- Appendix C business defined: FSB supervised by GFSC, PB registered under regulations, or business carried on from a country/territory listed in Appendix C and subject to AML/CFT requirements and supervision. (Paragraph 904)
- Simplified/reduced CDD prohibited where PB knows, suspects or has reasonable grounds to suspect any party is engaged in ML or TF or where risk is other than low. (Paragraph 905)

### Implementation concerns and effectiveness of risk concessions
- Requirements to evaluate and assess risk are detailed and comprehensive; guidance provides good overview and entities understand business and client risk assessments. Concession to apply reduced CDD measures for low risk clients is appropriate. (Paragraph 906)
- Assessors have concerns about concessions extended to TCSPs, lawyers, accountants and estate agents in Appendix C countries because:
  - these sectors have relatively recently been subject to AML/CFT regulation and effectiveness not tested;
  - practical difficulty for DNFBPs to determine whether foreign introducers are regulated and supervised for AML/CFT as required by Appendix C;
  - most countries listed in Appendix C have received partially compliant or non-compliant ratings for CDD measures applied to DNFBPs, questioning reliance on these sectors. (Paragraph 907)
- Assessors question concession allowing an individual to be director of six companies without TCSP licensing; concession not adequately justified from a risk perspective. (Paragraph 908)
- GFSC guidance on Businesses from Sensitive Sources and acceptable jurisdictions for simplified CDD contained contradictions (example: Greece listed in Appendix C but also in Business from Sensitive Sources notice of March 9, 2010); Greece was removed from Appendix C in July 2010. (Paragraph 909)
- Low risk exemptions have necessary safeguards but are not widely used; GFSC has not identified legal arrangements or fiduciaries as high risk, which assessors consider a concern given prevalence and vulnerability to ML. (Paragraph 910)

### Timing of verification
- Identification and verification of identity of a person or legal arrangement must be carried out before or during establishment of a business relationship or before carrying out an occasional transaction pursuant to Section 7 (1) PB Regulations. (Paragraph 911)
- Section 7 (2) allows verification following establishment provided it is completed as soon as reasonably practicable, essential not to interrupt normal conduct of business, and appropriate/effective policies, procedures and controls manage risk. (Paragraph 912)
- When verification may be completed following establishment or after an occasional transaction, prescribed businesses must have procedures to manage risk including:
  - establishing that it is not a high risk relationship;
  - senior management monitoring to ensure verification completed as soon as reasonably practicable;
  - ensuring funds received are not passed to third parties;
  - procedures to limit number, types and/or amount of transactions that can be undertaken. (Paragraph 913)
- Implementation view: timing requirements align with criteria; the exception for proceeding without identification when essential not to interrupt business seems reasonable with controls. (Paragraph 914)
- Concern: concept of "as soon as practicable" is not defined and could lead to unacceptable delays; PBs generally view verification should take place immediately and some have senior management verification, quarterly reviews, or system controls prohibiting establishment prior to identity verification. (Paragraph 915)

### Failure to satisfactorily complete CDD
- Section 9 PB regulations: where a PB cannot comply with CDD regulations it must:
  - terminate existing business relationship;
  - not enter into proposed business relationship or carry out occasional transaction; and
  - consider whether an STR must be made pursuant to part I of the DL or Section 12 of the TL. (Paragraph 916)
- Implementation: requirements prohibiting establishment/maintenance when identification not taken place combined with obligation to consider filing an STR are in line with criteria; DNFBPs provided concrete examples of refused/terminated relationships for inability to conduct CDD and STRs filed when suspicions of ML existed. (Paragraph 917)

### Existing customers and retrospective KYC
- Based on GFSC risk assessment, PB are not required to undertake a retrospective KYC program provided businesses are subject to ongoing monitoring obligations. Authorities justify exemption citing:
  - lawyers and accountants’ client base includes many regulated FSBs subject to AML/CFT;
  - hiving off by firms of company-creation business into regulated Guernsey TCSPs;
  - assessment of ML/FT vulnerabilities of accountancy sector;
  - significant number of property transactions for local persons using local bank accounts rather than foreign persons;
  - large number of PB transactions are one-off and low number of established business relationships. (Paragraph 918)
- Regulation 8: PB must not set up anonymous accounts or accounts in names known or reasonably suspected to be fictitious and must maintain accounts to facilitate meeting PB Regulations. (Paragraph 919)
- Assessors’ view: exemption from retrospective KYC is too broad; should not have excluded categories considered high risk by FATF (e.g., legal persons/arrangements such as trusts that are personal asset holding vehicles or companies with nominee shareholders or bearer shares). At minimum PB should be required to consider updating client information when:
  - (a) a significant transaction takes place;
  - (b) customer documentation standards change substantially;
  - (c) there is a material change in the way the account operates;
  - (d) the institution becomes aware that it lacks sufficient information about an existing customer. (Paragraph 920)

### eCasinos — Customer Due Diligence (Alderney eGambling Regulations)
- Two categories of eGambling licenses:
  - Category 1: oversees organization and preparation of gambling transactions — acquisition of players including marketing, registration and verification of players, contractual relationship with players, and fund management of players. Category 1 license holder conducts all CDD activities. (Paragraphs 921–922)
  - Category 2: responsible for effecting gambling transaction including operational management of a gambling platform in an approved hosting center; Category 2 licensees are not considered casinos for FATF purposes as they do not facilitate financial transactions nor have direct relationships with the customer. (Paragraph 922)
- Regulation 228(1): Category 1 eGambling licensee not permitted to hold anonymous accounts or accounts in fictitious names. (Paragraph 923)
- Schedule 16, Section 7(1)(e): MLRO or nominated officer must have prompt access to any other information useful for considering any report. (Paragraph 923)
- Registration and CDD before gambling transactions:
  - Customers must register with a Category 1 license holder.
  - Section 227(4): registration shall not be completed until the individual is identified, place of residence verified, confirmation received that he is acting as a principal, and if client is not a natural person the legal status is verified.
  - Section 226: Category 1 licensee shall not permit a person to effect a gambling transaction unless registered per regulation 227.
  - Schedule 16 Section 2(a): Category 1 licensee shall undertake CDD before registering a customer. (Paragraphs 924–925)
- Verification is conducted by identification verification software using public sources (electoral rolls, phone book) and some use credit history; software generates a score and licensees establish the acceptable percentage threshold. (Paragraph 925)

*Italic: Extracted from the source content unit _cr1112 - 888.      For the purposes of these sections underlying principal means, in relation to a business*

### 926.      Authorities have indicated that at times, on-line verification software is combined with

### _cr1112 - 926.

### Identification methods and verification software
- Authorities have indicated that at times, on-line verification software is combined with other identification methods such as:
  - (i) direct telephone contact with the new customer,
  - (ii) passport number, driving license number and national ID card number,
  - (iii) payment method checks;
  - (iv) profile and duplicate accounts detection processes;
  - (v) customer IP addresses, geographical address and machine ID checks;
  - (vi) credit checks; and
  - (vii) international item checks and local publication database checks.
- It is unclear whether these additional methods are applied in every situation or only when enhanced due diligence is warranted.
- There is no legislative or regulatory requirement that obligates entities to combine on-line verification tools with another verification method.
- Implementation finding:
  - The sources used by identification verification software are not sufficiently reliable to be used as the only form of identification in non face-to-face transactions.
  - The on-line identification verification tool provides an imprecise confirmation of identity because accepted scoring can be less than 100 percent.
  - Reliability of the software varies with the reliability of the data sources.
  - A specific legislative or regulatory requirement should be enacted requiring eCasinos to apply additional specific and effective CDD procedures when online verification tools are used to mitigate against the non-face-to-face nature of eCasino transactions and the imprecise findings of the online verification tool.

### Legal requirements for Customer Due Diligence (CDD) in eGambling
- Section 2 of Schedule 16 to the eGambling Regulations requires that a Category 1 eGambling licensee undertakes CDD prior to the customer being registered; and:
  - (1) after a registered customer makes a deposit of €3,000 or more, or makes a deposit that results in the total value of his deposits in the course of any period of 24 hours reaching or exceeding €3,000;
  - (2) when the eCasino has a suspicion of ML or FT; and
  - (3) when the eCasino doubts the veracity or adequacy of documents, data or information previously obtained for the purposes of identification or verification of a registered customer.
- There are no provisions which enable Category 1 eGambling licensees and their customers to use wire transfers. This method of funds transfer is not allowed in the eGambling sector.
- Once a client’s identity has been verified, a deposit of €3,000 or more or an STR will likely trigger a re-verification using the ID verification software.

### Additional CDD requirements (Section 10, Schedule 16)
- Requirements defined:
  - (a) identifying the customer and verifying the customer’s identity on the basis of identification data,
  - (b) identifying, where there is a beneficial owner or underlying principal who is not the customer, the beneficial owner or underlying principal and taking adequate measures, on a risk-sensitive basis, to verify his identity so that the eGambling licensee is satisfied that it knows who the beneficial owner or underlying principal is, including, in the case of a legal person, trust or other legal arrangement, measures to understand the ownership and control structure of the person, trust or arrangement,
  - (c) identifying any person purporting to act on behalf of a customer and verifying that identity on the basis of identification data and the authority of the person so acting, and
  - (d) obtaining information on the purpose and intended nature of the customer relationship.

### Ongoing monitoring (Section 6(1), Schedule 16)
- A Category 1 eGambling licensee shall perform and document ongoing and effective monitoring of any existing customer relationship which shall include:
  - (a) reviewing identification data to ensure they are kept up to date and relevant in particular for high risk customers;
  - (b) ensuring that data recording and storage facilitates on-going monitoring;
  - (c) ensuring that the transactions are consistent with the licensee’s knowledge of the registered customer and his risk profile, paying particular attention to complex transactions, large and unusual transactions and unusual patterns of transactions which have no apparent economic or lawful purpose.
- Implementation finding:
  - The measures in place to evaluate and mitigate risk in the eCasinos sector are in line with the criteria for this recommendation.
  - The AGCC guidance provides useful information on circumstances that might be considered higher risk in the eCasinos sector.

### Risk categories, enhanced CDD and PEPs
- Risk framework:
  - The AGCC determined that there are only two levels of risk for eGambling transactions: standard risk or high risk.
  - For standard risk, the Category 1 eGambling licensee needs to demonstrate normal CDD measures; for high risk, enhanced CDD is required.
- Enhanced CDD (Section 3 of Schedule 16):
  - Required for PEPs, jurisdictions that insufficiently apply FATF standards and high risk relationships.
  - Enhanced CDD measures involve steps in relation to identification and verification that are defined in the same way for eCasinos as for PB.
  - The Category 1 eGambling licensee is required to describe the enhanced CDD measures in its ICS (see Section 3.2.2 of the ICS Guidance).
- PEPs (Sections referenced):
  - The definition of PEP in Section 5 (2) (b) corresponds to the FATF definition including family members and close associates.
  - Section 227(2) requires that prior to registering a customer, or as soon as reasonably practicable thereafter, a Category 1 eGambling licensee shall undertake a risk assessment to determine if the customer or any beneficial owner or underlying principal is a politically exposed person.
  - Section 3(2) of Schedule 16 requires senior management approval before registering a PEP or continuing a relationship with an existing customer who is subsequently found to be a PEP.
  - Enhanced due diligence includes obtaining senior management approval, taking reasonable measures to establish the source of funds and of wealth, and carrying out more frequent and extensive ongoing monitoring.
- Implementation finding:
  - Requirements for PEPs determination are in place and well understood and implemented by DNFBPs supervised by the GFSC.
  - Enhanced CDD measures are well established in firms with PEP relationships.
  - Smaller firms are less likely to deal with foreign clients; when they do, they conduct PEP determinations at client identification.
  - Some firms previously paid limited attention to PEP requirements but plan to use commercial software in future; AGCC identified this shortcoming in examinations.

### Timing of verification and allowing play prior to verification
- Section 226 states a Category 1 eGambling licensee shall not permit a person to effect a gambling transaction unless that person is a customer who has been registered in accordance with Section 227.
- Section 4 of Schedule 16 sets out provisions for timing where CDD cannot be completed prior to registration if essential not to interrupt normal conduct of business, provided appropriate and effective policies, procedures and controls manage risk.
- AGCC practices and conditions when approving ICS require:
  - (1) No gambling may commence before player identification data has been received and examined;
  - (2) No gambling may commence before the risk has been assessed;
  - (3) No gambling may commence if negative inferences are present;
  - (4) The ICS must stipulate a maximum deposit limit prior to completed verification;
  - (5) The risk of fraud and money laundering must be fully mitigated by preventing the customer from withdrawing or transferring funds prior to completed verification.
- Implementation findings:
  - Customer verification will at times be conducted following the start of gaming activity.
  - The AGCC indicated that allowing a client to play for more than 72 hours without verification being completed would be unacceptable; however this standard has not been included in the guidance issued in July 2010.
  - Timing of verification requirements for eCasinos are in line with the standard; proper controls are required and oversight is conducted during the annual compliance examination.

### Failure to conduct CDD
- Section 5 of Schedule 16 states that if a Category 1 eGambling licensee cannot complete either CDD or enhanced CDD it should not register the customer, terminate the relationship of an existing customer and consider making an STR.
- Section 7 of the AML/CFT Guidance requires the ICS to detail processes for not registering a prospective customer and for terminating the relationship of an existing customer, and to highlight steps as to whether circumstances warrant making a disclosure with regard to the DL and the TL.
- Practice:
  - Some clients are able to gamble prior to their identities having been fully verified.
  - If a customer cannot be identified after having gambled for a limited amount of time with a fund limit, access to gambling is refused or revoked.
  - Standard practice is to revoke access after 72 hours if identity has not been verified.
- Implementation finding:
  - Requirements pertaining to failure to satisfactorily complete CDD are in line with the standard.

### Existing customers and ongoing validity of CDD
- CDD measures applied to existing customers are the same as those for prospective customers.
- In practice, there would be no existing customer that would not have been identified.
- Under paragraph 4 of Schedule 16, ongoing and effective monitoring of any existing customer relationship is required including scrutiny of transactions and close attention to high risk customers.
- Section 3.2.8 of the ICS Guidance requires procedures to ensure CDD remains valid, timely and current be set out in its ICS.
- No definition or guidance is provided as to what could be considered a high risk customer in the context of eGambling.
- Implementation finding:
  - Both the AGCC and eCasinos confirmed that all existing customers have been subject to identification verification.
  - Issues concerning the reliability of identification methods and effective mitigation of non-face-to-face transactions also affect identification verification of existing customers.

### Non face-to-face transactions and new technologies
- PB Regulations and PB Handbook:
  - PB Regulations lay down the basic framework for compliance with the non face-to-face requirements and contain provisions on new and developing technologies and include particular requirements with respect to business relationships or transactions where the client is not a Guernsey resident.
  - Section 3.2 of the PB Handbook requires PB management to take appropriate measures to keep abreast of and guard against the use of technological developments and new methodologies in ML and TF schemes.
  - Chapter 11 of the PB Handbook requires PB to ensure relevant employees receive ongoing training, including information on current ML and TF techniques, methods, trends and typologies.
  - Section 5(4) of the PB Regulations requires that where the client is not a Guernsey resident who is physically present, a PB must take adequate measures to compensate for the specific risk and must carry out monitoring; adequate measures are defined in section 4.5.1. of the PB Handbook.
- eGambling sector:
  - Section 175(3)(f) of the eGambling Regulations requires eGambling licensees identify within their approved ICS measures taken to keep abreast of and guard against the use of technological developments and new methodologies in ML and TF schemes.
  - The nature of the eGambling sector is that all transactions are conducted through non face-to-face channels.
  - There is no concept of low risk within the Alderney eGambling framework; risks are either standard or high and CDD levels are standard or enhanced accordingly.
- Implementation finding:
  - The requirements in PB regulations adequately address requirements with respect to new technologies and non face-to-face transactions.
  - DNFBPs have a good understanding of risks involved in non face-to-face transactions and are applying enhanced CDD to mitigate the risk associated with identifying non face-to-face customers.

*Source: _cr1112 - 926.*

### 965.      At the time of the on-site visit, requirements detailed in Alderney’s eGambling

### _cr1112 - 965.      At the time of the on-site visit, requirements detailed in Alderney’s eGambling

### eGambling — Non face-to-face transactions and client identification
- Section 175 (5) of the eGambling Regulations was amended on July 19, 2010 to require eCasinos to "incorporate robust client identification methods and measures to mitigate the specific risks related to non-compliance."
- At the time of the assessment:
  - "procedures implemented by eCasinos at the time of the assessment did not sufficiently mitigate the risk associated with non face-to-face transactions and the imprecise findings resulting from on-line verification methods."
  - The AGCC evaluates client identification and verification practices when it reviews each eCasino's Internal Control System (ICS), but "it is unclear whether eCasinos systematically apply additional CDD measures to mitigate the non face-to-face nature of transactions."
  - AGCC guidance "indicates that eCasinos should consider whether additional checks are required due to the non-face-to-face nature of the transactions but does not require it."
- Assessment conclusion: "ECasinos should be required, through legislation or regulation, to have additional CDD procedures in place for all non-face-to-face transactions."

### Intermediaries / Introduced Businesses (PBs, TCSPs, legal professionals, accountants, real estate agencies)
- Regulatory framework and guidance:
  - PB Regulations and PB Handbook permit PBs to establish introduced business relationships in specified circumstances.
  - GFSC Instruction Number 3 (November 2009) required PBs to review compliance on introduced business relationships; remediation was required "by the end of February 2010" or relationships discontinued.
  - Section 10(1) of the PB Regulations allows acceptance of written confirmation of identity from an introducer for Appendix C businesses or overseas branches/members of the same group.
  - Section 4.9 of the PB Handbook requires PBs relying on third parties to immediately obtain written confirmation (certificate or summary sheet(s)), to satisfy themselves that the introducer has appropriate risk-grading procedures and conducts appropriate and effective CDD, including enhanced CDD for PEP and other high risk relationships.
  - PBs must ensure certified copies/originals of identification data will be provided upon request and without delay; testing programs are required per Section 4.9 and Instruction number 4.
  - Section 10(3) of the PB Regulations: "where reliance is placed upon the introducer the responsibility for complying with the relevant provisions of the CDD requirements of the PB Regulations remains with the receiving PB."
- Implementation and effectiveness:
  - "Requirements outlined for TCSPs and PB are mostly in line with the standard and implementation is largely effective."
  - TSCPs, accountants and real estate agents "do not seem to rely heavily on introducers to conduct CDD measures."
  - Legal profession appears more reliant on introducers; GFSC and legal profession members confirmed CDD is conducted on the introducer and testing procedures are developed and implemented.
  - Concern: "concession that is extended to TCSPs, lawyers, accountants and real estate agents located in Appendix C countries" — these jurisdictions have "relatively recently been subject to AML/CFT regulation and the effectiveness of its implementation has not been tested."
  - Practical difficulty: "It may be difficult in practice for Guernsey institutions to determine whether particular foreign introducers is in fact regulated and supervised for AML/CFT purposes, as is required by the terms of Appendix C."

### eCasinos and introducers/outsourcing
- Category 1 eGambling licensees:
  - "may outsource their registration, verification and CDD functions to an associate." Such outsourcing is contractual and not considered introduced business.
  - Category 1 licensees "are allowed to receive introductions from associates and affiliates" but "are required when registering that person as a customer to undertake either CDD or enhanced CDD as appropriate depending upon their risk assessment of that customer." They "cannot rely on any CDD undertaken by the affiliate or associate."

### Record keeping (Legal professionals, Accountants, Real Estate Agents, PBs, eCasinos)
- PBs:
  - Section 14(1) of the PB Regulations requires PBs to keep transaction documents and any client due diligence information, or a copy, "for 5 years following the cessation of a relationship, after the transaction was completed or a longer period that the GFSC may direct."
  - Definition of transaction document and client due diligence information in Section 30.
  - PB Handbook Section 10.2 and Rule 10.2.1 specify CDD information must be kept: copies of identification data, copies of client files, account files, business correspondence, or information as to where copies may be obtained. "These last requirements are not included in regulations as required by the standard."
  - Section 14(4) allows documents to be kept in any manner provided they are readily retrievable and "must be made available promptly to any police officer, the GFSC or any other person where such documents or client due diligence information are requested pursuant to the PB regulations or any relevant enactment."
  - PB Handbook Chapter 10 requires policies, procedures and controls for record-keeping; periodic review of retrievability; PBs "must not enter into outsourcing arrangements or place reliance on third parties to retain records where access to records is likely to be restricted."
- eCasinos:
  - Section 9(1)(a) of Schedule 16 to the eGambling Regulations requires licensees to maintain records of transactions and any customer due diligence information "for five years following completion of the transaction or the cessation of the relationship (or such longer period as the AGCC may direct)."
  - Section 9(4) requires records to be "kept in a form that is readily retrievable and are made available on a timely basis to competent authorities including the FIS, the police and the AGCC." Customer due diligence information defined as identification data and any other files and correspondence relating to the customer relationship.
  - Section 1.8.6 of the ICS Guidance outlines AML record-keeping practices and procedures to produce records for inspection.
- Implementation and effectiveness:
  - "The recordkeeping measures in place are mostly in line with the standard."
  - "Law enforcement and the FIU are satisfied with the timeliness and completeness of information provided by the DNFBP sectors."
  - Caveat: "The use of on-line verification methods may have an impact on eCasinos’ capacity to provide evidence for prosecution of criminal activity but no concerns were expressed by law enforcement taking into account that there have been limited investigations involving the eCasinos sector."
  - Competent authorities other than the AGCC "should be able to extend the document retention period for eCasinos."

