Business Plan 2019 Sli.do Q&A - JFSC response - the Jersey ...
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Business Plan 2019
Sli.do Q&A - JFSC response
1. How many civil penalties are likely to be imposed in the next 18 months?
Civil Financial penalty legislation was amended in 2018 to allow for the imposition of a civil
financial penalty against a Registered Person owing to a significant and material negligent breach
of the codes of practice. We anticipate that the change in the law will result in civil penalty cases
being processed through our Decision Making Process. As yet it is too early to accurately assess
how many cases may be subject to a civil financial penalty.
2. Is the NRA exercise an independent exercise to the current Supervisory regime?
As outlined in the feedback paper on Consultation Paper No. 7 2017 'Data for Risk Based
Supervision', issued in February 2018, we are committed to capturing sufficient data to support
risk based supervision across all aspects of the regulatory framework: prudential, conduct and
financial crime. As a result, our recent and ongoing data collection exercises will be used:
› To develop our risk based approach to supervision
› In aggregated form as part of the Island's National Risk Assessment
› To inform the development of further data collection and reporting requirements.
› We decided to align these exercises for multiple purposes in order to minimise Industry
impact.
3. The GFSC Director General came from the Central Bank of Ireland (CBI) and
implemented its Prism supervisory methodology. Now Martin has arrived from the CBI,
is Jersey also about to implement Prism and seek alignment with Guernsey?
During 2018 we completed a major restructure of the supervisory operating model in order to
enhance our risk based approach. As part of this work we agreed the risk model design to
capture all aspects of our supervisory responsibilities and we are well advanced in the
development of this, which is on track to be operationalised in 2019.
4. Will the Supervision Examination teams also look at AML as well as the new AML
team?
The remit of our Financial Crime Examination Unit (FCEU) will be to undertake cyclical
examinations of those entities which are considered to be inherently high or medium risk in
relation to money laundering and terrorist financing. These examinations will consider the full
control environment of the entity. The team will sit alongside the existing Supervision
Examination Unit (SEU) and where possible will follow the same methodology and timeframes to
ensure consistency of approach. The SEU will continue to lead on thematic examinations which
may include such subjects as AML and CFT.
Page 1 of 5BP19 Q&A
5. Is the JFSC open to secondments from Industry to help resource the new Financial
Crime team?
Secondments to the JFSC from Industry and regulators from other jurisdictions have worked well
over the years and we are therefore keen to explore all options. We are of course always
mindful of managing any potential conflicts appropriately and ensuring sustainability in terms of
our resourcing.
6. Will Enhanced Customer Due Diligence be one of the areas for the JFSC to look into?
Maybe something for the new AML/CFT team?
A relevant person may already use other tools and/or methods to undertake customer due
diligence measures, so long as those methods comply with the Money Laundering Order. We
would expect firms to be able to demonstrate and explain particular risks with any technology
that is just as robust as the traditional methods outlined in the AML Handbook. Our use of
technology is a key focus in terms of efficiency and effectiveness and we continue to explore
how we can use technology to collate and evaluate data to support our risk based approach to
supervision.
7. Under Basel 3, will Jersey consider EU sovereign bonds as risk free? If so this is a
massive mistake.
The Basel Committee concluded that no specific changes were required regarding the treatment
of holdings of sovereign bonds. We will consider the general enhancements proposed in Basel III
to risk assessment as part of work on the implementation of Basel III. No holdings, sovereign or
otherwise, are exempt from risk assessment, either now or under the proposals.
8. Does the JFSC have plans to look at the rules and guidance issued in relation to PEPs to
bring us in line with our peers and international standards?
The Jersey Financial Crime Strategy Group consulted on changes to the legal obligations in
relation to PEPs in July 2018. These proposals were designed to bring the Jersey regime in line
with International Standards and, where applicable, our peers. We expect legislation in this
regard to be introduced mid-2019.
9. Mike mentioned 50% of staff work in Supervision, could the JFSC publicise numbers of
staff that work in each department so we can understand numbers in each?
We have included details of employee distribution on page 5 of our 2019 Business Plan.
https://www.jerseyfsc.org/media/2455/jfsc-business-plan-2019.pdf
10. Isle of Man (IOM) has had its first MONEYVAL review under the revised FATF standard
and is highly unlikely to get a gold star. Are you talking directly with the IOM regulator
to learn from their experience?
We are in regular contact with the regulators in the other Crown Dependencies and we monitor
the mutual evaluation reports of competitor/comparable jurisdictions with a view to learning
from their experiences, both good and bad.BP19 Q&A
11. Protecting the consumer has been mentioned - the JFSC hasn't issued any
information/guidance regarding Data Protection and personal sensitive data - data is
now being traded (e.g. Facebook) and the FCA is now looking at how UK institutions
like banks use data. What is going to be the JFSC's output and strategy?
We publish guidance on our website about how we process personal data and we have a Data
Protection Officer who helps individuals with concerns they might have. Our supervisors have
also received training in the security controls to look for when reviewing regulated entities’
systems and controls to help them identify whether measures to protect personal data are in
place. Where appropriate, we also collaborate with the Office of the Information Commissioner
which is the independent statutory authority with responsibility for promoting and protecting
the rights of individuals under Jersey’s data protection laws. We intend to build on these
measures during 2019, and to engage in further outreach with Industry.