### Attention to complex, unusual, large transactions
- PBs, legal professionals, accountants, real estate agencies:
  - Section 11(1)(b) of the PB Regulations requires ongoing and effective monitoring, "paying particular attention to all complex transaction, transactions which are both large and unusual and unusual patterns of transactions which have no apparent economic purpose or not apparent lawful purpose."
  - Requirement: extent and frequency of monitoring "is to be determined on a risk sensitive basis." The standard requires paying attention to complex and unusual transactions not be subject to extra risk consideration.
  - Section 7.2 of PB Handbook: background and purpose of unusual/large transactions must be examined and findings recorded in writing.
  - Documents must be available to police, FIS, GFSC and auditors; auditors confirmed access.
  - Implementation: "implementation of requirements related to complex, unusual transactions have been effectively implemented in the TCSP, legal professionals, accountants and real estate agency sectors."
- eCasinos:
  - Paragraph 6(1)(c) of Schedule 16 requires Category 1 eGambling licensees to "scrutinize any transactions or other activity (including, where necessary, the source of funds) to ensure that the transactions are consistent with the licensee’s knowledge of the registered customer and his risk profile" and to "pay special attention to all complex transactions, transactions which are both large and unusual, and unusual patterns of transactions, which have no apparent economic or lawful purpose."
  - Section 6(2) requires examination of background and purpose and written findings.
  - Section 9(3)(a) requires keeping records of such findings "for five years from the date the record was created." Article 9(4)(b) was amended in July 2010 to expressly include auditors.
  - Implementation issues:
    - "Not all Category 1 eCasino licensee effectively monitor all eGambling transactions."
    - "Gambling transactions facilitated by the Category 2 licensees have not been systematically subject to on-going monitoring activities by Category 1 licensees resulting in portions of Guernsey’s gambling activity not being subject to AML/CFT monitoring."
    - At the time of on-site examination the AGCC "did not believe that the Category 2 gambling information was provided to Category 1 licensees or that Category 1 licensees were monitoring these transactions."
    - Subsequent information pointed to an ICS developed by a Category 1 licensee that included monitoring of Category 2 gaming information; conflicting information left the assessment team "unable to determine the effectiveness of eCasinos capacity to detect unusual and complex transaction in this particular situation."

### Recommendations and comments
- Legal profession, accountants and real estate agents:
  - "Amend the exemption for individuals who act as a director for six companies or less in line with the standard."
  - "The GFSC should identify legal arrangements or fiduciaries as high risk given their vulnerability to money laundering and their prevalence in the Bailiwick."
  - "Determine when PBs could rely on foreign introducers or intermediaries who are DNFBPs. DNFBPs in most countries have recently been subject to AML/CFT regulation and the effectiveness of its implementation has not been tested. It may be difficult in practice for institutions to determine whether particular foreign introducers is in fact regulated and supervised for AML/CFT purposes, as is required by the terms of Appendix C."
- eCasinos:
  - "On-line verification software used by eCasinos for client identification purposes are not sufficiently reliable to be used as the only form of identification in non face-to-face transactions. Ecasinos should be required to apply additional specific and effective CDD measures to mitigate against the impreciseness of on-line verification methods."
  - "Implement methods and measures to manage and mitigate the specific risks associated with non face-to-face transactions in the eCasinos, including having additional CDD procedures in place when using on-line verification software for non face-to-face transactions, to bring the sector in line with the standard."
    - Note: "Amendments to Section 175 95) (a) of the eGambling Regulations were introduced on July 2010 to require eCasinos to implement methods and measures to manage and mitigate the specific risks on non face-to-face transaction. Despite this recent regulatory amendment, the procedures implemented by eCasinos at the time of the assessment did not sufficiently mitigate the risk associated with non face-to-face transactions and the imprecise findings resulting from on-line verification methods. Furthermore, the effectiveness of the new regulatory provisions could not be assessed due to their recent implementation."
  - "Not all eCasinos have effectively implemented the requirement to pay special attention to complex and unusual transactions. Gambling transactions facilitated by Category 2 licensees have not been subject to AML/CFT monitoring activities by Category 1 licensees. As the eCasino responsible for establishing the relationship with the customer, facilitating the financial transaction and providing the gateway for gambling activity Category 1 licensees should be required to monitor gambling transactions to identify complex, unusual or large transactions."

### Compliance with Recommendation 12 (R.12)
- Rating: R.12 PC
- Factors underlying the rating:
  - ECasinos:
    - "On-line verification methods used by eCasinos should be complemented by additional evidence of identity of the client."
    - "Requirements to mitigate against the risk associated with non face-to-face transactions in the eCasinos sector are not in line with the standard."
    - "Not all eCasinos have effectively implemented the requirement to pay special attention to complex and unusual transactions."
  - TCSPs, legal profession, accountants and estate agents:
    - "The exemption for individuals who act as a director for six companies or less is not in line with the standard."
    - "The GFSC should identify legal arrangements or fiduciaries as high risk."
    - "Reliance should not be placed on introducers or intermediaries who are DNFBPs."

*Source: _cr1112 - 965.      At the time of the on-site visit, requirements detailed in Alderney’s eGambling*

### 991.      The Disclosure Law (DL) and Terrorism Law (TL) provide the legal framework for the

### The Disclosure Law (DL) and Terrorism Law (TL) provide the legal framework for the reporting of suspicious transactions for all designated non-financial businesses and professionals

### Legal framework and reporting obligations
- Sections 12 and 15 of the TL require reporting of suspicions of terrorism financing for non-financial services businesses and financial services businesses, respectively.
- Sections 1 and 3 of the DL require reporting of suspicions on money laundering by financial services businesses (in this case trust and company service providers (TCSPs)) and non-financial services businesses.
- Both DL and TL originally required suspicions to be reported to a police officer; a legislative amendment requiring that suspicious transaction reports (STRs) be reported directly to the FIU came into force on April 28, 2010.
- Section 17 of the DL defines a non financial services business as a business which is not a financial services business; reporting obligations extend to all types of business activity and individuals, including DNFBPs such as TCSPs, lawyers, notaries, accountants, real estate agents, casinos, and dealers in precious metals and stones (including bullion dealers).
- Section 3 of the DL and Section 12 of the TL create an offence if a non-financial services business fails to report a suspicion of money laundering and terrorist financing respectively.
- Section 3(6)(d) of the DL provides that a professional legal adviser does not commit an offence for failing to report where the information came to him in privileged circumstances; items held with the intention of furthering a criminal purpose are not subject to legal professional privilege.
- Section 12.1. of the PB handbook sets out circumstances where legal privilege can be applied; exemptions applied to legal privilege are in line with the standard.
- Section 3(3) of the DL ties the mandatory reporting obligation to knowledge or suspicion based on information that has come to a person in the course of the business of a non financial services business.
- Sections 2 and 3 of the DL and Sections 12 and 15 of the TL were amended to require individuals and businesses to specifically report directly to the FIU (amendment effective April 28, 2010).

### STRs related to terrorism financing and attempted transactions
- Section 79 of the TL defines Terrorism Financing to include any attempt, conspiracy or incitement to carry out terrorism as well as fund raising, use and possession of money or property or the funding of arrangements for the purposes of terrorism.
- Amendments to TL and relevant regulations required reporting directly to the FIU; this amendment came into force on April 28, 2010.
- There is no reporting threshold specified in the DL or TL; definitions at Section 17 of the DL and Section 79 of the TL expressly cover attempts and apply irrespective of the value of the property involved.
- The reporting requirement is tied to knowledge or reasonable suspicion of money laundering and terrorist financing; reporting of attempted transactions is covered by the definitions but is not explicitly stated in Sections 1 and 3 of the DL and Sections 12 and 15 of the TL and must be inferred.
- Authorities and FSB guidance indicate attempted transactions are reportable; assessors recommend amending legislation and guidance to explicitly require reporting of suspicious attempted transactions.

### Fiscal matters and scope of predicate offences
- Neither the DL nor the TL makes any exception for transactions that may involve tax or other fiscal matters.
- Section 8.2 of chapter 8 of the PB Handbook requires each suspicion be reported to the MLRO regardless of whether it is thought to involve tax matters.
- The FIU indicated that in 2009, 263 STRs out of the 627 reported pertained to tax matters.
- Money laundering is defined at Section 17 of the DL referring to Sections 38, 39, and 40 of the POCL and Sections 57, 58, and 59 of the DTL, thus encompassing offences when a person conceals or disguises proceeds of criminal conduct or drug trafficking; the requirement to report applies to all criminal conduct (all predicate offences identified by the standard).

### Implementation, effectiveness, and assessor findings
- The reporting obligation is established via creation of an offence for failure to report rather than an explicit direct reporting mandate; assessors concluded this framing does not appear to negatively impact understanding or implementation by FSBs.
- The reporting of attempted transactions is not explicitly stated and guidance does not specifically outline the obligation; however, DNFBPs and the FIU reported understanding and submitting reports involving attempted transactions.
- Assessors suggested authorities consider amending legislation and guidance to explicitly require reporting of suspicious attempted transactions.

### STR reporting volumes by DNFBPs (2006–2009)
- TCSP:
  - 2006: 87 16%
  - 2007: 109 14%
  - 2008: 112 22%
  - 2009: 151 24%
- Accountants:
  - 2006: 3 0.5%
  - 2007: 3 0.3%
  - 2008: 5 0.9%
  - 2009: 14 2%
- Legal professionals:
  - 2006: 0 0%
  - 2007: 3 0.3%
  - 2008: 9 2%
  - 2009: 23 3%
- Estate agents:
  - 2006: 0 0%
  - 2007: 0 0%
  - 2008: 2 0.3%
  - 2009: 2 0.3%
- eCasinos:
  - 2006: 0 0%
  - 2007: 3 0.3%
  - 2008: 9 2%
  - 2009: 18 3%

- Observations:
  - TCSPs provided the second largest number of STRs of all reporting sectors (24% in 2009); reporting by TCSPs increased steadily since 2006, attributed to increased awareness and expansion of AML/CFT requirements in 2008.
  - Legal profession, accountants, and real estate agents had relatively low reporting volumes but increased after expanded requirements in 2008; legal profession increased from 0 reports in 2006 to 23 in 2009; accountants increased from 3 in 2006 to 14 in 2009.
  - GFSC conducted yearly analyses of reporting levels in accounting and legal sectors; GFSC issued a letter on February 17, 2010 reminding lawyers and accountants of the reporting requirement.
  - Real estate agent reporting remained low (high of two reports in 2008 and 2009); Guernsey’s dual market system (local market limited to Guernsey residents; 1,700 residences available on the island) may partially explain low reporting volumes but may not fully justify them.
  - eCasinos:
    - Structural and monitoring issues undermine capacity to identify suspicious transactions: Category 1 licensees register clients and manage client accounts and are required to conduct ongoing due diligence and monitor transactions; Category 2 licensees provide games and manage gambling and did not have CDD obligations prior to July 2, 2010.
    - Category 2 licensees only had a requirement to monitor complex or unusual transactions since July 2, 2010 due to amendments to Section 6 of Schedule 16 of the Alderney eGambling Regulations.
    - Most current license holders held both Category 1 and 2 licenses, but segregation is expected to increase over time.
    - Client identification by Category 1 license holders was found insufficient; non face-to-face nature and limited CDD reduced eCasinos’ knowledge of clients.
    - Training on money laundering trends, CDD, and reporting requirements was not required prior to July 2, 2010; effectiveness of recent changes could not be assessed by the assessment team.
    - EGambling license holders in Alderney had over 3 million customers and conducted £2.1 billion worth of transactions in 2009.
    - Reporting increased from zero reports in 2006 to 18 reports in 2009, but assessors judged the sector’s suspicious transaction detection framework ineffective and reporting levels not commensurate with transaction activity.

### STR protection, tipping-off, and confidentiality
- Disclosure to the FIU does not contravene confidentiality obligations pursuant to Sections 3 of the DL and 12 of the TL; these sections were amended to clarify that reporting in good faith is protected.
- Section 4 of the DL and Section 40 of the TL create tipping-off offences; DL and TL were each amended, effective July 28, 2010, to remove defenses that the person accused of tipping off did not know or suspect the disclosure was prejudicial or that it was not unreasonable to make the disclosure; TL was amended to remove the defense that the person had a reasonable excuse.
- Section 3(10) of the DL and Section 12(10) of the TL protect disclosures to police officers by employees of non financial services businesses; recent amendments clarify that suspicious reports made in good faith are protected.
- Section 4 of the DL and Section 40 of the TL make it an offence to disclose that an STR or related information has been or will be provided to the FIU; amendments described above apply to nonfinancial services businesses equally.
- FIU dissemination guidance and internal staff handbook ensure intelligence from STRs is sanitized to protect the source; all disseminations are subject to a risk assessment including personal risk criteria and must be authorized by a senior officer to ensure confidentiality of reporting staff.

### Internal policies, MLROs, and controls for DNFBPs
- Sections 12 to 15 of the Proceeds of Crime (Legal Professionals, Accountants and Real Estate Agents) and Chapter 2 of the Handbook for Legal Professionals, Accountants and Real Estate Agents outline internal policies and controls for legal professionals, accountants and estate agents.
- ECasinos are required to establish internal policies and controls pursuant to Section 175 and Sections 7 and 8 of Schedule 16 of the Alderney eGambling Regulations.
- Section 15(a) of the PB Regulations requires prescribed businesses to establish policies, procedures and controls appropriate and effective for forestalling, preventing and detecting money laundering and terrorism financing; these are to be the subject of staff training pursuant to Section 13(2)(d) of the PB Regulations. GFSC provides guidance in its PB handbook.
- Section 12 of the PB Regulations requires a prescribed business to appoint a person of at least management level as the Money Laundering Reporting Officer (MLRO) and provide the name and title to the GFSC and the FIS within fourteen days of appointment; a nominated officer must be appointed to receive STRs in the MLRO’s absence and relevant employees must be aware of that nominated officer’s name.

*Source: Excerpt from IMF assessment text in content unit _cr1112 - 991.*

### 2.4 of the PB Handbook require that the MLRO has access to the CDD records and receive full

### _cr1112 - 2.4 of the PB Handbook require that the MLRO has access to the CDD records and receive full

### MLRO access to CDD records and cooperation
- "2.4 of the PB Handbook require that the MLRO has access to the CDD records and receive full cooperation from all staff."
- "Customer due diligence is defined to include identification data and any account files and correspondence relating to the business relationship or occasional transaction."
- "Section 9(4) (b) of Schedule 16 to the eGambling Regulations requires that transaction documents and customer due diligence information are made available on a timely basis to the MLRO and the nominated officer (who carries out the functions of the MLRO in his absence)."
- "Section 7(1)(e) of Schedule 16 to the eGambling Regulations states that eGambling licensees are to ensure that the MLRO, or, in his absence, a nominated officer, is given prompt access to any other information which may be of assistance to him in considering any STR."

### eCasinos — internal control systems (ICS) and ML/TF prevention
- "Section 175 of the eGambling Regulations requires that eGambling licensees have an internal control system (ICS) which they must operate in accordance with."
- "The ICS is a detailed description of a licensee’s entire control environment, including but not limited to how the licensee complies with AML/CFT requirements."
- "The ICS must have policies, procedures and controls for the purposes of forestalling, preventing and detecting money laundering and terrorist financing."
- "Section 1 and 3 of the ICS guideline specify that policies and procedures should address the topics of CDD, record keeping, the detection of unusual and suspicious transactions and reporting obligations."
- "The ICS must be approved by the Alderney Gambling Control Commission (AGCC) in advance of the licensee commencing operations."
- "Section 8 (iv) of the ICS guideline requires that eCasinos must ensure that employees are trained with respect to the policies and procedures."
- "Section 4(d), 6(d) and 60(c) of the eGambling Regulations require eGambling licensees to appoint an executive officer in order to fulfill the duties of compliance officer to report to the AGCC on all compliance matters related to the eGambling Law."
- "Sections 4(e), 6(e) and 60(d) require that eGambling licensees appoint an executive officer to act as money laundering reporting officer (who may be the compliance officer)."
- "An executive officer is defined under Section 30 of the eGambling Ordinance as a person who is concerned with, or takes part in, the company's management."
- "Although timeliness is not defined meetings with eCasinos confirmed that the access to required documents and information was timely."

### Independent audit of internal controls (applying c. 15.2 to DNFBPs)
- "Section 15 of the PB Regulations requires prescribed businesses to establish and maintain an effective policy, for which responsibility must be taken by the board for the review of its compliance with the requirements of the PB Regulations, and such policy must include provisions as to the extent and frequency of such reviews."
- "The rules in Section 2.3 of the PB Handbook require prescribed businesses to ensure that there are appropriate and effective policies, procedures and controls in place which provide for the Board to meet its obligations relating to compliance review, in particular the Board must consider whether it would be appropriate to maintain a separate audit function to assess the adequacy and effectiveness of the area of compliance."
- "The requirement to consider the maintaining of an independent audit function seems appropriate in the context of prescribed businesses, given the diversity of their activities and the varying size of operations."
- "Section 175(3) (e) of the eGambling Regulations requires eGambling licensees to have an audit function in place which tests its systems as part of its internal control system."
- "Section 1.11 of the ICS Guidance highlights the importance of the internal audit function and requires eGambling licensees to describe, in its ICS, the reporting structure and processes by which the licensee's executive management monitors the correct operation of its internal control program."
- "Section 188 of the eGambling Regulations requires eCasinos to discuss the results of the review at a Board Meeting."
- "The ICS guidance does not specify whether the review must be conducted by an independent third party."

### Ongoing employee training on AML/CFT matters (applying c. 15.3 to DNFBPs)
- "Section 13(2) of the PB Regulations requires prescribed business to ensure that relevant employees receive comprehensive ongoing training with respect to the relevant enactments, the Regulations and the Handbook; their personal obligations; the implications of noncompliance; and its AML policies, procedures and controls."
- "Relevant employee is defined at Section 30 of the PB Regulations as any member of the board, member of the management of the prescribed business and employees whose duties relate to the prescribed business."
- "The Rules in Section 9.4 of the PB Handbook require that prescribed businesses ensure that employees receive the ongoing training required under the PB Regulations and in particular ensure that they are kept informed of CDD and STR reporting requirements, sanctions for failing to report, the identity and responsibilities of the MLRO, vulnerabilities of products and services offered by the PB; and new ML and FT developments including trends and typologies."
- "Section 175(3)(d) the eGambling Regulations requires eGambling licensees, as part of their internal control system, to have an ongoing employee training program for the purposes of forestalling, preventing and detecting ML and FT."
- "Section 8(1) (b) of Schedule 16 to the eGambling Regulations requires that relevant employees receive comprehensive ongoing training in the AML/CFT legislation framework, the personal obligations of employees, the implications of noncompliance by employees and the eCasino’s AML/CFT policies, procedures and controls."
- "Paragraph 8(1)(c) of Schedule 16 to the eGambling Regulations requires that eGambling licensees identify relevant employees who, in view of their particular responsibilities, should receive additional and ongoing training, appropriate to their roles, in the matters set out above and shall provide such training."
- "The June 2, 2010 amendments to Section 8 of the eGambling Regulation now require that employees be trained on money laundering techniques, methods and trends, the identity and responsibilities of the MLRO and the detection of unusual or suspicious transactions. However, due to their recent implementation the effectiveness of these requirements could not be assessed."
- "Training organized by the GFSC and the FIS was widely attended."
- "All fiduciaries and prescribed businesses met during the assessment had comprehensive training programs including the widespread use of AML consultants and in one instance a web-based training program."
- "Although some AML training does occur in the eCasinos sector the extent of training should be expanded."
- "The training obligation does not require all employees to be trained."
- "Some eCasinos interviewed confirmed that they did not deliver training to all employees."

### Employee screening procedures (applying c. 15.4 to DNFBPs)
- "Section 13(1) of the PB Regulations requires prescribed businesses to maintain appropriate and effective procedures, when hiring employees, for the purpose of ensuring high standards of employee probity and competence."
- "The Rules in Section 9.2 of the PB Handbook require that in order for a prescribed business to ensure that employees are of the required standard of probity and competence they should obtain and confirm references, request disclosure of any regulatory action taken and obtain a check of the candidate’s criminal record."
- "Section 175(3)(c) the eGambling Regulations requires that, as part of their ICS, eGambling licensees must have screening practices in place when recruiting relevant employees for the purposes of forestalling, preventing and detecting ML and TF."
- "Section 1.5 of the ICS Guidance explains that eGambling licensees are under an obligation to 'know your employee.'"
- "The AGCC requires the licensees to describe the controls and procedures employed to ensure that employees are suitable to maintain the integrity of licensed eGambling operations."
- "As part of the screening process different levels of classification of employee may undergo different degrees of vetting."
- "Paragraph 8(1)(a) of Schedule 16 to the eGambling Regulations requires that an eGambling licensee shall maintain appropriate and effective procedures, when hiring employees, for the purpose of ensuring high standards of employee probity and competence."
- "All DNFBPs met during the assessment had extensive employee screening programs."
- "All businesses conducted criminal background checks prior to hiring employees."