12. What is the JFSC’s stance on the proposed change to the codes in relation to the
insurance of the principal persons? Will this not discourage directors in future and
deplete further the skilled professional pool?
The intent of the Penalty regime is, among other things, to ensure that a financial disincentive
exists to deter contraventions of the Codes and that persons cannot expect to profit from a
contravention of the Codes. The Law change was passed unanimously by the States as, in line
with established international regulatory practice, the Government of Jersey is of the view that
behavioural change is more likely to be achieved when principal persons know that, potentially,
they will bear a financial penalty personally for poor conduct. The UK experience with respect to
the Senior Manager regime has been that there has been no perceptible impact on the
willingness of high quality individuals accepting high-profile positions.
13. Mike, you mentioned in your presentation that for every new initiative introduced, you
need to drop another or reprioritise resources. How does this align with Martin’s
statement that regulators today need to keep growing in line with increased regulatory
demands?
I was describing the challenge we currently face - being asked to do ever more at a high standard
with existing resources. I think Martin Moloney is referring to the fact most regulators have
significantly increased their resources in light of these challenges post the global financial crisis -
this is something that Jersey will need to review and consider the resourcing and funding of the
JFSC.
14. Did I notice over 23,000 questions relating to the NRA exercise? Does the Commission
regard this as a success or could more have been done with Industry before this
important programme was rolled out?
The 2018 supervisory data collection exercise is considered a success as we collected consistent
data across the full spectrum of regulated financial services. Prior to the start of the data
collection exercise in March 2018 and in conjunction with the Government of Jersey, we
consulted with many Island Trade Bodies and Trade Associations and shared early drafts of the
questionnaires and received useful feedback.BP19 Q&A
15. You discussed Fintech however is Regtech on the JFSC agenda to help Industry map and
control changes to regulation that may currently be very manual and time consuming?
Absolutely. Regtech is regularly discussed as part of our Fintech agenda with various
stakeholders. There are huge efficiency opportunities for both regulator and Industry from
Regtech developments.
16. You have mentioned our hard won international reputation - do you think that the
blacklisting of Jersey by the Netherlands is a one off or a precursor to further
international/European pressure?
Only time will tell is the honest answer. Jersey's constructive engagement with the EU code of
conduct group could result in a central, co-ordinated, fair and transparent list replacing
individual EU member state lists.
17. Do you foresee any changes to regulation or standards as a result of the economic
substance law?
It is possible that some changes may be necessary depending on the final outcome of that
process and any guidance that follows. As usual we will liaise with government and Industry on
any necessary changes to our regime.
18. If the UK deregulates after Brexit, how would the JFSC react?
There are still multiple permutations as to the outcome of Brexit and it wouldn’t be an efficient
use of our limited time to speculate on permutations. The UK, like Jersey, is committed to
meeting international standards so we wouldn't envisage a dramatic change in their stance. We
continue to have a close and regular dialogue with the UK regulatory authorities in relation to
Brexit.
19. When will the change in the results of changes to the code be published by JFSC?
If you are referring to the consultation regarding maintenance amendments, we published our
final position on 22 March 2019.
20. When will the regulator provide legal and regulatory guidance to Industry on
investments into the marijuana industry, which is now legal in Canada, given that
clients wish to invest in this sector?
There is no current formal position on this subject but we have discussed the topic with
Government and further discussions are needed in relation to the Sound Business Practice
Policy. Until such time as the position is concluded, issues and applications are being considered
on a case by case basis.BP19 A&A
Business Plan 2019 Sli.do Q&A
Government response
1. When will arrangements for bank resolution and depositor compensation scheme be
clarified? (Government response)
The Government of Jersey is currently developing a structural framework for bank resolution in
Jersey, and expect to consult with stakeholders in the first half of this year.
2. When will we get guidance on substance rules, our clients are asking for answers!
(Government response)
The Government of Jersey is committed to providing Industry with as much certainty as possible
on the new Economic Substance Law. We have already issued a ‘Key Aspects’ document, an
explanatory flowchart, a ‘Q & A document’, and have engaged in extensive discussions with
Industry on the application of the law. Relevant documents and contact details for Government
on this topic are found here. More comprehensive guidance is under development.
3. Given the concerns over EU relations, is there appetite to better align the MLJO with
the EU MLD? (Government response)
The Government of Jersey, in collaboration with the JFSC, is working through various tranches of
legislative proposals designed to ensure the AML regime remains fit-for-purpose. The changes
which may, as a result, be proposed are driven by various external comparators, the most
important of which is the 2012 Recommendations of the Financial Action Task Force
(FATF). These changes were consulted on last year, law drafting is now ongoing, and a formal
response to the consultation will be published in due course. Similarly, the Government will
review the EU’s Fourth and Fifth Anti-Money Laundering Directions (AMLDs) along with other
external information sources to take account of international best practice and implement
changes which further enhance Jersey’s regime.
4. Rather than continually fighting substance battles and incurring costs to address them,
is it time to move away from 0pc instead? (Government response)
The standard rate of 0% corporate tax is based on two key principles. One is the EU Code of
Conduct principle of non-discrimination between resident and non-resident owned companies.
The other is the principle of tax neutrality combined with transparency. The Government’s
commitment is clear, the Common Strategic Policy 2018-22 includes ‘maintain tax neutrality’ as
a direct policy outcome.
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