### Independence of the compliance officer (applying c. 15.5 to DNFBPs)
- "The rules in Section 2.4 of the PB Handbook require that the MLRO reports directly to the Board."
- "Sections 4(e), 6(e) and 60(d) require that eGambling licensees appoint an executive officer to act as money laundering reporting officer ensuring that the MLRO has direct access to the Board."

### Implementation and effectiveness — summary findings
- "The legal framework for prescribed business, TCSPs and eCasinos, is comprehensive and largely in line with the standard."
- "The one omission pertains to eCasinos who did not have an explicit requirement to train employees on money laundering techniques, methods and trends, customer due diligence requirements and the detection of unusual or suspicious transactions."
- "A regulatory amendment was introduced on July 2, 2010 to address this concern; however, its recent implementation did not allow the assessment team to ascertain its effectiveness."
- "The requirement to test policies, procedures and controls could be further clarified."
- "It is unclear what is expected of businesses that determine that an internal audit function is not appropriate."
- "Supervisors should clearly state whether the individual conducting the review must be independent or have certified auditing skills."
- "Discussions with the GFSC and reviews of policies and procedures from reporting entities confirm that policies and procedures include sections on CDD, record retention, the detection of unusual and suspicious transactions and reporting obligations."
- "As a regular practice, reporting entities develop their policies and procedures based on the structure of the PB handbook."
- "Policies and procedures in the eCasinos sector are incorporated in the eCasino’s ICS."
- "Although all key AML topics are included they are interspersed throughout the very technical elements of the document potentially diluting their effectiveness."
- "The size of the ICS (often several hundred pages) makes it extremely difficult for employees to fully understand all the requirements."
- "This could be addressed by ensuring that appropriate training on all aspects of AML requirements is delivered periodically."
- "During meetings with industry the assessment team was able to ascertain that MLROs were all at the management level."
- "They also confirmed that larger firms had established an independent audit function."
- "Smaller firms used the requirement to conduct periodic reviews as the mechanism to ensure that policies and procedures were respected and appropriate controls were in place."
- "Reviews were conducted by external consultants as well as by employees of the businesses. All reviews were documented and presented to the Board for consideration and appropriate action."

### Special attention to countries not sufficiently applying FATF Recommendations (c. 21.1 and 21.1.1)
- "Section 5 of the PB Handbook outlines the requirements with respect to giving special attention to countries not sufficiently applying FATF Recommendations."
- "Section 3 of the Handbook requires PBs to visit the GFSC’s website and apprise themselves of new information including notices, instructions and warning."
- "There is a similar provision in Section 4 of the eGambling Regulation requiring Category 1 eGambling license holders to visit the AGCC website."
- "There is no requirement for eCasinos to pay special attention to countries not sufficiently applying FATF Recommendations."
- "Section 3 (1) (b) of Schedule 16 to the eGambling Regulations does require eCasinos to carry out enhanced due diligence including the conducting of more frequent and extensive monitoring."
- "Section 5(1) (b) of the PB Regulations requires that where a prescribed business is required to carry out CDD, it must also carry out enhanced CDD in relation to a business relationship or an occasional transaction including countries that do not apply or insufficiently apply the Financial Action Task Force (FATF) Recommendations."
- "Pursuant to Section 5.4 of the PB Handbook, prescribed businesses must give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries or territories that do not or insufficiently apply the FATF Recommendations and from other countries or territories closely associated with illegal drug production/processing or trafficking, corruption, terrorism, terrorist financing and other organized crime."
- "Section 3.5.1 of the PB Handbook contains rules which require a prescribed business to visit the GFSC’s website and appraise itself of the available information on a regular basis including Business from Sensitive Sources Notices, advisory notices, instructions and warnings which highlight potential risks arising from particular sources of business which are issued by the GFSC from time to time."
- "The GFSC had issued Business from Sensitive Source Notices and informs entities directly when they are issued."
- "Section 4(l) of the eGambling Regulations requires that the Category 1 eGambling licensee must take note and meet the requirements of all notices, instructions and counter-measures (whether described as 'Business from Sensitive Sources Notices' or otherwise) issued by the AGCC and designed to alert and advise it of weaknesses in the anti-money laundering systems in other countries or territories where the Category 1 eGambling licensee may operate."
- "There was no similar requirement for Category 2 license holder to take note and meet the requirements of the notices instructions and counter-measures."
- "Section 6(1) was inserted into the Alderney eGambling Regulations on the 1 July 2010 which requires Category 2 eGambling licensees to take note and meet the requirements of the notices, instructions and counter-measures issued by the Commission."
- "Section 3(1) (b) of Schedule 16 to the eGambling Regulations requires that Category 1 eGambling licensees apply enhanced CDD in respect of relationships where the customer is established or situated in a country or territory that does not apply or insufficiently applies the FATF Recommendations."
- "Paragraph 6 (1) requires that when an eCasinos identifies transactions as having no apparent economic or lawful purpose it should document its findings in writing."
- "Paragraph 6 (1) (c) of Schedule 16 of the eGambling regulations was amended on July 2, 2010 to specifically require transactions arising from a country or territory that does not apply or insufficiently applies the FATF Recommendations to be subject to on-going and effective monitoring."

### Examinations of transactions with no apparent economic or visible lawful purpose (c. 21.2)
- "The rules in Section 5.4. of the PB Handbook require prescribed businesses to identify transactions which (in the context of business relationships and occasional transactions) have no apparent economic or visible lawful purpose and examine the background and purpose of such transactions and record in writing the findings of such examinations in order to assist the GFSC, the FIS and other domestic competent authorities."
- "A June 21, 2010 amendment to Section 14 (4) (b) (ii) of the PB regulations outlines a requirement to also make documents available to auditors."
- "There is no specific provision to provide access to the background and purpose of transactions that have no apparent economic or visible lawful purpose to competent authorities or auditors."

### Ability to apply counter-measures with regard to countries not sufficiently applying FATF Recommendations (c. 21.3)
- "Section 49(7) of the Proceeds of Crime Law provides for the GFSC to make rules, instructions and guidance for the purposes of the FSB Regulations."
- "The GFSC issues Business from Sensitive Sources Notices/instructions which require prescribed businesses to undertake enhanced CDD measures and give special attention to all business relationships and transactions connected with specific countries or territories."
- "These notices/instructions have been issued in light of requests from the FATF for jurisdictions to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism risks emanating from jurisdictions which have deficiencies in their anti money laundering and financing of terrorism regimes."

*Source: _cr1112 - 2.4 of the PB Handbook require that the MLRO has access to the CDD records and receive full*

### 1057.      In addition to issuing notices the GFSC has the power to impose any conditions to PBs

### _cr1112 - 1057.      In addition to issuing notices the GFSC has the power to impose any conditions to PBs

### Powers to issue notices and impose conditions
- The GFSC has the power to impose any conditions to PBs pursuant to Section 8 of the Registration of Non-Regulated Financial Services Businesses Law and could prohibit transactions emanating from a jurisdiction of concern.
- The GFSC issued instruction number 8 requiring financial services businesses to immediately consider whether they had exposure to particular persons and, if so, to advise the GFSC accordingly.
- The AGCC, under Section 22(3)(b) of the eGambling Ordinance, can issue a notice requiring application of other appropriate counter measures which Category 1 eGambling licensees must adopt (under Section 4(l) of the eGambling Regulations). Under this guidance-making power the AGCC could also prohibit transactions with a high risk jurisdiction.
- Business from sensitive sources notices have been issued in coordination between the AGCC and the GFSC.

### Implementation and effectiveness
- Both the AGCC and the GFSC have issued Business from Sensitive Sources Notices and requested enhanced customer due diligence, mostly to coincide with FATF advisories.
- The authorities have the necessary authority to apply varying countermeasures to jurisdictions of concern if required.
- In practice, Business from Sensitive Sources Notices are issued when the FATF or other competent authorities raise concerns.
- The focus of PBs paying special attention is on countries not sufficiently applying FATF recommendations rather than on business relationships and transactions with persons from those countries; the assessment team does not believe this drafting difference impacts effectiveness.
- PBs and TSCPs are aware of notices and instructions issued by the GFSC and have incorporated this information into monitoring programs.
- All industry representatives from the TCSP and prescribed businesses sectors were very familiar with the notices.

### Sector size and supervisory responsibilities
- As of December 31, 2009 there were 296 businesses in the DNFBP category with the vast majority being TCSPs (197).
- DNFBPs are supervised by the GFSC and the AGCC.
  - The Fiduciary and Intelligence Services Division of the GFSC is responsible for supervising TCSPs.
  - The Policy and International Affairs Division monitors lawyers, accountants and real estate agents.
  - The AGCC is responsible for supervising eCasinos.
- A breakdown of examinations conducted between 2007 and 2009 is referenced in R.24.
- A table outlining the number of STRs reported by TCSPs is included at the beginning of the recommendation; statistics include an analysis of reporting levels.

### Findings, deficiencies, and targeted recommendations (4.2.2)
- Findings:
  - Although the definition of money laundering and terrorist financing includes attempts, reporting of attempted transactions is not explicitly stated within the sections requiring reporting (Section 1 and 3 of the DL and 12 and 15 of the TL) and must be inferred.
- Recommendations:
  - Authorities should consider amending the DL and TL and providing guidance to businesses to explicitly require the reporting of suspicious attempted transactions.
- eCasinos-specific findings:
  - STR reporting in the eCasinos sector is insufficient; the number of STRs does not correspond to the AML risk level and the transactions volume of the industry.
  - AML/CFT training requirements do not apply to all eCasinos employees and do not specifically require training on money laundering techniques or employee obligations regarding CDD and reporting.
- eCasinos recommendations:
  - Authorities are recommended to require eCasinos to provide AML/CFT training to all eCasinos employees. The training should specifically include, inter alia, money laundering techniques and employee obligations regarding CDD and reporting.

### Compliance with Recommendation 16 (4.2.3)
- Rating: R.16 LC
- Factors underlying rating:
  - The number of suspicious transaction reports submitted by the eCasinos sector is insufficient.
  - Ecasinos were not specifically required to provide training to their employees on money laundering techniques or employee obligations regarding CDD and reporting.
  - The requirement to provide training does not apply to all eCasinos employees.

### Regulation, supervision, and monitoring framework (R.24-25, 4.3)
- GFSC and AGCC responsibilities:
  - The GFSC and the AGCC are responsible for ensuring supervision and monitoring of DNFPBs.
  - GFSC oversight extends to all FSB and Non-Financial Services Businesses; GFSC can enter any premises in the Bailiwick owned by a PB or FSB pursuant to Section 49B of the Proceeds of Crime Law (POCL).
  - AGCC supervises eCasinos including compliance with licensing, technical standards and AML/CFT pursuant to Section 2 (b) of the Alderney Gambling Law.
- Legal professional privilege and inspection powers:
  - Section 49B (4) of the POCL states the section does not compel production or divulgence of items subject to legal professional privilege or excluded material, but an advocate or legal adviser may be required to give the name and address of a client. Sections 49B(4) of the POCL was extended to legal professionals, accountants and estate agents by Section 24 of the PB regulations.

### Regulation and supervision of eCasinos (c. 24.1, 24.1.1, 24.1.2 & 24.1.3)
- AGCC establishment and inspection regime:
  - Section 2B of the Alderney Gambling Law established the AGCC to license and regulate eGambling in Alderney.
  - The AGCC requires active licensees be inspected at least annually after activation of their license; historically all operative licensees have received an annual on-site inspection at their main place of business wherever in the world.
  - Inspections are frequently timed to coincide with the licensee's financial year end; inspection regime focuses on financial, technical and regulatory areas, all including AML/CFT components.
  - The AGCC conducted 11 on-site inspections in 2007, 16 in 2008, and 22 in 2009.
- Legal powers and sanctions:
  - Sections 249 and 251 of the eGambling Regulations provide powers for routine inspections; Section 249(2) affords the AGCC access to records and information needed to monitor operations and to call for information from the licensee and associates (including hosting facilities).
  - Under Section 12(1) of the eGambling Ordinance the AGCC may use sanctioning powers; Section 12(3) sets out sanctions including direction to rectify, written caution, financial penalty not exceeding £25,000, suspension or revocation of license or certificate, and combinations of these.
  - Between January 2008 and July 2010 the AGCC undertook five special investigations, issued 11 rectification directions, four formal cautions and applied two fines and two suspensions.
  - The Gambling (Alderney) Law: first offence liable to fine not exceeding £25,000, imprisonment not exceeding 6 months or both; second or subsequent offence liable to fine not exceeding £50,000, imprisonment not exceeding 2 years or both. Money laundering offences are subject to these sanctions pursuant to Section 233 of the eGambling Regulations.
  - Under Section 25 (1) of the eGambling Ordinance employees, directors and senior management can also be held to account.
- Fit and proper checks:
  - All applicants for eGambling licenses, their ultimate beneficial owner(s) and senior management are closely scrutinized for "fit and proper" status by examining character, business reputation, financial position, ownership and corporate structures, business associates and sources of funding.
  - Key individuals must be approved by the AGCC. Processes do not include police checks; criminal background checks are conducted through WorldCheck and Equifax. Where concerns exist the AGCC uses external agencies and additional intelligence sources.
  - There have been two instances where associates of eGambling licensees had certificates revoked due to criminal involvement identified by ongoing AGCC due diligence.

### Monitoring systems for other DNFBPs
- Trust and Company Service Providers (TCSPs):
  - GFSC began on-site inspections of TCSPs in 2001; a specific supervisory team uses a risk-based approach updating risk assessments on every TCSP annually.
  - Quarterly examination plans are established by risk: high risk entities examined every three years, medium risk entities every 4 years; it is estimated all TCSPs will be subject to an on-site examination approximately every 6 years.
  - Section 49B (1) of the POCL allows GFSC to enter any premises in the Bailiwick to determine compliance with related regulations.
  - On-site inspections types: full inspections, management inspections and themed inspections. Full inspections cover management and operational levels; a selection of client files is reviewed and an extensive questionnaire administered covering corporate governance, risk-based approach, CDD, high/low risk relationships, monitoring transactions, record keeping, reporting suspicion and MLRO responsibilities.
  - Management inspections target directors/senior management with offsite document review and onsite interviews; management inspections include summary of CDD for at least five client relationships.
  - Themed inspections cover specific aspects on an exception basis. The Fiduciary and Intelligence Services Division conducts an equal number of full and management inspections.
  - Off-site supervision includes review of prescribed annual returns and management letters from independent auditors; inspectors update entity risk assessments annually.
  - The Fiduciary and Intelligence Services Division conducted 23 onsite examinations in 2009 representing 12% of all entities in the sector.
  - Examinations in the TCSP sectors decreased from a high of 43 inspections in 2006; the Division is comprised of 11 staff members.
  - The GFSC has issued two public statements about individuals not meeting AML/CFT requirements and issued financial penalties to three individuals ranging from £7,000 to £14,000.
- Bullion dealers:
  - Bullion dealers are supervised by the Policy and International Affairs Division of the GFSC. There were two bullion dealers in the Bailiwick at the time of the assessment; both were subject to on-site examination. One follow-up on-site inspection was conducted in April 2010 on AML/CFT obligations and no significant deficiencies were identified.
- Legal professionals, accountants, and real estate agents:
  - Section 24 of the PB Regulations extends Sections 49B and 49C of the POCL to PBs, providing that the GFSC may on request enter any premises in the Bailiwick and require production of documents and answers.
  - Section 5 of the Financial Services Commission (Site Visit) Ordinance provides powers for the GFSC to obtain information, documents and explanations from PBs; failure without reasonable excuse is an offence.
  - The GFSC commenced on-site inspections of PB in 2008 using a detailed questionnaire covering corporate governance, risk-based approach, CDD, record keeping, monitoring transactions, reporting suspicions, employee screening and training, with sample testing to ascertain effectiveness.
  - Inspections in lawyers’ offices raised no privilege issues; some law firms separate client due diligence information to reduce potential privilege claims—a practice promoted by the GFSC as best practice.
  - The GFSC conducted a total of 22 on-site examinations since December 2008: 6 in the legal profession, 4 accountants and 12 in the real estate sector representing 39 percent of all PB. All high risk entities have been examined.
  - Policy and International Affairs Division plans: high risk entities every 12 to 18 months, medium risk entities every two to three years; plan for all prescribed businesses to be examined within four years.
  - Off-site supervisory activities include an annual compliance questionnaire to all prescribed businesses informing risk assessments and use of GFSC intelligence to further inform entity risk assessments.
  - The GFSC took measures to ensure the cash prohibition for Dealers in Precious Metals and Stones (DPMS) is implemented: a letter to all DPMS on May 25, 2010 reminding them of the prohibition to conduct transactions of £10,000 or more; package included information on money laundering, DPMS vulnerabilities and a feedback report by the FIS. GFSC wrote to banks reminding them of the cash prohibition and to remain vigilant.
  - Deficiencies are followed up by requiring PBs to amend policies, procedures and controls or undertake actions such as staff training by a particular date or reviewing business risk assessments. The GFSC has used its powers to impose conditions on four entities.
- Sanctions and disqualification:
  - The Royal Court under Section 15 of the PB Law may issue a disqualification order prohibiting a person from being a director, controller, partner or senior officer of any prescribed business or from participating in management, formation or promotion of any PB for up to 15 years.
  - Section 12 to 14 of the law allows the GFSC to issue a formal private reprimand, impose a financial penalty of up to £200,000 on issue, or make a public statement regarding a PB.
  - Under Section 27 of the PB Regulations a person guilty of breaching regulations is liable on summary conviction to imprisonment of up to 6 months or a fine or both; on indictment imprisonment for up to 5 years or a fine or both.
  - The Guernsey Bar Law recognizes AML/CFT importance for lawyers: Section 17(1) requires La Chambre de Discipline to hear complaints about professional misconduct including breaches of the Proceeds of Crime Regulations; Section 17(2) explicitly includes such complaints. Pursuant to 27 (1) (b) of the Guernsey Bar Regulations, sanctions available include reprimand, public rebuke, a fine, suspension and disbarring.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr1112.pdf*

### 1093.      The PB Handbook contains guidance as well as rules for lawyers, notaries, accountants

### _cr1112 - 1093.      The PB Handbook contains guidance as well as rules for lawyers, notaries, accountants

### PB Handbook: scope and content
- The PB Handbook contains guidance as well as rules for lawyers, notaries, accountants and real estate agents across the spectrum of their obligations; guidance is one of the key features of the PB Handbook.
- Chapters cover: corporate governance, the risk-based approach, customer due diligence, high-risk relationships, low risk relationships, monitoring transactions and activity, reporting suspicion, employee screening and training, and record keeping.
- Chapter 10 covers suspicion reporting requirements, including the DL and TL and the regulations made under those laws; it also provides guidance on the Terrorism Order and the Al-Qa’ida Order.
- Chapter 13 provides industry specific guidance and includes several pages of information on suspicious features and activities.
- Appendix G to the FSB Handbook provides several pages describing ML and TF and a series of sector specific case studies.

### Alderney Gambling Control Commission (AGCC) guidance and notices
- AGCC publishes guidelines to assist eGambling licensees in implementing effective AML/CFT regimes.
- AGCC publications include:
  - An Internal Control Systems (ICS) handbook providing guidance on how to develop an entity specific control system.
  - Prevention of Money Laundering & Combating the Funding of Terrorism Guidelines designed to assist licensees in understanding the rationale behind the legislation and offering practical assistance on areas to consider for AML/CFT systems.
- AGCC issues Business from Sensitive Sources Notices; under regulation 4(l) of the eGambling Regulations category 1 eGambling licensees are required to take note of and meet any requirements of all notices, instructions and counter-measures. These requirements did not apply to Category 2 holders. Following amendment of section 6(1) of Schedule 16 of the Alderney eGambling Regulations in July 2010, this requirement does not apply to Category 2 eGambling licensees.
- The eGambling regulations preclude the licensed operator from ever handling player funds in the form of cash; player funds are always credited and debited through financial intermediaries (banks, credit card operators or other payment intermediaries authorized by the AGCC).

### Feedback, typologies and industry engagement
- Annual feedback sessions are organized by the FIS and GFSC for all reporting sectors to highlight reporting deficiencies and emerging trends and typologies.
- FIS issued a Feedback and Typologies document providing analysis of STRs received, a summary of law enforcement actions, examples of grounds for suspicion by reporting sectors and typologies involving FIS sanitized cases.
- Meetings with industry representatives (fiduciary, legal, accounting, estate agency and casino sectors) highlighted GFSC and AGCC availability to provide guidance on entity-specific questions.
- FIS provided feedback on the quality of STRs to most DNFBP sectors. Breakdown of feedback provided from 2004 to 2009 (table reproduced as list):
  - Year — Accountants — Law Firms — Estate Agents
  - 2006 — 2 — 0 — 0
  - 2007 — 0 — 1 — 0
  - 2008 — 0 — 5 — 2
  - 2009 — 1 — 8 — 2
  - Totals — 3 — 14 — 4

### Supervisory examinations and sanctions (statistics from 2007–2010)
- On-site inspections conducted in DNFBP sectors (selected figures reproduced):
  - TCSPs inspections by year:
    - 2007 — 40
    - 2008 — 27
    - 2009 — 23
  - Lawyers: Not applicable — 2 — 4 (for 2007, 2008, 2009 respectively as shown)
  - Accountants: Not applicable — 1 — 2
  - Real Estate Agents: Not applicable — 2 — 8
  - eCasinos: 11 — 16 — 26 (2007, 2008, 2009)
- Sanctions imposed on TCSPs (Directions/License conditions; Public Statement; Monetary Penalty) reproduced as presented:
  - Directions/License conditions: 2007 — 3; 2008 — 2; 2009 — 7; 2010 (Jan/April) — 4
  - Public Statement: 2007 — -; 2008 — -; 2009 — 0; 2010 (Jan/April) — 3
  - Monetary Penalty: 2007 — -; 2008 — -; 2009 — -; 2010 (Jan/April) — 3
- Sanctions imposed on Prescribed Businesses:
  - 2009 — Directions/License conditions — 6
  - 2010 (Jan/April) — Directions/License conditions — 1
- Sanctions imposed on Casinos:
  - Rectification proposal/Direction to rectify: 2007 — 4; 2008 — 3; 2009 — 4; 2010 (Jan/April) — -
  - Caution: 2007 — -; 2008 — -; 2009 — -; 2010 (Jan/April) — 7
  - License/certificate suspension: 2007 — -; 2008 — -; 2009 — -; 2010 (Jan/April) — 2
  - License Denial: 2007 — -; 2008 — 1; 2009 — -; 2010 (Jan/April) — -
  - Fine: 2007 — -; 2008 — 1 (suspended); 2009 — -; 2010 (Jan/April) — -
- The GFSC has referred four cases of noncompliance to the Law Officers for criminal prosecutions.

### Adequacy of supervisory resources (R.30)
- AGCC staffing and inspection workload:
  - AGCC has 17 staff including 9 inspectors responsible on average for 5 licensees each.
  - Three inspectors specialize more specifically on AML compliance.
  - eCasinos are inspected annually; AGCC conducts monthly and quarterly reporting analysis; any changes to an eCasino’s ICS must be reported to AGCC for approval.
- GFSC inspection resources and recent changes:
  - Examinations in the TCSP sector declined from a high of 43 inspections in 2006 to 23 inspections in 2009.
  - GFSC hired an additional Assistant Director as of June 21, 2010 to increase inspection coverage in the fiduciary sector.
  - Three officers and two contractors conduct inspections of bullion dealers, legal professionals, accountants and estate agents.
  - Since December 2010, 22 inspections were conducted in these sectors. Given the small number of entities (58) in these sectors, resources dedicated to PB supervision appear adequate.
- GFSC AML/CFT training:
  - Provided through an on-line training module, periodic face-to-face training by specialists and attendance at workshops and conferences.
  - GFSC employees are subject to confidentiality provisions renewed annually.
  - Two contractors are subject to confidentiality provisions in contracts and have completed the on-line training module and attended conferences, seminars and briefings on AML/CFT.

### Implementation, effectiveness, and sector vulnerabilities
- AGCC supervision of eCasinos:
  - Annual onsite inspections; ICS is the basis for onsite inspection; AML/CFT is part of all onsite examinations.
  - AML component represents between 10 to 50 percent of the 10 person-day on-site inspection.
  - AGCC conducts a “fit and proper” test on key individuals including criminal background checks, identity verification, examination of financial position, ownership and corporate structures.
  - Police record checks are not conducted for all key individuals; criminal background checks are conducted through Equifax and WorldCheck (private software) which do not have the same accuracy and certainty as police record checks.
  - Two instances occurred where associates of eGambling licensees had their certificates revoked due to criminal involvement subsequent to approval; AGCC ongoing due diligence identified criminal involvement and associations were terminated.
- GFSC supervision of TCSPs:
  - Full inspections appear comprehensive; inspection questionnaire covers all obligations.
  - When deficiencies are identified, timely follow-up action is requested and inspectors ensure mandated timeframes are respected.
  - GFSC has used powers to impose conditions, issued two public statements and three fines to individuals; four cases referred to Law Officers for criminal prosecutions.
  - Recommendation that frequency of supervision of TCSPs needs to be enhanced: examinations reduced by nearly 50 percent since 2006; the three year cycle for high risk entities is not appropriate.
- Monitoring framework for legal professionals, accountants and real estate agents:
  - Considered appropriate given number of businesses and vulnerability to ML and TF.
  - Scope of onsite inspections is comprehensive; frequency acceptable with 41 percent of entities examined since December 2008.
  - Inspections of lawyers’ offices effectively address solicitor-client privilege by promoting separation of client due diligence files from privileged materials.
- GFSC inspections of bullion dealers and DPMS:
  - On-site inspections conducted for both bullion dealers; retail jewelers not yet inspected on-site.
  - GFSC measures to ensure cash restriction compliance: prior discussions with Law Officers, the GBA and GFSC; GFSC contacted banks to assess use of cash by retail DPMS; GFSC wrote to DPMS reminding them of the prohibition on accepting cash above £10,000 and wrote to banks to remind them and request vigilance.

### Sanctions and outcomes
- Both AGCC and GFSC have a wide range of sanctions including imposing conditions, imposing fines, issuing public statements and revoking licenses.
- In almost all circumstances where sanctions were imposed the deficiencies identified were addressed. In a few instances the business withdrew its license or relocated.
- GFSC has referred four cases of criminal non-compliance to the Law Officers' Chambers; investigations are ongoing.
- Recommendation 32 reflects sanctions applied over the last three years.

### Recommendations and compliance (selected)
- Police record checks are not conducted systematically on key individuals seeking an eGambling license. The absence of police record checks increases the risk that a license may be granted to criminals or their associates.
- The GFSC should increase the frequency of its on-site inspections for TCSPs. Examinations have been reduced by nearly half in the TCSP sector since 2006. All TCSPs should be inspected on a more frequent basis.
- The AGCC should provide more guidance with respect to AML requirements particularly in the area of customer due diligence.
- Compliance ratings (summary):
  - R.24 — LC
    - Police record checks are not conducted systematically on key individuals seeking an eGambling license.
    - The GFSC should increase the frequency of its on-site inspections for TCSPs.
  - R.25 — LC
    - The AGCC should provide additional guidance with respect to AML requirements particularly CDD measures.

### Other Non-Financial Businesses and Professions — Modern, Secure Transaction Techniques (R.20) and scope extensions
- Methodology examples of businesses to consider applying FATF Recommendations: dealers in high value and luxury goods, pawnshops, gambling, auction houses, and investment advisers.
- Suspicious reporting requirements outlined in the DL and TL apply to all individuals and businesses in the Bailiwick, extending reporting obligations beyond those with AML/CFT obligations for CDD and internal controls.
- Guernsey has extended its AML/CFT framework beyond FATF definitions to include:
  - Investment advisers licensed under the Protection of Investors Law and money brokers not covered under FATF definition of financial institutions.
  - General insurers (GFSC considers ML risks of non-life and other investment related insurance to be underestimated internationally).
  - In March 2010, the framework was extended to cover bullion dealers, bullion brokers and stamp dealers.
  - Electronic money explicitly brought into the definition of the issue, redemption, management or administration of means of payment.
- Alderney AML/CFT framework encompasses all e-gambling/gambling licensees.
- February 2010 amendment to Schedule 2 to the Proceeds of Crime Law extended AML/CFT framework to external accountants, tax advisers, auditors and insolvency practitioners; these businesses required to register with the GFSC by October 4, 2010 and meet PB Regulations and PB Handbook rules by October 31, 2010.
- All the sectors above are subject to GFSC supervision. No STRs have been received by these sectors.
- Modernization and cash control measures:
  - Guernsey issues its own sterling notes and coins in denominations: £50, £20, £10, £5 and £1; limited demand for the £50 note.
  - UK bank notes are legal tender and circulate alongside Guernsey issues.
  - GFSC encourages FSB to develop modern and secure techniques of money management to replace cash transfers; GFSC discourages inappropriate use of cash collections and requires FSBs to maintain registers recording value and reasons for cash collections.
  - GFSC reviews use of cash during onsite inspections; industry meetings confirmed use of cash outside banking sector is very rare.
  - GFSC worked with private banks to manage down customer expectations about cash availability; cross border counter payments eliminated; few private banks permit cash payments and those keep a register/log available for inspection by GFSC.

### Legal persons and beneficial ownership access (beginning of R.33)
- Bailiwick legal entities regulated by:
  - Companies (Guernsey) Law 2008 (Guernsey CL)
  - Companies (Alderney) Law 1994 (Alderney CL)
  - Limited Partnerships (Guernsey) Law 1995
  - Control of Borrowing Ordinance (COBO) and Criminal Justice (Proceeds of Crime) (Financial Service Businesses) Regulation are relevant.
- Measures to obtain and maintain beneficial ownership information for Bailiwick legal persons:
  - For majority of Guernsey companies: requirement to have a registered agent obligated to “take reasonable steps” to ascertain identity of beneficial owners.
  - For majority of Bailiwick companies and limited partnerships: requirement to utilize a licensed Trust and Company Service Provider (TCSP) supervised for CDD obligations.
  - For all Bailiwick companies and limited partnerships: obligation to provide certain beneficial ownership information to the relevant registry and to update such information.
  - For all Bailiwick companies and limited partnerships: duty to maintain shareholder, director and partner registers and to file annual returns with the Alderney and Guernsey Company Registrars.
  - For Alderney companies only: COBO conditions incorporation on consent by the GFSC, granted only upon provision of beneficial ownership information. For Guernsey, COBO was repealed upon introduction of the registered agent requirement.
  - Measures supported by investigative and other powers of LEAs and the GFSC to obtain access to information held by FSBs, TCSPs and other entities and persons as outlined under Recommendations 4, 27, and 28.

*Source: _cr1112 - 1093.      The PB Handbook contains guidance as well as rules for lawyers, notaries, accountants*

### 1129.      With few exceptions, Guernsey companies are required under Section  483 Guernsey CL

### _cr1112 - 1129.      With few exceptions, Guernsey companies are required under Section  483 Guernsey CL

### Registered agent requirement and obligations
- With few exceptions, Guernsey companies are required under Section 483 Guernsey CL to have a registered agent, who must be either a Guernsey resident serving as individual director of the company or a licensed company service provider. Companies that fail to comply with this requirement are guilty of an offense under the Guernsey CL.
- The name and address of the registered agent must be provided to the Guernsey registrar upon incorporation and any changes to it are to be provided within 14 days. In addition, the company itself is required pursuant to Section 485 to record such information.
- Under Section 486 Guernsey CL, the registered agent is required to ―take reasonable steps to ascertain the identity of the person who are the beneficial owners of members’ interest in that company‖; the law does not elaborate or define the meaning of the terms ―reasonable steps‖ and ―beneficial owner‖.
- Pursuant to Section 487 Guernsey CL, the name, usual residential address, nationality and date of birth of each natural beneficial owner must be obtained. For beneficial owners that are legal entities, the company name, its registered or principal office, the legal form and law by which it is governed and if applicable its registration number has to be obtained.
- Records on beneficial owners have to be kept at the registered office in Guernsey, where police, customs, supervisory and prosecuting authorities may gain access to such information on the basis of a ―certificate‖ as outlined under criterion 33.2. Section 487 is an ongoing obligation requiring the registered agent to keep beneficial ownership information updated at all times. Failure to comply with Section 487 may result in criminal prosecution of the registered agent.

### Definition and consistency issues for "beneficial owner" and "reasonable steps"
- The authorities indicated that in the absence of a definition in the Guernsey CL, the term ―beneficial owner‖ would be defined in line with the definition as contained in the Criminal Justice (Proceeds of Crime) (Financial Service Businesses) Regulation which, as outlined under Recommendation 5 above, is in line with the definition in the FATF standard and refers to a natural person in all cases.
- Sections 487 of the Guernsey CL differentiates between beneficial owners that are natural and those that are legal entities in specifying required information, suggesting the term ―beneficial owner‖ in the Guernsey CL may be wider than the Regulation’s definition and thus may not in all cases require identification of the natural person standing behind a shareholder, director, beneficiary or controller/enforcer.
- Section 486 Guernsey CL requires registered agents to take ―reasonable measures to ascertain‖ beneficial ownership, whereas Section 4 of the Proceeds of Crime Regulation requires TCSPs to ―identify and take reasonable steps to verify‖ beneficial ownership information. This inconsistency may cause confusion for licensed TCSPs subject to both regimes.
- The authorities stated the term ―reasonable steps‖ would be interpreted in a strict sense and that registered agents would be required to obtain beneficial ownership in all but very exceptional circumstances.
- The authorities emphasized TCSPs would be subject to criminal liability for breach of the Regulation provisions and thus would apply the stricter provision of the Regulation. Private sector participants confirmed they would always identify the natural persons owning or controlling a legal entity and interpret Guernsey law to require them to do so.

### Utilization and supervision of licensed TCSPs
- As a general principle, the Guernsey CL requires that all applications for incorporation of a Guernsey company must be submitted by a TCSP (Section 17 Guernsey CL). Applications under Alderney law must be submitted by an advocate, whereby since 2008 advocates require a TCSP license to carry out such an activity. At the initial formation stage, all Bailiwick companies are linked to a licensed TCSP, which in turn is required to obtain and maintain beneficial ownership information as part of the initial CDD process.
- Limited partnerships may be registered without involvement of a licensed TCSP.
- The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law 2000 requires a Guernsey TCSP license for anyone providing corporate administration activities “by way of business,” defined as specified activities in exchange for ―any income, fee, emolument or other consideration in money or money's worth.‖
- Licensed TCSPs are subject to the full range of CDD obligations under the Criminal Justice (Proceeds of Crime) (Financial Service Businesses) Regulation, including the obligation to identify and verify the identity of beneficial owners and to keep such information complete, accurate and updated, and are monitored for compliance by the GFSC.
- The Regulation provides exemptions allowing persons to conduct activities without a license; Section 3 (1) (g) of the Fiduciary Law allows a person to act as a director for up to six companies without a license. Persons covered by this exemption remain subject to the CDD obligations under the Criminal Justice (Proceeds of Crime) (Financial Service Businesses) Regulation pursuant to Schedule 1 Part I (23) of the Regulation, but in the absence of a supervisory framework the accuracy and completeness of beneficial ownership information maintained by exempted providers is questionable. Other measures (registration requirement, registered agent requirement, law enforcement powers) remain applicable in such scenarios.
- The authorities stated that about 70% of all Guernsey companies and about 50 percent of all Alderney companies are managed by licensed TCSPs.

### Registries, information requirements, and access by authorities
- To incorporate a company and obtain legal personality, registration requires: (1) a memorandum of incorporation signed by at least founding member stating among other things the company name, the registered office in Guernsey, the type of company, the liability of the company members and whether or not the company is to be established as cell company; (2) the articles of incorporation; and (3) the address of the company’s first registered office, the name, address or registered office, nationality or legal form, occupation and date of birth or registration number of the first directors, and the name and address of the first registered agent (if applicable) and all founding members. Changes to directors or particulars of directors, to the registered office or the registered agent have to be provided to the relevant companies’ registry within 14 days.
- Limited partnerships are required under Section 8 of the Limited Partnership Law to provide details on the name of the limited partnership, the nature and principal place of its business, its registered office in Guernsey and the full name of every general partner and his address upon registration. Any change to the registered information must be provided to the registry within 21 days. Changes to the registered office take effect only upon notification of the partnership registry.
- Under Sections 123 Guernsey CL and Section 71 Alderney CL, the member registry must contain the name and address of all members as well as the date on which a person was registered or ceased to serve as such. For companies with share capital, the number and class of share held by each member must be provided. Less stringent requirements apply to incorporated cell companies with an incorporated cell of more than 50 members.
- Under Sections 143 Guernsey CL and Section 70 Alderney CL, director registries must provide the name and residential or service address, nationality, business occupation and date of birth of each natural person director; and the name, registered or principal office, legal form, and the jurisdiction of incorporation and the register number for each company director. Any changes to the director registry have to be provided to the relevant Company registry within 14 days. Verification of registered director information in the annual tax return is required. Under Alderney but not Guernsey law, changes to the members or particulars of members of the company also have to be verified in the annual tax return.
- Limited partnerships are required to maintain a register indicating, amongst other things, the full name and address of each limited partner.
- Under the Alderney system, companies require ―consent‖ from the GFSC on behalf of the Policy Council pursuant to the Control and Borrowing (Bailiwick of Guernsey) Ordinance (COBO) before they can apply for incorporation. The GFSC provides such consent only after having conducted due diligence on the proposed beneficial owners and the proposed activity of the company. The beneficial ownership information obtained by the GFSC is not provided to the Alderney Company registry but can be obtained by LEAs from the GFSC through the gateways outlined elsewhere in the report. The COBO was repealed for Guernsey following the introduction of the registered agent requirement.
- The COBO consent form requires applicants to indicate details of the party interested in registration, the person from whom instructions were received, the registered and beneficial owners, all nominee shareholders and the beneficial owners of each share, and persons for whose ultimate benefit the company will be operated — requiring most but not all elements of the FATF definition of “beneficial owner.”
- Information obtained by TCSPs in the course of conducting CDD can be accessed by LEAs pursuant to Section 14 (4) (b) of the PB regulation, which provides that CDD information must be made available promptly to any police officer, the FIS or the GFSC.
- For Guernsey companies, Section 490 of the Guernsey CL requires the registered agent to grant LEAs, the GFSC and the Attorney General access to beneficial ownership information upon presentation of a certificate stating that the information is sought for the purposes of: (1) any criminal or regulatory investigation which is being or may be carried out, whether in Guernsey or elsewhere, (2) any criminal or regulatory proceedings which have been or may be initiated, whether in Guernsey or elsewhere, (3) the initiation or bringing to an end of any such investigation or proceedings, or (4) facilitating a determination of whether any such investigation or proceedings should be initiated or brought to an end if the disclosure is proportionate to what is sought to be achieved by it. A request may also relate to information which existed prior to enactment of the Guernsey CL.
- Both the Alderney and Guernsey Registry of Companies are publicly accessible; the Alderney registry is only available in paper form, the Guernsey registry is also available online. All information maintained as part of the two registries, including underlying documentation, can be accessed by LEAs, the public and thus also FSB, whereby a small fee may apply. The partnership registry is publicly available.
- Information held by companies themselves, including director and shareholder registries, are publicly accessible upon request and against a small fee. Access to the register may be denied only based on a court decision. Information held by limited partnerships is accessible by LEAs pursuant to Section 15 (11) Limited Partnership Law.

### Bearer shares and access by financial institutions
- While not expressly prohibited, both Guernsey and Alderney law effectively treat bearer shares as registered shares due to the requirement to maintain a complete shareholder register. Section 77 (3) Guernsey CL prohibits the migration of foreign companies into Guernsey if they have issued bearer shares.
- Information held by companies and partnerships (including director and shareholder registers) as well as information maintained by the company and partnership registries is publicly available and can thus be accessed by financial institutions (FSB).

### Implementation, effectiveness, and identified gaps
- Bailiwick companies are subject to a wide variety of measures which in summary ensure that accurate and comprehensive beneficial ownership information is obtained for all legal entities. Most notably, registration requirements under the Guernsey and Alderney CL and the Partnership Law coupled with the link between the majority of Bailiwick companies and licensed TCSPs ensure transparency with respect to beneficial ownership and control of legal persons.
- The Bailiwick authorities appear to have a good understanding of the risks involved with the use of corporate vehicles as asset management tools and allocate significant resources and efforts to implementation. Effectiveness is further facilitated by the high level of professionalism amongst Bailiwick TCSPs. All TCSPs the assessors met with were well informed of their obligations with respect to beneficial ownership information and stated that in all cases the natural person ultimately owning or controlling a legal entity would be identified.
- To ensure consistent application of the measures described, including by companies not linked to a licensed CSP, the authorities should clarify the meaning of the terms ―beneficial owner‖ and ―reasonable measures to ascertain‖ as contained in the Guernsey CL.

### Recommendation (from report)
- The authorities should clarify the meaning of the terms ―beneficial owner‖ and ―reasonable measures to ascertain‖ as contained in the Guernsey CL to ensure a consistent application of the measures described above.

### Legal arrangements: trusts and general partnerships (access to beneficial ownership and control information)
- Guernsey allows creation of trusts under the Trust (Guernsey) Law 2007 and of general partnerships pursuant to the Partnership (Guernsey) Law 1995. The Criminal Justice (Proceeds of Crime) (Financial Service Businesses) Regulation is relevant.
- Trusts and general partnerships may be set up under Guernsey but not under Alderney or Sark law.
- Neither trusts nor general partnerships are subject to any registration requirements. However, any person who provides ―by way of business‖ services relating to or advice on formation, management or administration of trusts or partnerships (e.g., acting as partner, individual or corporate trustee, or protector) is regulated under the Regulation of Fiduciaries, Administration Businesses and Company Directors (Bailiwick of Guernsey) Law 2000 and subject to the full range of CDD obligations under the Criminal Justice (Proceeds of Crime) (Financial Service Businesses) Regulation, including obligations to identify and verify beneficial owners and to keep such information complete, accurate and updated.
- The term ―by way of business‖ applies to any regulated activity conducted for remuneration and allows only very narrow exemptions. Licensed TCSPs are supervised for compliance with CDD requirements.
- For access to information held by TCSPs see the analysis under Recommendations 27 and 28 of the report.
- Based on GFSC statistics, there are about 27,000 Guernsey trusts administered by Guernsey TCSPs. The authorities estimated that an additional 3,000 Guernsey trusts not linked to a licensed TCSP may exist.
- It was unclear how many general partnerships existed and what percentage were linked to a licensed TCSP; the authorities stated the number of partnerships seemed very limited. Upon request by the GFSC, the three largest law firms in the Bailiwick reviewed historical records and concluded that none of them had ever been involved in the establishment of a general partnership.

*IMF staff report content unit: _cr1112 - 1129.      With few exceptions, Guernsey companies are required under Section  483 Guernsey CL*

### 1163.      Those partners and trustees that are not subject to the AML/CFT framework are not

### _cr1112 - 1163.      Those partners and trustees that are not subject to the AML/CFT framework are not

### Beneficial ownership of legal arrangements (trusts, partnerships)
- Finding: Those partners and trustees that are not subject to the AML/CFT framework are not under any legal obligation to obtain and maintain accurate, complete and updated beneficial ownership information.
- Investigative remedy: LEA investigative powers under Recommendations 27 and 28 could be used to inquire and, if necessary, compel production of such information.
- Practical observation: Trustees would be expected in practice to obtain some beneficiary information, but absent a specific legal obligation the completeness and accuracy of that information is questionable.
- Access: Information held by TCSPs is not publicly available and therefore not accessible to FIs.
- Statistics and scope concerns:
  - 496 general partnerships are linked to licensed TCSPs.
  - There are trusts not covered by obligations—up to 10%.
  - The total number of partnerships is unknown, making the 496 figure difficult to contextualize.
- Effectiveness factors:
  - Bailiwick authorities appear to understand risks and allocate significant resources to implementation.
  - High level of professionalism among Bailiwick TCSPs; assessors were told TCSPs would identify the natural person ultimately owning or controlling a legal entity in all cases.
  - Nevertheless, the absence of a legal obligation for trustees/partners outside licensed TCSPs raises concerns about completeness and accuracy of beneficial ownership information.

### Recommendations and compliance (R.34)
- Recommendation:
  - The authorities should put in place specific measures to ensure the availability of accurate and complete beneficial ownership information for trusts and general partnerships that are not administered by licensed TCSPs.
- Compliance outcome:
  - R.34 rating: LC
  - Underlying factors:
    - While the vast majority of trust arrangements seem covered by the CDD requirements of the AML/CFT framework, no measures are in place to ensure that accurate, complete, and current beneficial ownership information is available for legal arrangements not administered by a licensed TCSP.

---

### Non-Profit Organizations (NPOs) — Legal framework and registration
- Legal thresholds and coverage:
  - Charities and Non Profit Organizations (Registration) (Guernsey) Law, 2008 (introduced in November 2008) requires registration for NPOs with gross assets and funds of £10,000 or more, or gross annual income of £5,000 or more.
  - Registration obligations apply to NPOs located in Guernsey, Herm and Jethou. Legislation is being considered to extend to Sark and Alderney.
  - Exemptions: NPOs with less than £10,000 in gross assets or funds or gross annual income of less than £5,000.
  - Manumitted organizations (under control of professional trustees licensed by the GFSC and whose dealings are in the course of regulated activities) are not subject to registration requirements.
- Recordkeeping and filings:
  - NPOs and manumitted organizations required to keep records of all financial transactions for 6 years.
  - Registered organizations must file annual financial statements and renew registration; annual filing does not extend to manumitted organizations.
- Sanctions in law:
  - Director of Income Tax can refuse registration if not satisfied organization is an NPO.
  - Failure to register is a criminal offence liable on summary conviction to a fine.
  - Providing false or misleading information can result in imprisonment for a term not exceeding two year or to a fine or both.
  - Specific sanctions under the Charities and NPO Law:
    - Failure to comply with registration: summary conviction fine up to £10,000 (Section 1 (5)).
    - Providing false or misleading information: on indictment unlimited fine and/or up to 2 years imprisonment; on summary conviction up to 3 months imprisonment and/or fine up to £10,000 (Section 3; paragraph 8(4)).
  - Administrative penalties introduced by amendment on July 28, 2010: range from £10 to £500.

### NPO registration content and disclosure
- Registration application must state full names of persons who own, direct or control the organization including directors, officers and trustees, and give relevant addresses (Section 2 of Schedule 1).
- Public availability:
  - The name of the NPO is publicly available on the Income Tax Office website.
  - Other information relating to purpose/objectives and identity of persons who own/control/direct activities are not publicly available for registered NPOs.
  - Information held by manumitted organizations is not publicly available.
- Disclosure to authorities:
  - Section 13 of the Schedule allows information held by the Director of Income Tax to be disclosed to competent authorities.
  - Information held by manumitted organizations can be disclosed by the GFSC under Section 21 (2) (b) of the Financial Services Commission Law.

### Risk assessment, supervision, outreach, and investigatory powers
- Risk assessment framework:
  - Director of Income Tax conducts periodic risk assessments.
  - Higher risk: NPOs operating outside the Bailiwick.
  - Medium risk: NPOs operating internationally but are branches or sub-organizations of NPOs established in the U.K. or other major jurisdiction.
  - Accounts for higher and medium category NPOs are received and sampled; details of medium/high risk forwarded to the FIS and updated quarterly.
- Manumitted organizations analysis:
  - Recent risk analysis found 207 NPOs and charities administered by fiduciaries with asset value of £2 billion.
  - Asset location top three jurisdictions: Switzerland, Guernsey and Luxemburg.
  - Purposes generally cultural, educational and social.
  - GFSC risk assessment determined manumitted organizations activities are low risk.
- Outreach:
  - Director of Income Tax and GFSC met with the Association of Guernsey Charities prior to registration requirements.
  - Registration details publicized via press release and local media.
  - Presentation by a U.K. Charities Commission officer delivered to NPOs in 2007; included TF vulnerability content.
  - Information on TF risks placed on States of Guernsey, States of Alderney, and the GFSC websites; directed to all registered NPOs.
  - GFSC held information session in June 2010 targeted to TCSPs who manage manumitted organizations.
- Supervision and monitoring:
  - Director of Income Tax undertakes periodic review of registration applications and annual renewals.
  - No supervision of NPOs has been undertaken with respect to record keeping requirements.
  - Manumitted organizations had not been subject to specific supervisory oversight by the GFSC with respect to all obligations under the NPO Law prior to May 2010; GFSC did examine some record keeping requirements.
  - Sark: Charities and Non-Profit Organisations (Registration) Sark Law came into force on May 11, 2010; registry not yet established at time of assessment.
- Investigatory powers and information sharing:
  - Section 9 of the Schedule allows the Director of Income Tax to require registered or manumitted organizations to deliver documents relevant to assets, funds and income.
  - Section 13 allows disclosure to competent authorities.
  - Schedules 5 to 7 of the TL provide LEAs (AG) powers (search and seizure, production orders, customer information orders, account monitoring).
  - Recent amendments to the NPO Law (effect April 15, 2010) provide the Attorney General powers to investigate charities and NPOs, including bodies outside the Bailiwick.
  - Director of Income Tax regularly provides a copy of the full registry (including non-public parts) to the FIU; medium and high risk NPO information is shared with the FIU quarterly.
  - FIU can undertake investigations if an NPO is suspected of being exploited by a terrorist organization.
  - Section 8 of the Disclosure Law allows LEAs to provide information to any other person if disclosure contributes to prevention, detection or prosecution of criminal offences in the Bailiwick or elsewhere.
  - Manager of the Compliance Investigation Unit of the Income Tax Office receives international requests made to the Director of Tax (Section 13 (2)).

### Implementation effectiveness and vulnerabilities
- Key implementation findings:
  - The registration framework for NPOs is not comprehensive.
  - Exemption of manumitted organizations is not justified from a risk perspective.
  - 207 manumitted organizations hold £2.018 billion in assets with over 76% of those assets held internationally.
  - Large asset values and international holdings do not justify a low risk evaluation from a TF perspective.
  - Manumitted organizations present the highest vulnerability to TF in the NPO/charities sector in Guernsey and therefore should be subject to registration.
- Public access and supervision shortcomings:
  - Information on the purpose/objectives of NPOs and the identity of persons who own/control/direct activities is not publicly available for registered NPOs.
  - No public information on manumitted organizations.
  - No supervision or monitoring activities undertaken regarding non-registration requirements; Director of Tax has not undertaken inspections of registered NPOs beyond application/renewal completeness checks.
  - GFSC had not specifically conducted inspections with respect to all manumitted organizations’ obligations under the NPO Law until May 2010.
- Sanctions and enforcement:
  - Sanctions for non-compliance with registration requirements are not effective; authorities reluctant to criminally sanction charities unwilling to register.
  - Administrative penalties (introduced July 28, 2010) range from £10 to £500 and do not appear dissuasive; effectiveness could not be assessed given recent implementation.

### Recommendations and compliance (SR.VIII)
- Recommendations:
  - Manumitted organizations could be vulnerable to terrorism financing activities and should be subject to registration.
  - Outreach to raise awareness on risks of terrorist abuse and available protective measures should be provided to the entire NPO sector.
  - Information on the purpose and objectives of the NPO and the identity of the persons who own, control or direct their activities should be made publicly available.
  - Supervision of manumitted organizations should be undertaken with respect to their obligations under the NPO Law.
  - Sanctions for non-compliance with registration requirements should be strengthened to ensure that they are effective and dissuasive.
- Compliance outcome:
  - SR.VIII rating: PC
  - Underlying factors:
    - NPO registration system not comprehensive.
    - Outreach not provided to the entire NPO sector.
    - Information on purpose/objectives and identity of persons who own/control/direct activities not publicly available.
    - NPOs are not subject to limited supervisory activities.
    - Sanctions for non-compliance with registration requirements are not effective and dissuasive.

*Source: IMF assessment text (content unit _cr1112 - 1163).*

### 6. NATIONAL AND INTERNATIONAL COOPERATION

### 6. NATIONAL AND INTERNATIONAL COOPERATION

### 6.1. National Cooperation and Coordination (R.31 & R. 32)
#### 6.1.1. Description and Analysis — Legal Framework
- 1198. Relevant agencies, including the FIU, the police, the GFSC and the Attorney General among others operate in legal frameworks that permit cooperation on issues at both operational and policy levels.
- 1199. The Disclosure Law (DL) authorizes for purposes of a criminal investigation or proceeding disclosures of information that a government department holds. It permits police and customs officers to disclose information they receive in order to prevent, detect, and investigate civil and criminal offenses; prosecute criminal offences; or assist the GFSC or the intelligence service in carrying out their functions. In addition, the Director of Income Tax may disclose information to police officers to facilitate criminal investigations or proceedings, or to assist in intelligence service functions, and also disclose to the GFSC information to enable it to discharge its functions. The Attorney General and specified police and customs officers may also disclose information to the Director of Income Tax if they reasonably believe it will assist the Director to carry out his functions. DL, Sections 6 and 8 -10.
- 1200. Other Bailiwick laws also have provisions that permit specific agencies to make disclosures to enhance the ability of other agencies to fulfill their functions. For instance:
  - Financial Services Commission Law: The GFSC may disclose information for a wide range of purposes. Among these are to assist the GFSC to carry out any of its functions; to prevent or detect crime; for the purposes of a criminal proceeding; and to enable Bailiwick gambling supervisory authorities to carry out their functions or pursue investigations. Section 21(2).
  - Proceeds of Crime Law: The criminal offences of assisting another to retain proceeds and acquisition, possession and use each have provisions for persons to disclose suspicions to police officers. Although there is a general prohibition against the officer receiving the information from disclosing it, there are exceptions in the case of a disclosure for purposes of the investigation of crime or in support of a criminal proceeding in the Bailiwick, or to the Attorney General, the GFSC or another police officer.
  - Fraud Investigation Law: The Attorney General may disclose information that he receives under the Law for the purposes of the investigation or prosecution of an offence, or to the Director of Income Tax or bodies with supervisory, regulatory or disciplinary functions in relation to financial services, among others. Section 2.
  - Gambling (Alderney) Law - The AGCC may transmit to other persons or bodies such information relating to its functions as it sees fit. Schedule 1, paragraph 12(2)(c).
  - Charities and NPOs Registration Law: The Director of Income Tax may disclose information held as the keeper of the register of charities and NPOs for a wide range of purposes, including the prevention or detection of crime; for purposes of criminal proceeding; and to assist the Attorney General to discharge his functions. Schedule, para. 13(2).
  - The Guernsey Company Law: Resident agents of Guernsey companies must disclose information to the Attorney General, the GFSC and the law enforcement agencies if necessary for the exercise of their functions. Section 490.
  - The Alderney and Guernsey Company Registries and Guernsey Partnership Registry: Information held on the ownership and control of legal entities and limited partnerships is publicly available.

#### Mechanisms for Domestic Cooperation and Coordination in AML/CFT (c. 31.1) — Policy
- 1201. The Bailiwick has had an AML/CFT policy coordination committee in place since 1999. Its members have always included the Attorney General, Director General of the GFSC, head of the FIU, and Chief Officers of the police and customs services. In 2009 its membership was expanded to include the Director of Income Tax, Registrar of Companies and CEO of the AGCC, and the Committee was renamed the Bailiwick AML/CFT Advisory Committee. It serves as both an advisory body to the States of Guernsey Policy Council and as a consultative body. It meets several times a year.
- 1202. The Committee works to ensure that the Bailiwick’s AML/CFT policies and strategies have political support at the highest levels. Beginning in October 2008, it formulated and now regularly updates a written policy, its ―Financial Crime Strategy‖ that is aimed at ensuring a coordinated approach by all key stakeholders in AML/CFT. Currently, there are seven strategic imperatives. These include increasing the amount of criminal proceeds recovered and the cases in which they are pursued, and focusing increasingly on using the criminal and civil forfeiture legislation. Agencies that are represented on the Committee self-assess against this strategy on a bi-annual basis.
- 1203. In addition to the Advisory Committee, three other groups, two of which report formally to the Committee, work in specialized policy areas. A Financial Crime Group, chaired by the head of the FIU, is responsible for coordination and implementation of the strategy that the Committee has adopted and with policy matters in tackling financial crime. It consists of representatives of the Attorney General’s Chambers, GFSC and Income Tax, and the managers of all three financial teams within the FIS. The Group discusses trends, identifies emerging money laundering risks, and will consider issues that arise, as well as current cases and mutual cooperation matters.
- 1204. A specialized Terrorist Financing Team operates under the Financial Crime Group. It also meets quarterly. Its membership is similar to that of the Financial Crime Group. However, the Police Special Branch also participates in this team. The focus of this team is terrorist financing issues both local and international.
- 1205. Additionally, in 2009 the Attorney General’s Chambers established an AML/CFT forum within the Chambers to facilitate coordination of policy, legislative and operational matters across the different office directorates. The Attorney General, the head of prosecutions, the office’s mutual legal assistance, legislative drafting and asset recovery lawyers, and legislative counsel responsible for AML/CFT policy issues are part of the forum. It meets on a quarterly basis to review ongoing cases and trends, as well as developments in the law relating to AML/CFT.

#### Operational
- 1206. The relevant agencies also have close working relationships on the operational level. The Customs Service and police force work cooperatively and coordinate activities particularly in drug and financial crime related matters. They also work together in the FIU setting. The head of the FIS also manages caseload, resources and priorities of law enforcement officers working on financial investigation matters.
- 1207. Prosecutors work closely with law enforcement agencies in preparing individual cases, and assist the FIS/FIU in reviewing and preparing cases. The Director of Income Tax provides information to the FIS.
- 1208. There are also meetings of regulatory authorities, representatives of the Attorney General’s office and law enforcement officials on particular issues, as needed. Agencies also share training opportunities.

#### Additional Element — Mechanisms for Consultation between Competent Authorities and Regulated Institutions (c. 31.2)
- 1209. There is regular consultation between the authorities and regulated industry. The GFSC meets with associations that represent the financial sector. There was a consultation process between the GFSC, FIS and industry in the development of the Handbook for Financial Services Businesses and of regulations that apply to financial services.
- 1210. The FIU has developed an Industry Focus Group to permit money laundering reporting officers and other representatives of financial firms to engage in informal discussion with the FIU.
- 1211. Joint seminars are held that include representatives of GFSC, FIS/FIU and members of the finance sector. These provide an opportunity to address current issues and hear feedback. The Director of Income Tax is in regular contact with the Association of Guernsey Charities, and, as needed, with individual charities and other NPOs. The AGCC has regular contact with the eGambling sector including AML/CFT training sessions to ensure that the sector is kept abreast of developments.

#### Review of Effectiveness (c. 32.1)
- 1212. Bailiwick authorities regularly review the effectiveness of their systems for combating ML and FT. The Advisory Committee, together with the subcommittees noted above, consider strategic direction, and analyze effectiveness in meeting the elements of the strategy. Each stakeholder self-assesses against the strategy at least bi-annually and compiled results are discussed and used in re-evaluations of overall effectiveness. In addition, the authorities regularly consider and revise risk assessments, and use statistics gathered to evaluate the adequacy of preventive measures and other systems.
- 1213. The Bailiwick has developed very effective mechanisms for coordination and cooperation among all domestic AML/CFT stakeholders. There is regular consultation and coordination on both policy and operational levels through regularly-scheduled formal meetings and through informal contact. There is also a unified development of a common vision and strategy and regular assessments against the strategy. Emerging issues are examined and discussed both through strategy papers and in meeting settings. There is regular attention given to overall effectiveness through the work of the Committee and sub-committees.
- 1214. Statistics have generally been found to be comprehensive and accurate for all aspects of R 32. Detailed statistics can be found in the relevant sections of this report as follows: Section 2 on FIU and law enforcement, Section 3 on FSBs, Section 4 on DNFBPs, Section 5 on legal arrangements and this section on national and international cooperation.

#### 6.1.2. Recommendations and Comments
- None.

#### 6.1.3. Compliance with Recommendation 31 & 32 (criterion 32.1 only)
- Rating R.31: C
- Rating R.32: C

### 6.2. The Conventions and UN Special Resolutions (R.35 & SR.I)
#### 6.2.1. Description and Analysis — Legal Framework
- 1215. The Bailiwick, as a dependency of the British Crown, may not sign or ratify international conventions on its own. By constitutional convention, the U.K. government acts for the Bailiwick in international matters. The U.K. can extend its ratification of international conventions to the Bailiwick. This occurs at the Bailiwick’s request. It must satisfy itself and the U.K. authorities that it has in place the legislative and other measures necessary to satisfy the requirements of the convention in issue. Once the U.K. government is satisfied that all requirements are in place, it will inform the Secretary General of the United Nations that its ratification of the convention has been extended to the Bailiwick.
- 1216. The U.K.’s ratifications of the Vienna and Terrorist Financing Conventions have been extended to the Bailiwick. The Bailiwick has not yet requested the extension of the Palermo Convention to it as issues for resolution have arisen in the course of the Bailiwick’s consultation with the U.K.

#### Ratification of AML-Related UN Conventions (c. 35.1)
- 1217. The Vienna Convention was extended to the Bailiwick on April 9, 2002. The Convention is implemented by the Drug Trafficking Law (DTL). As noted above, the Bailiwick has not yet requested the extension of the Palermo Convention to it. This is because, in consultation with authorities in the U.K., a question has been raised regarding whether the extradition laws that apply currently in the Bailiwick meet fully all Palermo Convention requirements in particular with respect to the requirement for simplified extradition. The authorities indicated that once this issue, currently under study by U.K. authorities in the context of a review of extradition issues generally, is resolved, the Bailiwick intends to request an extension of the ratification of the Palermo Convention to it.

#### Ratification of CFT-Related UN Conventions (c. I.1)
- 1218. The Terrorist Financing Convention was extended to the Bailiwick on September 25, 2008. The requirements of this Convention are implemented through provisions of the Terrorism Law (TL), the Police Powers Law, the Interpretation Law, Extradition Act and International Cooperation Law.
- 1219. Of the remaining 15 international counter-terrorism related legal instruments, four have been extended to the Bailiwick: the Unlawful Seizure Convention, the Civil Aviation Convention, the Diplomatic Agents Convention, and the Nuclear Material Convention. Extension of the Airport Protocol has been requested but not yet been granted.

#### Implementation of AML-related UN Conventions
- 1220. The provisions of the Vienna and Palermo Conventions that require criminalization of ML have been entirely implemented in that the Bailiwick’s legal provisions that make ML criminal meet Convention requirements. However, there is a question regarding the effective application of the provisions in that there have been few ML cases involving financial sector participants, and there remains a disconnect between the number of ML cases investigated versus the cases prosecuted and eventually resulting in a conviction. This calls into question the effective application of the ML provisions. A question remains whether the extradition procedures in the Bailiwick meet all of the requirements of the Palermo convention.

#### Implementation of SFT Convention
- 1221. The provisions of the SFT Convention relating to the criminalization of FT have been fully implemented.

#### Implementation of UN SCRs relating to Prevention and Suppression of FT (c. I.2)
- 1222. As discussed under Special Recommendation III, the Bailiwick implements UNSCR 1267 and 1373 through two Order-in-Council, the Al-Qa’ida and Terrorism Orders. However, limited legal – as well as some practical – shortcomings remain. The legal framework does not make explicit that designated persons are not to receive prior notice of a freeze action. Guidance regarding lists and their application in the Bailiwick could be improved. There could be greater clarity in a criminal provision for enforcement.

#### Additional Element — Ratification or Implementation of other relevant international conventions (c. 35.2)
- 1223. The ratification of the following conventions has been extended to the Bailiwick:
  - Hague Convention for the Suppression of Unlawful Seizure of Aircraft, extended on 22nd December 1971, implemented by the Hijacking Act (Guernsey) Order.
  - Montreal Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, extended on 25th October 1973, implemented by the Protection of Aircraft Act (Guernsey) Order.
  - UN Convention on the Prevention and Punishment of Crimes against Internationally Protected Persons, including Diplomatic Agents, extended on 2nd May 1979, implemented by the Internationally Protected Persons Act (Guernsey) Order.
  - Vienna Convention on the Physical Protection of Nuclear Material, extended on 11th December 1991, implemented by the Nuclear Material (Offences) Act (Guernsey) Order.
  - 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, extended on 23rd September 2002, implemented by the Proceeds of Crime Law, the Drug Trafficking Law and the Terrorism Law.
  - 1959 Council of Europe Convention on Mutual Assistance, extended on 23/09/2002, implemented by the Proceeds of Crime Law, the Drug Trafficking Law, the Terrorism Law and the International Cooperation Law.
  - United Nations Convention against Corruption, extended in November 2009, implemented by the Prevention of Corruption Law.
- 1224. The Bailiwick has also requested extension of the ratification of the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, supplementary to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation.

#### 6.2.2. Recommendations and Comments
- The Bailiwick should work to resolve issues with the United Kingdom in order to be in a position to request an extension of the ratification of the Palermo Convention to it.
- The authorities should continue efforts to improve the effective application of the ML provisions with the development of cases involving financial sector participants, and by addressing the disconnect between the number of ML cases investigated versus the cases prosecuted and eventually resulting in a conviction.
- The recommendations set forth in the section on SR III should be addressed in order to fully implement the applicable UN Security Council resolutions.

#### 6.2.3. Compliance with Recommendation 35 and Special Recommendation I
- Rating R.35: LC
  - Vienna and Palermo Conventions
    - Palermo Convention not yet extended to the Bailiwick.
    - Questions regarding the effective application of ML provisions with few ML cases involving financial sector participants, and disconnect between investigations and prosecutions/convictions.
- Rating SR.I: LC
  - UNSCR implementation:
    - In the legal framework, it is not explicit that designated persons are not to receive prior notice of a freeze action.
    - Guidance regarding lists and their application in the Bailiwick should be improved.
    - Criminal provision for enforcement could have greater clarity as identified in SR III section.

### 6.3. Mutual Legal Assistance (R.36-38, SR.V)
#### 6.3.1. Description and Analysis — Legal Framework
- 1225. There is no overarching legislation regulating the mutual legal assistance (MLA) practice of Guernsey. In the context of assistance in cases involving ML, FT or predicate offenses, the judicial authorities rely mainly on the provisions of the following laws:
  - The provisions of the POCL, DTL and TL apply to criminal activity both in and outside Guernsey, except when expressly restricted to Guernsey, and may thus also be used in the context of MLA. Before the enactment of a legislative amendment to these laws in July 2010, assistance in restraining and confiscating proceeds of crime, was only granted to a limited number of designated countries and territories or based on an emergency ordinance as outlined below.
  - The Criminal Justice (International Cooperation) (Bailiwick of Guernsey) Law (―International Cooperation Law‖) is used mainly to restrain and confiscate instrumentalities of crime. Whereas most provisions of this law are and always have been applied to requests coming from any country, until July 2010 assistance in the restraint and confiscation of assets and property was only granted to a limited number of designated countries or territories or based on an emergency ordinance.
  - The Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law (―Fraud Law‖) extends in scope to any ―serious or complex fraud,‖ whereby Guernsey does not have specific offenses under this category but would consider a range of offenses to fall under the scope of the law. In the context of MLA, the Fraud Law has in the past been used by the authorities to assist other countries in fraud related ML cases. The measures are and always have been available with respect to any country.

*Source: _cr1112 - 6. NATIONAL AND INTERNATIONAL COOPERATION*

### 1226.      As indicated above, prior to July 2010, the restraint and confiscation measures pursuant

### _cr1112 - 1226.      As indicated above, prior to July 2010, the restraint and confiscation measures pursuant

### Designation mechanism and legislative change
- Prior to July 2010, restraint and confiscation measures pursuant to the POCL, DTL, TL and International Cooperation Law were generally taken only based on a request by a designated country or territory or an emergency ordinance.
- Designations were made by way of Guernsey Ordinances and substantively replicated U.K. designations.
- Designations were also made by a parliamentary sub-committee that could enact emergency ordinances without parliamentary consent.
- The authorities stated the designation requirement had never caused problems to the granting of MLA and that no requests had ever been denied on these grounds; in three cases requests had been received from non-designated countries and were granted after the sub-committee designated those countries through an emergency ordinance.
- The authorities stated an emergency ordinance could be obtained within a matter of days and thus unreasonable delays had not been experienced.
- Assessors raised concern that the existence of the designation mechanism may have deterred countries from sending MLA requests to Guernsey, particularly because only the designation mechanisms but not the emergency ordinance option were set out in the law.
- To eliminate any external perception of negative impact the legislative framework was revised in July 2010: all countries are now considered to be designated countries or territories.

### Legal basis for international cooperation and MLA authorities
- Guernsey may not provide MLA directly based on provisions of international conventions; cooperation may only take place based on domestic law.
- The U.K.’s ratification of the Vienna, Merida and Suppression of the Financing of Terrorism have been extended to Guernsey; the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and the 1959 Council of Europe Convention on Mutual Assistance have been extended to Guernsey.
- The Attorney General (AG) is the designated authority to receive and deal with mutual legal assistance requests. The U.K. Central Authority for Mutual Legal Assistance is generally not involved.

### Production, search and seizure of information, documents or evidence (Widest Possible Range of Mutual Assistance, c. 36.1)
- Main provisions contained in the POCL, the DTL, the TL and the International Cooperation Law.
- Sections 45 POCL and 63 DTL: Bailiff may issue production orders where:
  - there are reasonable grounds to suspect a specific person has engaged in or benefited from criminal conduct;
  - the material is likely of substantive value to the investigation; and
  - it is in the public interest to issue the order.
- Sections 46 POCL and 64 DTL: search and seizure warrants if production order is impractical or would seriously prejudice the ongoing investigation and access would be denied absent a search warrant.
- Sections 48A POCL and 67A DTL: allow issuance of “customer information orders”; Sections 48H POCL and 67H DTL: account monitoring orders.
- TL Schedules 5 and 7: search and seizure warrants for “terrorist investigations” where material is likely of substantial value and must be seized to prevent concealment, loss, damage, alteration or destruction; production orders under Section 4 of Schedule 5.
- Schedule 6 and 7 mirror DTL and POCL provisions on customer information and account monitoring.
- All orders may be issued ex parte; items subject to legal privilege are exempted.
- Section 7 International Cooperation Law: issuance of search and seizure warrants if (1) criminal proceedings have been or are reasonably expected to be instituted in the requesting country; (2) the conduct would constitute a criminal offense punishable with imprisonment under Guernsey law; and (3) there are reasonable grounds to believe evidence is located in Guernsey. Authorities stated this provision would mainly be used to seize instrumentalities as opposed to proceeds of crime.
- None of the above provisions require the requesting country to be “designated”.

### Taking of evidence or statements from persons
- Section 4 and Schedule 1 International Cooperation Law: AG can require any person or witness to appear before the authority specified and to provide a voluntary witness statement, including under oath, or to provide testimony; non-compliance may lead the court to secure attendance through coercive measures.
- Section 1 Fraud Law: AG may require a person under investigation or any other person to answer questions or furnish information relevant to the investigation or to evidence produced by that person.

### Providing originals or copies of documents and records
- Section 7 International Cooperation Law: evidence received by the court in MLA must be forwarded to the AG for transmission to the requesting authority; AG may transmit original document or evidence or a copy, picture, description or other representation as necessary.
- Section 8 Disclosure (Bailiwick of Guernsey) Law 2007: information obtained by a police officer may be disclosed to any other person if disclosure is for the purpose of preventing, detecting, investigating, or prosecuting a criminal offense in Guernsey or elsewhere.

### Service of judicial documents and voluntary appearances
- Section 1 International Cooperation Law: AG may grant service in Guernsey of summons or other processes issued in the course of criminal proceedings in the requesting jurisdiction and any document recording the decision of a foreign criminal court.
- Facilitating voluntary appearances for providing information or testimony is a normal form of assistance based on AG practice and does not require a specific legal provision.

### Identification, freezing, seizure and confiscation (overview and timeliness, c. 38.1)
- Pertinent provisions set out in the POCL as amended by Proceeds of Crime (Enforcement of Confiscation Orders) Ordinance, the DTL as amended by Drug Trafficking Offences (Designated Countries and Territories) Ordinance, the TL as amended by the Terrorism and Crime (Enforcement of External Orders) Ordinance, and the International Cooperation Law.
- Restraint and confiscation provisions under all four laws may only be applied to requests from designated countries and territories or on the basis of an emergency ordinance (note legislative change in July 2010 making all countries designated).
- POCL scope (as amended by the Ordinance) extends to any “payments or other rewards received in connection with criminal conduct or their value” and may apply to specified property (without differentiation of property held by the defendant or a third party) or, absent specification, to any property held by the defendant or by a third party to whom the defendant has made a gift or to which the defendant is beneficially entitled.
  - Law allows assistance in restraining and confiscating proceeds from criminal conduct, whether held by the defendant or by third parties, and of legitimate assets equivalent in value to such proceeds.
  - Instrumentalities could be restrained.
  - POCL supplemented by the International Cooperation Law as amended by the Ordinance allows assistance in restraining and confiscation of “anything in respect of which a[n indictable] offence has been committed or which was used or intended for use in connection with the commission of such an offence”.
- DTL (as amended by the Ordinance) contains same provisions as POCL with respect to proceeds and also allows restraint and confiscation of “anything in respect of which [an offense under the DTL] has been committed or which was used or intended for use in connection with the commission of such an offence”.
- TL (as amended by the Ordinance) applies to any property in the possession or under control of a person prosecuted or investigated for FT offenses or terrorism related ML offenses; allows measures against proceeds and their equivalent value as well as intended and actual instrumentalities of any offenses under the act.
  - Based on the broad language, legitimate assets used to finance terrorism could also be restrained or confiscated.

### Provision of assistance: timeliness, scope, secrecy and fiscal matters
- No formal time requirements for dealing with MLA requests; public guidelines state requests would generally be dealt with in a speedy manner but provide no specific timeframes.
- Statistics provided by the AG’s office suggest that between 2003 and 2007, the average timeframe for dealing with mutual legal assistance requests was 3.6 months. Only one case took more than one year to be fully implemented.
- No binding guidelines, policy statements or statutory provisions set out grounds for refusal of MLA requests; policy described as rather flexible with few grounds for refusal.
- Reciprocity is not a prerequisite for MLA.
- None of the laws contain a de minimis rule or make reference to refusal of “fishing expeditions.”
- Dual criminality is required for some but not all measures (see Dual Criminality subsection).
- Requests relating to offenses of a political character: AG would contact the U.K. Foreign Office for background information; general human rights considerations are taken into account.
- Requests relating to offenses sanctioned with capital punishment in the requesting country would generally not be granted unless an undertaking is provided that the death penalty would not be imposed in a specific case.
- Authorities stated the most common ground for refusal in the past was a lack of evidence.
- Guernsey law does not preclude provision of MLA where a request relates to fiscal matters; practice is not to refuse in such cases. Authorities stated Guernsey has provided MLA in a large number of cases involving tax evasion and Value-Added Tax (VAT) fraud.
- Existence of confidentiality does not impede provision of MLA in ML or FT cases; items and information subject to legal privilege are precluded and their production may not be compelled.

### Efficiency of processes and handling of requests (c. 36.3)
- No legislative provisions governing processing of MLA requests; practice described as:
  - Urgent requests dealt with immediately by the AG’s mutual legal assistance lawyer or in his absence by the Solicitor General.
  - Non-urgent requests initially reviewed by a paralegal with recommended course of action forwarded to the mutual assistance lawyer or Solicitor General.
  - Mutual legal assistance lawyer decides whether to grant or reject a request or seek further clarification; minor deficiencies generally do not preclude preliminary enquiries in Guernsey.
- All MLA requests are then forwarded to the FIS, which prepares drafts of necessary notices or court applications.
  - FIS involvement allows review for valuable intelligence information and ensures LEAs and the AG’s office work in close collaboration, including where an MLA request was received as a direct result of voluntary disclosure by the FIS to the FIU of the requesting country.
  - Authorities stated FIS involvement is not considered an additional and time consuming hurdle.
- Documents produced as a result of an order or notice must be reviewed by the FIS and the Law Officers to ensure compliance; documents are then copied or scanned and forwarded to the Law Officers for onward transmission.

### Availability of powers and organizational arrangements (c. 36.6, 36.8, R.28, SR V)
- Full range of powers required under Recommendation 28 are available for use in response to MLA requests, in addition to specific MLA investigatory powers in the International Cooperation Law.
- No direct requesting process between the FIS and foreign counterparts or other law enforcement authorities; all requests for mutual legal assistance to secure evidential information must go through the Law Officers’ Department.
- The provisions of the POCL, the TL and the International Cooperation Law apply equally to FT.

### Dual criminality and mutual assistance (c. 37.1 & 37.2)
- Many measures under the International Cooperation Law are applicable even in the absence of dual criminality.
- Any measures under the POCL, DTL and TL as amended by the Ordinances and under the International Cooperation Law are only available with respect to offenses that meet dual criminality, with different thresholds depending on the measure requested and law applied.
- Section 7 International Cooperation Law search warrants require that the conduct would be punishable with imprisonment under Guernsey law, regardless of triability.
- For restraint and confiscation measures pursuant to Section 8 International Cooperation Law and for measures under the POCL, dual criminality is met if the case relates to an act that would have constituted an indictable offense had it been committed in Guernsey.
- Measures pursuant to the Fraud Law require conduct would constitute serious or complex fraud had it been committed in Guernsey.
- Dual criminality pursuant to the TL and DTL means the request relates to an act that would have constituted an offense under the relevant law had it been committed in Guernsey.
- Authorities confirmed that for forms of MLA where dual criminality is required, mere technical differences between the requesting state’s law and Guernsey law do not pose an impediment; no request for MLA had ever been denied based on lack of dual criminality.

### Avoiding conflicts of jurisdiction (c. 36.7)
- No formal proceedings in place for conflicts of jurisdiction; no such difficulty has presented itself in practice.
- Authorities stated any issue would be dealt with on an ad-hoc basis, taking into account prospects of a successful prosecution in each jurisdiction involved.

*Italicized source: IMF country report content unit _cr1112 - 1226.*

### 1268.      In summary, the restraint and confiscation measures available under Guernsey law in the

### _cr1112 - 1268.      In summary, the restraint and confiscation measures available under Guernsey law in the

### Provisional measures based on foreign order and request
- Guernsey gives effect to foreign restraint orders through issuance of domestic mirror orders; a review on the merits of the case is not required.
- The power of the court to register foreign restraint orders is implied rather than set out in statute, with the exception of the TL which expressly references registration of foreign restraint orders.
- In the absence of a foreign order, under the POCL and DTL Guernsey authorities may restrain assets upon foreign request if:
  - (1) a criminal investigation or criminal proceedings have been initiated in the requesting country; and
  - (2) an external confiscation order has been made or is expected to be made based on reasonable grounds.
- Restraint orders may also be issued based on Section 3 Schedule 2 TL when proceedings or a criminal investigation for FT or terrorism related ML have been instituted and a forfeiture order has been made or is expected or the property is possessed or controlled by the suspect.
- Section 8 of the International Cooperation Law allows for the restraining of instrumentalities upon foreign request subject to the same conditions; Section 7 provides for seizure of instrumentalities.

### Confiscation in the context of MLA
- Foreign confiscation orders may be registered in Guernsey and implemented like domestic orders through appointment of a receiver; orders must be final and in force to be registered.
- Registration of foreign confiscation orders is provided for under the POCL, the DTL, and the TL as amended by the Ordinances.
- Measures are available for all types of ML, FT and predicate offenses and apply to proceeds or their equivalent value and to instrumentalities used or intended for use in the commission of such offenses.

### Coordination and international cooperation
- No formal procedures are in place to coordinate seizure and confiscation actions with other countries; authorities may cooperate and liaise on a case-by-case basis.
- International Cooperation under SR V: see analysis under Recommendation 38 (as referenced in source).

### Asset Forfeiture Fund and asset sharing
- Guernsey has established an asset forfeiture fund into which assets realized from local confiscation orders and money shared by other jurisdictions are paid.
  - Money in the fund can only be used for special purposes associated with law enforcement and crime prevention.
- Guernsey does not have a statutory provision allowing for asset sharing; authorities stated absence of permissive legislation would be interpreted to allow Guernsey to share assets.
- In practice Guernsey has returned (not shared) assets confiscated as a result of an MLA request to Norway and was negotiating an asset sharing agreement with Belgium at the time of assessment.

### Additional elements — recognition of foreign orders and SR V
- The Civil Forfeiture Law provides for a wide range of mutual legal assistance in civil proceedings, including obtaining evidence and enforcement of foreign restraint and civil asset recovery orders.
- No cases in which Guernsey has shared assets relating to terrorism funding with another jurisdiction.

### Statistics on MLA and asset measures (2007–2009)
- Between 2007 and 2009 Guernsey received 178 requests for MLA in criminal cases involving proceeds of crime.
  - 37 cases related to offenses designated by the requesting country as partially or exclusively relating to ML.
  - 75 of the 178 cases were still pending at time of onsite mission.
  - 25 cases had been rejected.
  - 78 requests were partially or fully granted.
- In each of the three years about half of all requests were received from the UK.
- Most common MLA measures requested: production orders and serving of fraud notices.
- Eight cases requested issuance of a restraint order (none based on a foreign restraint order).
  - In all eight cases the restraint order was issued; in three cases the order was later lifted based on a notice by the requesting country that a specific confiscation order had been satisfied.
- Five cases requested registration and enforcement of a foreign confiscation order:
  - Two of the five external confiscation orders had already been enforced and the remaining three had been registered at time of assessment.
- As of May 2010:
  - amount of assets restrained in Guernsey in the context of MLA requests was £216,747,075
  - amounts realized were £216,747,075
- Between 2007 and 2009 the most common grounds for refusal of MLA requests were:
  - evidence not located in Guernsey;
  - witness had left the jurisdiction;
  - requesting jurisdiction no longer sought the evidence.
- The majority of requests (about 73 percent) were dealt with within three months.
- In the last four years there have been only eight cases which have taken a year to be more than fully implemented; time taken was due to ongoing nature of the investigation or failure of requesting jurisdiction to provide further information.

### Year-by-year operational figures (selected highlights)
- 2007:
  - Fraud Investigation Law: Requests received 35; Fraud Notices served 41 (7 were from previous years).
  - Proceeds of Crime Law: Requests received 13; Production Orders served 10 (2 were from previous years).
  - Drug Trafficking Law: Requests received 4; Production Orders served 2.
  - International Co-operation Law: Requests received 4; Requests completed (inc Hearings) 2 (from requests received previous year).
  - Restraint Orders (2007): 2 Restraint Orders made under the Proceeds of Crime Law (both UK); 2 Restraint Orders under the Proceeds of Crime Law varied (both UK); 1 Restraint Order under the Drug Trafficking Law discharged (UK).
  - Overseas Orders (2007): 1 Overseas Forfeiture Order registered (USA); 1 Overseas Forfeiture Order enforced (Belgium).
- 2008:
  - Fraud Investigation Law: Requests received 20; Fraud Notices served 30 (9 were from previous years).
  - Proceeds of Crime Law: Requests received 8; Production Orders served 12 (2 from a 2007 request).
  - Drug Trafficking Law: Requests received 2; Production Orders served 4 (1 from a 2007 request).
  - International Co-operation Law: Requests received 4; Requests completed (inc Hearings) 4 (from requests received 2007).
  - Civil Forfeiture Law: Requests received 1; Requests completed 0.
  - Restraint Orders (2008): 2 Restraint Orders under the Proceeds of Crime Law discharged (Cyprus and UK).
  - Overseas Orders (2008): 1 Overseas Forfeiture Order registered (USA).
- 2009:
  - Fraud Investigation Law: Requests received 25 (4 requests were consent letters only); Fraud Notices served 15 (9 were from previous years).
  - Proceeds of Crime Law: Requests received 14 (5 requests were consent letters only); Production Orders served 4 (1 from a 2008 request).
  - Drug Trafficking Law: Requests received 1; Production Orders served 1.
  - International Co-operation Law: Requests received 9; Requests completed (inc Hearings) 7 (inc 2 hearings from 2008).
  - Civil Forfeiture Law: Requests received 0; Production Orders served 1.
  - Restraint Orders (2009): 1 Restraint Order under the Proceeds of Crime Law (UK).
  - Overseas Orders (2009): 1 Overseas Forfeiture Order enforced (USA); 1 Overseas Forfeiture Order registered (UK).

### Response-time statistics (2007–2009)
- Response Time counts by year:
  - < 1 month: 2007 = 13; 2008 = 14 (2 from previous year); 2009 = 19
  - < 2 months: 2007 = 18 (4 from previous year); 2008 = 8 (2 from previous year); 2009 = 6 (2 from previous year)
  - < 3 months: 2007 = 18 (2 from previous year); 2008 = 14 (7 from previous year)
  - < 4 months: 2007 = 6 (1 from previous year); 2008 = 6 (2 from previous year); 2009 = 2
  - < 5 months: 2007 = 4; 2008 = 2; 2009 = 2 (2 from previous year)
  - < 6 months: 2007 = 1; 2008 = 2; 2009 = 1
  - < 7 months: 2007 = 1 (from previous year); 2008 = 1; 2009 = 2 (1 from previous year)
  - < 8 months: 2007 = 1; 2008 = 2 (1 from previous year)
  - < 9 months: 2009 = 1
  - < 10 months: 2007 = 1 (from previous year); 2008 = 1 (from previous year)
  - < 12 months: 2007 = 1 (from previous year); 2008 = 2
  - > Over 12 months: 2007 = 1 (from previous year)
- Requests Not Proceeded: 2007 = 9; 2008 = 10; 2009 = 6
- Pending at year end (includes approved but still under active investigation): 2007 = 21; 2008 = 23; 2009 = 31

### Implementation, effectiveness, and concerns
- The legal framework for MLA is comprehensive and addresses all criteria under the FATF standard.
- Provision of MLA is not subject to unreasonable, disproportionate or unduly restrictive conditions.
- Statistics indicate that since 2007 the majority of requests have been implemented in an efficient and timely manner.
- Concern: prior to July 2010 the designation mechanism with respect to restraint and confiscation measures may have caused a number of non-designated countries to refrain from requesting assistance from Guernsey; assessors consider the impact on overall effectiveness unclear.
- Recommendation noted: recent legislative amendments de facto eliminate the designation mechanism and thus any concern on this point for future cases, but prior to July 2010 the mechanism may have had a negative impact on overall effectiveness.

### Ratings and summary for Recommendations 36–38 and SR.V
- R.36: LC
  - Prior to July 2010, the designation mechanism may have had a negative impact on the overall effectiveness of the MLA system.
- R.37: C
- R.38: LC
  - Prior to July 2010, the designation mechanism may have had a negative impact on the overall effectiveness of the MLA system.
- SR.V: LC
  - Prior to July 2010, the designation mechanism may have had a negative impact on the overall effectiveness of the MLA system.

### Extradition (R.37, 39, SR.V) — legal framework
- Guernsey has not introduced its own legislation on extradition; extradition is governed by the U.K. Extradition Act 1989.
  - Section 29 (1) provides that Parts I to V of the Act shall extend to the Channel Islands and the Isle of Man.
  - Although repealed within the United Kingdom in 2003, it remained in force in the Bailiwick of Guernsey by reason of the Extradition Act 2003 (Commencement and Savings) Order 2003 (Section 5 (2)).
- Guernsey is signatory to the Council of Europe Convention on Extradition 1957 under article 27(2), including its additional protocols; the Convention became applicable in Guernsey on 13 February 1991.
  - Authorities would use this instrument for outgoing extradition requests to other countries party to the Convention.
  - Incoming requests remain governed by the 1989 Extradition Act.
  - The European Arrest Warrant does not apply in the Bailiwick.

*Italic: Content derived from the provided IMF assessment excerpt.*

### 1287.      So in practice the extradition process will be managed by the U.K. authorities. Warrants

### _cr1112 - 1287.      So in practice the extradition process will be managed by the U.K. authorities. Warrants

### Extradition practice and legal framework
- Warrants issued by a U.K. court in the framework of extradition procedures require an exequatur by the Guernsey Royal Court; otherwise Guernsey judicial authorities are not involved.
- No active or passive extradition procedures have taken place in Guernsey under the 1989 Act yet.
- Sections 7 to 12 of the Extradition Act set out the procedures to be followed; the procedures are common to most jurisdictions and do not appear obstructive. Refusal grounds are deemed justified and universally accepted.
- An extradition request can be addressed by direct facsimile transmission to the U.K. Home Secretary (Section 7 Extradition Act); Section 9 allows for extradition on the basis of arrest warrants; Section 14 provides for simplified extradition procedures when the person waives rights.
- No extraditions are on record under the 1989 Extradition Act.

### Dual criminality and designation of extraditable offenses (c. 37.1 & 37.2; c. 39.1)
- Section 2 of the Extradition Act: the dual criminality principle strictly applies; to qualify as an "extradition crime" the conduct must constitute an offence punishable with at least twelve months’ imprisonment both in the foreign state and in the "United Kingdom" (i.e., Guernsey).
- The relevant test focuses on the conduct underlying the offence; the correct law for dual criminality is considered to be the law of the United Kingdom, although Guernsey legislation would also satisfy the requirement.
- Money laundering: reference offenses for AML are the U.K. offences under sections 327 to 329 of the Proceeds of Crime Act 2002 carrying a maximum of 14 years imprisonment, and the money laundering offence in respect of terrorist property at section 18 of the Terrorism Act 2000 (maximum 14 years). From Guernsey’s perspective these would constitute extradition crimes assuming the requesting state’s equivalent penalty is 12 months’ imprisonment or more.
- Bailiwick legislation would yield the same result: Proceeds of Crime Law sections 38 to 40, Drug Trafficking Law sections 57 to 59, and Terrorism Law section 11 carry penalties of up to 14 years imprisonment.

### Extradition of nationals and domestic prosecution alternatives (c. 39.2; c. 39.3)
- No law or legal principle prevents the U.K./Guernsey from extraditing its own nationals; Section 6 refusal grounds of the Extradition Act do not include nationality.
- If extradition is refused, Guernsey would consider requests to take over prosecution or could mount its own prosecution provided it has jurisdiction over the facts.
- Extraterritorial jurisdiction is available under sections 61 and 62 of the Terrorism Law, or pursuant to Article 6(2) of the Council of Europe Convention in cases involving another signatory state.
- Proceeds of Crime Law provides no extraterritorial jurisdiction; money laundering criminal proceedings depend on jurisdiction ratione loci.
- Cooperation for prosecution would be sought in accordance with the Bailiwick’s mutual legal assistance practices and, where applicable, Articles 6(2) and 12(1) of the Council of Europe Convention.

### Efficiency and effectiveness of extradition process (c. 39.4; c.V.4)
- Guernsey has no practical experience with extradition procedures; therefore only theory and formal provisions can be assessed.
- Although the extradition process can be lengthy while legal challenges are exhausted, any request to Guernsey would be treated as urgent.
- The applicable U.K. legal framework is described as comprehensive, compliant with international standards, and—per the U.K. MER—found to work effectively.
- Rating summary: R.39 C; R.37 C; SR.V C.
- Implementation and effectiveness: In the absence of actual precedents, assessment relies on legal provisions and the U.K. framework’s reported effectiveness.

### Extradition under Special Recommendation V (terrorist financing) (applying c. 39.1 to 39.4, c.V.4)
- Terrorist financing reference offences at U.K. Terrorism Act 2000 sections 15 to 18, and the Bailiwick Terrorism Law (Sections 8 to 11) and Terrorism Order carry a maximum of 14 years imprisonment and are therefore extraditable under the Extradition Act 1989 and the Convention.
- Extradition procedures for terrorist financing follow the same principles as for money laundering.

### Other forms of international cooperation — legal framework (R.40 & SR.V)
- The Disclosure and the Proceeds of Crime Law provide formal legal basis for FIU/FIS and Police to supply relevant information to FIUs and other law enforcement agencies outside the Bailiwick for prevention, detection, investigation or prosecution of criminal offences; reciprocity or an MOU is not a prerequisite.
- Provisions and practices apply to all criminal conduct, including money laundering and terrorist financing.

### FIU (FIS), police, customs cooperation and channels (c. 40.1)
- FIS: actively exchanges information with counterparts, particularly Egmont network FIUs over the Egmont Secure Web; bilateral MOU not required but FIS will sign if required by foreign law; Egmont principles govern FIU-to-FIU cooperation and require consent for further use; cooperation to non-Egmont agencies follows the same principles.
- Police: use Interpol’s international communication network; Police Fraud Department is central Interpol point of contact; Financial Investigation Unit is member of the CARIN Group and associated to the U.K. FFIN-Net; assistance is routinely granted at intelligence level but coercive measures cannot be provided without MLA procedures.
- Customs: customs-to-customs information exchange for law enforcement does not require formal arrangement; Data Protection Law permits exchange for prevention and detection of crime; Bailiwick Customs and Excise represented by the United Kingdom in the World Customs Organisation; as part of the customs territory of the EU, Customs and Excise can cooperate under mutual assistance agreements between countries and the EU.

### Supervisory authorities and gambling regulator cooperation (c. 40.1)
- GFSC: established an intelligence function coordinating requests from international regulators in banking, insurance and securities; since 2004 the GFSC has responded to 152 queries from other non-Guernsey agencies; conversely GFSC has made 29 requests to regulators in the UK and Channel Islands.
- AGCC: authorized to hold information sharing relationships under paragraph 12(2) of Schedule 1 of the Gambling (Alderney) Law, 1999; may obtain, consult, and transmit information as appropriate; maintains relationships with other casino regulators and has entered formal information sharing agreements with Kahnawake and Antigua and Barbuda.
- AGCC cooperates with gambling regulators worldwide (including the United Kingdom, Nevada, New Jersey, the Isle of Man, Gibraltar, Malta, Singapore, Denmark, South Africa, Antigua and Barbuda, and Kahnawake) and participates in International Association of Gaming Regulators and the Gaming Regulators European Forum; chaired the International Association of Gaming Regulators in 2009.

### Timeliness and responsiveness (c. 40.1.1)
- Law enforcement: All police and FIU ML/FT-related requests handled by the FIU/FIS and dealt with promptly in practice; average response time to intelligence requests in the period 2003 to year-end 2009 was 3.2 days.
- No instances of undue delays signaled for police and customs cooperation.
- Supervisory authorities: consolidation within the Fiduciary and Intelligence division facilitates coordination; GFSC does not maintain timeliness statistics but policy is to respond promptly and fully; Guernsey reported to have an excellent record responding to IOSCO MMoU requests.

### GFSC and disclosure statistics (preserved exactly)
- Since 2004 the GFSC has responded to 152 queries from other non-Guernsey agency including foreign regulators.
- Conversely, the GFSC has made 29 requests to regulators in the UK and Channel Islands.

- Number of enquiries received by the GFSC‘s Investment Business Division from other regulators:
  - Subject Matter 2007 2008 2009 Up to April 30, 2010
  - Money Laundering 0 0 0 0
  - Terrorist Financing 0 0 0 0
  - Insider Dealing/Market Abuse 7 5 5 1
  - Other 0 0 3 0
  - Total 7 5 8 1
  - *All request for information were granted.*

- GFSC disclosures to the FIS relating to AML/CFT:
  - Year 2007 2008 2009 Up to April 30, 2010
  - Number of disclosures 9 9 10 2

- Number of enquiries made by the GFSC‘s Policy & International Affairs Division to other regulators:
  - Regulator 2008 2009 Up to April 30, 2010
  - Jersey Financial Services Commission 4 5 6
  - Isle of Man Financial Supervisory Commission 2 2 1
  - HMT 2 1 0
  - UK FSA 3 2 1
  - Total 11 10 8

### Gateways for exchange of information and legal powers (c. 40.2)
- FIS: no MOU required to exchange information, but FIS has MOUs with 13 counterpart agencies that required such agreement; FIS disseminates information directly to overseas jurisdictions subject to senior officer authorization; uses Egmont Secure Web with Egmont FIUs.
- Police and Customs: information supplied under Section 8 of the Disclosure Law and Section 44 of the Proceeds of Crime Law normally passes through Interpol or customary customs channels or is disseminated bilaterally.
- GFSC: Fiduciary and Intelligence Division coordinates requests; no MOU needed under Section 21A of the Financial Services Commission Law which empowers cooperation with persons or bodies exercising corresponding functions outside the Bailiwick.
- Section 21B allows GFSC powers to be exercised to enable or assist requesting foreign authorities.
- Section 41I of the Protection of Investors Law allows the GFSC to exercise investigative powers to assist an overseas authority investigating market abuse, including obtaining information from the public.
- Additional statutory provisions (Financial Services Commission Law, Banking Supervisory Law, Protection of Investors Law, Insurance Business Law, Insurance Managers and Insurance Intermediaries Law, Regulation of Fiduciaries Law, Registered FSBs Law, PB Law) enable GFSC to provide information to foreign supervisory authorities for supervision and countering financial crime and for preventing, detecting, investigating or prosecuting crime.

### Spontaneous exchange of information (c. 40.3)
- FIS/Law enforcement: Disclosure Law and Proceeds of Crime Law permit spontaneous or requested dissemination; spontaneous dissemination to overseas agencies has occurred regularly to develop intelligence or confirm investigations in the subject’s domestic jurisdiction.
- STR spontaneous dissemination: 418 STRs in 2008 and 542 STRs in 2009.
- Supervisory authorities: GFSC has authority to provide information spontaneously; cooperation may take the form of sharing any information which the GFSC may lawfully disclose.
- No legislative requirement for bilateral agreements before GFSC exchanges information; GFSC has signed 20 bilateral MoUs and 2 multilateral information agreements; Guernsey is signatory to the IOSCO multilateral memorandum of understanding and has applied to be a signatory to the IAIS multilateral memorandum of understanding.

### Recommendations and compliance
- 6.4.2. Recommendations and Comments: None.
- Compliance ratings: R.39 C; R.37 C; SR.V C.

*Source: IMF country report text provided in content unit*

### 1321.      The GFSC authorities indicated that they do provide information spontaneously.  For

### _cr1112 - 1321.

### Spontaneous Information Sharing
- The GFSC authorities indicated that they do provide information spontaneously.
- Examples of proactive information provision by the GFSC:
  - During 2009 the GFSC pro-actively provided information to the United States Commodities and Futures Trading Commission, the United Kingdom Office of Fair Trading, the French Authorite des Marches Financiers and various police forces.
  - In 2010 the GFSC pro-actively provided information to the JFSC and the U.K. FSA regarding an entity with presence in Guernsey, Jersey, and the United Kingdom and whether it should be regulated for AML/CFT purposes in Jersey and the United Kingdom.
  - The GFSC provided information to Bafin (Germany) due to concerns of insider dealing.
- AGCC (eCasinos sector) authority and example:
  - Under paragraph 12(2) of Schedule 1 of the Gambling (Alderney) Law, 1999 the AGCC may “transmit to other persons or bodies, in such manner as it considers appropriate, such information relating to its functions as it thinks fit.”
  - Example (May 2010): AGCC Chief Inspector noted strange betting patterns from Sporting Press review; enquiries of Alderney licensees found five licensees had suffered significant losses; identified possible deniable transaction/concert party by a consortium of bettors.
  - Following these findings the Chief Inspector made spontaneous contact with three other regulators; a review is taking place in the United Kingdom to determine if a formal investigation into potentially criminal offences should occur.
  - The AGCC indicated willingness to support ongoing investigations and prosecutions; initiative coincided with UKGC launch of a Sports Betting Intelligence Unit.

### Making Inquiries on Behalf of Foreign Counterparts (c. 40.4); FIU Authorized to Make Inquiries (c. 40.4.1)
- FIS/Law enforcement:
  - Section 44 of the Proceeds of Crime Law allows police and customs officers to use domestic enquiry powers to obtain further information at the request of foreign colleagues. Same applies to the FIU/FIS when collecting intelligence in ML/FT matters.
  - Routine assistance includes checking FIS database and other relevant sources accessible to the FIS—such as law enforcement databases, administrative sources and information from supervisory authorities (indirectly), and Company registry information.
  - The FIU checks if there is a bank account in Guernsey (see stats below), though there is no legal obligation for banks to respond.
- Supervisory authorities:
  - Financial Services Commission Law and Protection of Investors Law expressly permit the GFSC to use investigatory powers to assist another jurisdiction.
  - GFSC is signatory to the IOSCO MMoU and complies with undertaking enquiries under the MMoU.

### Conducting Investigations on Behalf of Foreign Counterparts (c. 40.5)
- Law enforcement:
  - Outside MLA context, police requests to perform investigative actions can be complied with if they do not imply coercive measures and are voluntary (e.g., taking witness statements, requesting documents, collecting other information).
  - Customs can conduct investigations in cross-border cases within their legal remit, mostly related to drug trafficking, smuggling and fraudulent evasion of duties.
- Supervisory authorities:
  - GFSC can conduct investigations on behalf of a foreign counterpart as indicated by relevant legislation.

### No Unreasonable or Unduly Restrictive Conditions on Exchange of Information (c. 40.6)
- Law enforcement/FIS:
  - All exchanged information is subject to the Data Protection Law 2001, particularly paragraph 8 of part I of Schedule 1 and Schedule 4—requiring the other jurisdiction to ensure an adequate level of protection or reasons of substantial public interest.
  - FIU-to-FIU cooperation governed by the Egmont Principles of Information Exchange; general rule: information supplied for intelligence purposes only; evidentiary use requires formal MLA.
- Supervisory authorities:
  - Data Protection Law paragraph 8 of part I of Schedule 1 prevents transfer of personal data outside the Bailiwick unless the recipient ensures an adequate level of protection.
  - Schedule 1, part II, paragraph 13 lists factors for adequacy assessment.
  - Paragraph 15 of Schedule 1, part II makes European Commission findings determinative.
  - Jurisdictions deemed to have adequate levels of protection include: EEA members, Argentina, Canada, the Faroe Islands, Jersey, the Isle of Man, Switzerland, and organizations that subscribe to the U.S. Safe Harbour agreement.
  - Disclosure permissible under Schedule 4 to the Data Protection Law, including transfers necessary for reasons of substantial public interest.
  - Data Protection (Transfer in the Substantial Public Interest) Order governs what constitutes substantial public interest for GFSC disclosures and imposes conditions on recipient onward transfers.
  - Section 21(6) of the Financial Services Commission Law allows GFSC to impose conditions or safeguards when disclosing confidential information; GFSC disclosure statement: “This information is confidential. It is provided in accordance with the provisions of section 21 of the Financial Services Commission Law. It should not be disseminated further without the written consent of the GFSC and should only be used for supervisory purposes.”

### Provision of Assistance Regardless of Possible Involvement of Fiscal Matters (c. 40.7)
- Fiscal nature of request is irrelevant; cooperation in fiscal matters provided at intelligence and evidential level in the same way as other crimes.
- Offences such as tax evasion constitute a crime within the Bailiwick; intelligence is disseminated in support of fiscal investigations.
- Even if the fiscal aspect would not be qualified as a crime, exchange of information is allowed under Section 8 of the Disclosure Law to administrative authorities such as tax administration or supervisory authorities.

### Provision of Assistance Regardless of Existence of Secrecy and Confidentiality Laws (c. 40.8)
- Law enforcement/FIS:
  - Except legal privilege, there is no obligation of secrecy on financial institutions and DNFBPs, who are bound by contractual confidentiality only.
  - Legislation overrides confidentiality when counterpart agencies request information.
  - FIU-to-FIU exchange takes place at intelligence level under Egmont rules; evidentiary use requires letters rogatory.
- Supervisory authorities:
  - No Bailiwick legislation imposes secrecy or confidentiality on financial institutions or DNFBPs that prevents information exchange.
  - Legislation governing obtaining of evidence/information contains provisions overriding duties of confidentiality, specifically citing:
    - Sections 45 (9) (b), 48(10), 48F and 48L of the Proceeds of Crime Law,
    - Sections 63(9) (b), 67(10), 67F and 67L of the Drug Trafficking Law,
    - Schedule 5 section 5(4)(b), Schedule 6 section 1(3) and Schedule 7 section 5 (2) of the Terrorism Law,
    - Sections 23 (2), 33, 39 45(5) 47(5) and 52(4) of the Civil Forfeiture Law,
    - Schedule 1, Para 5 of the International Cooperation Law applying the Bankers Books Law,
    - Section 2 of the Fraud Investigation Law,
    - Section 41M of the Protection of Investors Law,
    - Section 11(5) of the Insider Dealing Law,
    - Section 21 and 21E of the Financial Services Commission Law.
  - Tournier v National Provincial & Union Bank England (English Court of Appeal) establishes that duties of confidence do not prevent disclosure where compelled by law, where an official is called to give evidence in court, or where disclosure is necessary to prevent frauds or crimes.
  - Additional confidentiality provisions to which GFSC and officers are subject: Section 21(4) of the Financial Services Commission Law, section 43 of the Banking Supervision Law, section 34A of the Protection of Investor Law, section 79 of the Insurance Business Law, section 56 of the Insurance Managers and Insurance Intermediaries Law, section 43 of the Regulation of Fiduciaries Law, section 28 of the Registered FSB Law and section 20 of the PB Law.
  - Gateways exist for GFSC to provide cooperation and confidential information to third parties; GFSC liaises with the Attorney General’s Chambers when GFSC cannot provide assistance itself.

### Safeguards in Use of Exchanged Information (c. 40.9)
- FIS:
  - Information from counterpart FIUs is registered in the FIS database.
  - Access to foreign FIU intelligence and sensitive domestic intelligence is subject to security restrictions (enforced computer protocols and physical security systems) to restrict access to authorized personnel only.
  - Egmont rules imposing confidentiality guarantees and prior consent conditions are observed.
- Police:
  - Relevant information, including requests for assistance and foreign law enforcement information, is stored in a secured central police database accessible to police and customs officers of the FIS.
  - Use of information is purpose bound under Data Protection rules for prevention and detection of crime.
- Supervisory authorities/GFSC:
  - Confidential information must only be used for GFSC functions; misuse would put legal protections of GFSC personnel in doubt.
  - Confidential information is held securely with measures to prevent unauthorized access or unlawful use.
  - Confidential information must not be disclosed to a third party except in accordance with statutory gateways; requests considered on a case-by-case basis.
  - Schedule 1 to the Data Protection Law contains relevant principles:
    - second principle: personal data obtained only for specified and lawful purposes and not further processed incompatibly (further processed includes disclosure to other bodies),
    - seventh principle: appropriate technical and organizational measures against unauthorized or unlawful processing and accidental loss/destruction/damage,
    - eighth principle: personal data shall not be transferred outside the Bailiwick unless adequate protection ensured.
  - GFSC requires staff to adhere to a code of conduct, re-affirmed annually.
  - AGCC confidential information must only be used for AGCC functions; misuse could put legal protection under Section 4 of the Gambling (Alderney) law, 1999 in doubt.
  - AGCC internal policies: physical retention of information per office procedures manual and information security policy.
  - AGCC is a Data Controller under the Data Protection (Bailiwick of Guernsey) Law, 2001 and maintains a notification with Data Protection in Guernsey.
  - Unauthorized disclosure by AGCC staff is a criminal offence under Section 55 of the Data Protection (Bailiwick of Guernsey) Law, 2001.

### Exchange of Information with Non-Counterparts (c. 40.10 & c. 40.10.1)
- Bailiwick law enforcement authorities can exchange information with non-counterparts under section 8 of the Disclosure Law and section 44 of the Proceeds of Crime Law.
- Regular direct and indirect exchanges occur with non-FIU agencies such as the FSA and HMRC for criminal investigation purposes.
- Operationally, supervisory authorization is required for such dissemination per departmental guidance.

### Provision of Information to FIU by Other Competent Authorities pursuant to Request from Foreign FIU (c. 40.11)
- Requesting authority must disclose nature and purpose of enquiry and demonstrate the request is justified and proportionate.
- The requesting authority must identify the nature of criminality under investigation and why information held in Guernsey will benefit their investigation and that the investigation relates to an offence that would be an offence if committed in Guernsey.

### International Cooperation under SR V (applying c. 40.1-40.9 in R. 40, c. V.5)
- All answers related to international cooperation and information exchange outside the MLA context equally apply in TF matters.

### Additional Element under SR V (applying c. 40.10-40.11 in R. 40, c. V.9)
- See comments for c. 40.10 & c. 40.11.

### Statistics (R.32) FIS
- Detailed statistics on international requests for intelligence/assistance are kept by the FIS, including number of refusals and spontaneous referrals.
- 1. Requests to foreign authorities since 2006
  - Note: FIM: Financial Intelligence Messages. This refers to outgoing requests to counterpart FIUs or other foreign law enforcement agencies.
  - The FIS stated that none of their requests were formally refused.
- 2. Requests from foreign authorities for the last 3 years (2008 – 31st March 2010)
  - Year / Overseas Requests FIU / Overseas Responses to FIU / Refused Response
  - 2008: 33 33 0
  - 2009: 54 54 0
  - 2010: 17 17 0
  - The FIS responds to all overseas requests for assistance even if the result is negative.
- 3. Statistics in respect of spontaneous referrals (i.e. without request to that effect) to foreign authorities for the last 3 years (2008 – 31st March 2010)
  - Year / Overseas Referrals FIU / Overseas Referrals Non FIU / Response to Referrals
  - 2008: 403 142 205
  - 2009: 549 200 277
  - 2010: 123 30 188
  - Note: one STR may have been disseminated to several FIUs or other LE agencies.

### Financial Account Requests (FAE) — Police (PCFD) Operational International Contacts
- Table of operational international contacts of the PCFD (data to May 15, 2010 for 2010):
  - 2007 / 2008 / 2009 / 2010*
  - Total Preliminary Investigations: 254 282 195 109
  - Interpol: 17 17 5 1
  - HMRC/Border Agency: 3 1 1 -
  - UK Police: 18 14 8 -
  - SOCA: 3 1 -
  - Crown Dependencies: 3 - 1 -
  - International: 7 8 2 1
  - Other (non LE): 2 - 2 -
  - * Data to the May 15, 2010

*Source: Selected excerpts from _cr1112 - 1321._*

### 1351.      As for the formal dissemination of operational intelligence by the customs to foreign LE

### _cr1112 - 1351.      As for the formal dissemination of operational intelligence by the customs to foreign LE

### Formal dissemination by Customs — activity and statistics
- A total of 126 formal reports were sent during the three year period from January 1, 2007 to December 31, 2009.
  - 82 reports were sent to Customs agencies.
  - 44 reports were sent to other law enforcement agencies (Police and SOCA).
- A total of 41 formal intelligence reports were received by the Service during this same period.

### FIU / Law enforcement cooperation and operational exchange
- Context and volume:
  - Considering the importance of the Bailiwick as a financial offshore centre, international cooperation at financial intelligence or law enforcement level constitutes an essential part of the assignment of the Guernsey FIU and police.
  - Of the STRs disseminated, some 60 percent have an overseas destination.
  - Most referrals to foreign FIUs or other authorities are done spontaneously, when it is deemed of interest for the AML/CFT effort or other law enforcement purposes.
- Egmont Group engagement and requests:
  - The FIS is an active member of the Egmont Group and makes effective use of its secure communication system.
  - In 2008/2009 200 outgoing requests were registered against 87 incoming.

### FIU/FIS powers, limits, and practical approach
- Powers and limitations:
  - The powers of the FIU/FIS to collect information or make further enquiries at the request of its counterparts are adequate where they relate to law enforcement, administrative or commercial sources, but limited in respect of financial information.
  - Confidential substantive financial information resting within the financial services requires the intervention of a judge, and consequently cannot be obtained in the intelligence/pre-investigative phase.
  - Information of that nature can be obtained when in possession of the supervisory authorities and financial institutions may (voluntarily) divulge the existence of financial accounts at the request of the FIU/FIS.
- Practical cooperation:
  - The FIU/FIS follows a constructive approach to all serious requests and consent to use the supplied information for intelligence purposes has never been refused.
  - Requests aimed at collecting evidence need to follow the appropriate MLA procedures.
  - The same approach is taken by the Guernsey Police and Customs and Excise.

### Supervisory intelligence function
- The establishment of an intelligence function within the GFSC allows for a coordinated approach to coordination with foreign supervisors.
- Statistics demonstrate a good level of cooperation with foreign counterparts.

### Recommendations and compliance (compact)
- Although limited in its possibilities to directly collect financial information at intelligence level, the cross-border cooperation capacity and practice of the FIU/FIS complies with the relevant international standards, both on money laundering and terrorism financing.

### Ratings (selected) and summary factors underlying ratings
- Recommendation ratings shown in the source (selection):
  - R.40: C
  - SR.V: C
  - R.30: C
  - R.32: C
- Selected factors underlying less-than-Compliant ratings (verbatim from source):
  - R.1 / R.2 (ML offense / mental element and corporate liability) — LC
    - Given the size of the Bailiwick’s financial sector and its status as an international financial center, the modest number of cases involving third party ML by financial sector participants and the disconnect between the number of ML cases investigated versus the number of cases prosecuted and eventually resulting in a conviction calls into question the effective application of the ML provisions.
  - R.3 (Confiscation and provisional measures) — LC
    - Although the Bailiwick’s provisions are robust, and they are used routinely in all prosecutions where they can be applied, they have not yet been used in a fully effective manner because of the few cases instituted in proceeds-generating matters other than drug trafficking.
  - R.5 (Customer due diligence) — LC
    - List of customers to which EDD must be applied omits higher-risk categories relevant to Guernsey.
  - R.9 (Third parties and introducers) — LC
    - Inclusion of lawyers and accountants in Guernsey, Jersey, the Isle of Man, and the United Kingdom as Appendix C businesses is not appropriate as they have not been subject to, nor supervised for compliance with, AML/CFT regulation and supervision for a sufficient period, nor has such supervision been assessed.
  - R.15 (Internal controls, compliance & audit) — LC
    - There is no requirement to maintain an adequately resourced independent audit function to test compliance with AML/CFT policies, procedures and controls.
  - R.26 (The FIU) — LC
    - Limited effectiveness of the overall reporting system in terms of domestic law enforcement results in respect of money laundering.
    - Lack of effectiveness due to a limited direct access to financial information.
  - SR.III (Freeze and confiscate terrorist assets) — LC
    - It is not explicit in the legal framework that a designated person is not to receive prior notice of a freeze action.
    - Convictions under Section 5 of the Terrorism Order may be difficult because of a lack of clarity regarding who might fall under the category of a person who commits or attempts to commit or participates or facilitates the commission of terrorism.

### Selected elements from the Recommended Action Plan (priority actions, verbatim)
- Criminalization and enforcement:
  - The authorities should continue to focus their attention on identifying ML crimes within the domestic financial sector.
  - The authorities should further examine the underlying reasons for the disconnect between the number of ML investigations vis-à-vis the number of ML prosecutions and convictions and take measures to overcome any identified obstacles.
- Confiscation and use of framework:
  - The authorities should increase efforts to use their robust framework in a more effective way to address financial sector criminal activity in addition to drug trafficking and use the confiscation provisions in such matters.
- Freezing of terrorist financing-related funds:
  - In the legal framework, it should be made explicit that a designated person does not receive prior notice of a freeze action.
  - For convictions under Section 5 of the Terrorism Order to be successful, there should be greater clarity in relevant statutes regarding who might fall under the category of a person who commits or attempts to commit or participates or facilitates the commission of terrorism or a person controlled by such a person.
  - GFSC public information should have greater clarity on the issue of the import of the lists appearing on the HM Treasury website and specifically which lists apply in Guernsey and in what manner. There should be additional clarity on the obligation of financial sector and other participants to locate and screen for funds of persons on the UNSCR 1267 list, and steps they might consider to determine who might be covered by UNSCR 1373, and thus should be part of their screening and CDD processes. There should be greater emphasis on the obligation not to make funds available that is irrespective of the STR process.
  - At the time the Freezing of Funds Notice is served on the designated person, he should also receive information regarding the availability of revocation and the possibility of a license to permit access to some assets and advised that guides are available regarding these issues.
  - Authorities should undertake efforts to enhance the monitoring of compliance with legislation, rules, and regulations relevant to the UN sanctions regime with such steps as including more in supervisory checklists.
- FIU effectiveness and law enforcement:
  - The FIU/FIS, as part of the Bailiwick law enforcement community, should implement steps to improve the effectiveness of the reporting system to support an increase in the number of investigations and prosecutions.
  - The authorities should implement steps to improve effectiveness by seeking to increase the number of investigations and prosecutions, particularly on autonomous money laundering.
- Cross-border cash controls (SR.IX):
  - Legislative steps need to be taken to align the cross-border cash declaration control related to mail with the comprehensive approach of Cash Controls Law 2007, particularly in relation to the authority to enquire, the temporary restraint measures, and the adequate and uniform level of sanctions.
  - It is recommended to adapt a uniform approach for all cross-border cash transportations.
- Preventive measures — CDD and supervision:
  - The authorities should expand the list of higher-risk customers to which enhanced due diligence must be applied and consider including private banking and non-resident customers.
  - The authorities should not include lawyers and accountants in Guernsey, Jersey, the Isle of Man and the United Kingdom as Appendix C businesses, as they have not been subject to, nor supervised for compliance with, AML/CFT regulation and supervision for a sufficient period.
  - The authorities should establish a direct obligation for FSB maintain an adequately resourced and independent audit function to test compliance with the AML/CFT policies, procedures, and controls.
  - The authorities should consider enhancing the discretionary financial penalties regime and establishing a sanctions regime that is dissuasive and proportionate to the severity of the violation or level of non compliance.
- DNFBP and eCasinos recommendations:
  - Amend the exemption for individuals who act as a director for six companies or less in line with the standard.
  - Identify legal arrangements or fiduciaries as high risk given their vulnerability to money laundering and their prevalence in the Bailiwick.
  - Require e-Casinos to: apply additional specific and effective CDD measures to mitigate against the impreciseness of on-line verification methods; implement methods and measures to manage and mitigate the specific risks on non face-to-face transaction, including having additional CDD procedures in place when using on-line verification software for non face-to-face transactions; monitor gambling transactions and pay special attention to complex and unusual transactions.
- STR and TL amendments:
  - Consider amending DL and TL and/or relevant guidance to explicitly require the reporting of attempts, or issuing guidance to clarify the requirement.
  - Review STR process to determine whether timeliness could be improved by revising and possibly simplifying the procedure.
  - The reporting requirement in the TL should be amended to also extent to conduct under Section 5 of the Terrorism (UN Measures) (Channel Islands) Order 2001.

*Italicized source: Excerpt from the IMF assessment document provided in the source content.*

### 4.2  Suspicious transaction

### _cr1112 - 4.2  Suspicious transaction

### 4.2 Suspicious transaction reporting (R.16)
- The authorities are recommended to consider amending the DL and TL to create direct, explicit obligations to report suspicions of ML and TF and to explicitly require the reporting of suspicious attempted transactions.

### eCasinos
- The authorities are recommended to require eCasinos to provide AML/CFT training to all eCasinos employees.
- The training should specifically include, inter alia, money laundering techniques and employee obligations regarding CDD and reporting.

### 4.3 Regulation, supervision, monitoring, and sanctions (R.17, 24, & 25)
- Police record checks are not conducted systematically on key individuals seeking an eGambling license. The absence of police record checks increases the risk that a license may be granted to criminals or their associates.
- The GFSC should, as it has recognized, increase the frequency of its on-site inspections for TCSPs. Examinations have been reduced by nearly half in the TCSP sector since 2006. All TCSPs should be inspected on a more frequent basis.
- The AGCC should provide more guidance with respect to AML requirements particularly in the area of customer due diligence.

### 4.4 Other designated non-financial businesses and professions (R.20)
- (No specific recommendations or findings provided in the excerpt.)

### 5 Legal Persons and Arrangements & Nonprofit Organizations

#### 5.1 Legal Persons–Access to beneficial ownership and control information (R.33)
- (No specific recommendations or findings provided in the excerpt.)

#### 5.2 Legal Arrangements–Access to beneficial ownership and control information (R.34)
- The authorities should put in place specific measures to ensure the availability of accurate and complete beneficial ownership information for trusts and general partnerships that are not administered by licensed TCSPs.

#### 5.3 Nonprofit organizations (SR.VIII)
- Manumitted organizations could be vulnerable to terrorism financing activities and should be subject to registration.
- Outreach focused on the raising awareness on the risks of terrorist abuse and the available measures to protect against such abuses should be provided to the entire NPO sector.
- Information on the purpose and objectives of the NPO and the identity of the persons who own, control or direct their activities is not publicly available.
- Supervision of manumitted organizations should be undertaken with respect to their obligations under the NPO Law.
- Sanctions for non-compliance with registration requirements should be strengthened to ensure that they are effective and dissuasive.

### 6 National and International Cooperation

#### 6.1 National cooperation and coordination (R.31)
- (No specific recommendations or findings provided in the excerpt.)

#### 6.2 The Conventions and UN Special Resolutions (R.35 & SR.I)
- The Bailiwick should work to resolve issues with the United Kingdom in order to be in a position to request an extension of the ratification of the Palermo Convention to it.
- The authorities should continue efforts to improve the effective application of the ML provisions with the development of cases involving financial sector participants, and by addressing the disconnect between the number of ML cases investigated versus the cases prosecuted and eventually resulting in a conviction.
- The recommendations set forth in the section on SR III should be addressed in order to fully implement the applicable UN Security Council resolutions.

#### 6.3 Mutual Legal Assistance (R.36, 37, 38 & SR.V)
- While the recent legislative amendments de facto eliminate the designation mechanism and thus any concern on this point for future cases, prior to July 2010 the designation mechanism may have had a negative impact on the overall effectiveness of Guernsey’s MLA framework.

#### 6.4 Extradition (R. 39, 37 & SR.V)
- (No specific recommendations or findings provided in the excerpt.)

#### 6.5 Other Forms of Cooperation (R. 40 & SR.V)
- (No specific recommendations or findings provided in the excerpt.)

### 7 Other Issues

#### 7.1 Resources and statistics (R.30 & 32)
- (No specific recommendations or findings provided in the excerpt.)

### Annex 1. Authorities' Response to the Assessment — key points and outcomes
- The Bailiwick authorities are fully committed to meeting the standards set by the FATF Forty Recommendations on Money Laundering and the Nine Special Recommendations.
- The Bailiwick has a comprehensive AML/CFT legal framework that provides a sound basis for an effective AML/CFT regime.
- There is comprehensive co-ordination and co-operation between the AML/CFT authorities in the Bailiwick as evidenced by the effectiveness of the AML/CFT Advisory Committee.
- The Bailiwick has an on-going programme to review and enhance AML/CFT legislation, regulation, rules and guidance; monitor effectiveness of compliance with the AML/CFT regime; and address identified shortcomings. The recommendations made by the IMF have been, and will continue to be, taken seriously. Work on addressing the shortcomings began as soon as the IMF evaluation team left the Bailiwick.
- Most of the recommendations made by the assessors are technical in nature, with some relating to the improvement of implementation of legislation. Even since the on-site element of the IMF’s evaluation, steps taken by the Bailiwick’s AML/CFT authorities over several years have produced enhanced results.
- The first prosecution for autonomous money laundering has come to trial and the defendant has been convicted on nine different counts.
- There has also been a further successful money laundering prosecution involving two counts of self-laundering. This trend is expected to continue, with further successful money laundering prosecutions for both self laundering and autonomous money laundering anticipated.
- Confiscation and provisional measures within the Bailiwick are robust and are used routinely in all prosecutions where they can be applied.
  - Since the on-site element of the IMF’s evaluation a confiscation order in the sum of £268,556 has been made. This is the biggest domestic confiscation order made to date and arose from a non-drug trafficking case.
  - Following the successful prosecution for autonomous money laundering, an application will be made for a confiscation order in excess of £300,000.
- Since the on–site visit, the effectiveness of the sanctions for breaching controls on cross border cash movements has been demonstrated by the first prosecution under the cash controls legislation, which resulted in a £2,000 fine and confiscation of all the money involved (nearly £10,000) even though it was legitimately sourced.
- The assessors had a concern that the then designation mechanism may have had a negative impact on the overall effectiveness of the mutual legal assistance system. The designation requirement was removed with effect from 28 July 2010.
- Recommendations were made by the assessors to enhance the requirements for the freezing and confiscation of terrorist assets. These will be addressed in the legislation which is being drafted to replace the current framework.
- Further guidance has been provided to the financial sector in respect of the freezing and confiscation of terrorist assets and the Sanctions Committee will continue to monitor its effectiveness.
- Several of the assessors’ recommendations will be considered in the context of the proposed revisions to the FATF Recommendations.

*Source: _cr1112 - 4.2  Suspicious transaction*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr1112.pdf_