Jersey Financial Services Commission: Annual Report 2017

Jersey Financial

  Services Commission

    2017

Annual Report 2017

Delivering

  a first-class

  public service  to both

  Industry

  and the

  Island

 Contents

Jersey Financial

Services Commission

Annual Repor t

    2017

 01 . Highlights &     07.   08.

Achievements

2017 _ JFSC and o£3million in prther aoceeds for Jersegencies work led ty s Criminal o  Launched netthe end oo modernise Island f the yw Jerseear s funds ry Private Fegime. und Offences Confiscation Fund 81 structures were authorised by

01.   02.   09.   10.

Successfully delivered Central Register of Beneficial Ownership and Control on time and within budget. Our work was recognised with an international merit award from IACA (see page 40)

Launched inaugural public awareness  Members of the Serious Fraud Office spoke  JFSC staff won CIPD award for corporate campaign to highlight investment  at joint JFSC and Law Officers conference  social responsibility initiatives and raised mis-selling in Jersey on financial crime more than £11,000 for charitable causes

03.   04.   11.   12.

Co-hosted conference with Government  Annamaria Koerling appointed  Held first in-house careers drop-in session  Participated in IOSCO s first World Investor of Jersey on combating terrorist financing  as Commissioner at JFSC offices for prospective recruits to  Week to educate and protect investors

with global expert speakers from the UN,  learn more about the organisation

Israel, France and UK

05.   06.   13.   14.

Contributed to OECD assessment which  Hosted cyber-security masterclass  Conducted and published results of first  Financial education programme reached resulted in fully compliant rating in tax  for Industry leaders Industry cyber-security survey 2,000+ Jersey secondary school students transparency for Jersey

01.

   Jersey Financial

Services Commission: Our role

What we do We aim to fulfil these responsibilities by:

The Jersey Financial Services Commission (JFSC) is the financial regulator for    Ensuring that all authorised financial services businesses and individuals Jersey. We aim to deliver balanced, progressive, risk-based financial regulation   meet the appropriate criteria and that we, as the regulator, match for the Island, built on insight, integrity and expertise.   international standards of banking, securities, trust company business,

  and insurance regulation

Our mission is to maintain Jersey s position as a leading international finance

centre, with high regulatory standards, and to adhere to our guiding principles:  Playing our role in combatting the financing of terrorism and financial

  crime as part of the wider international effort

 Reducing risk to the public of financial loss due to dishonesty, incompetence,

  malpractice or the financial unsoundness of financial service providers  Working closely with fellow regulators and law-makers to ensure access

  to efficient and effective markets for financial services

 Protecting and enhancing the reputation and integrity of Jersey in

  commercial and financial matters  Reacting to and, where appropriate, anticipating changes in markets

  and the financial services industry (Industry) by developing policy and

 Safeguarding the best economic interests of Jersey  the way we supervise

 Countering financial crime both in Jersey and elsewhere.  Acting as an agile, thoughtful, proportionate and listening regulator

  that gives fair consideration to both the costs and benefits of regulation.

Our statutory responsibilities are set out in the Financial Services Commission (Jersey) Law 1998 (the Commission Law) and include:

 Authorising, supervising, overseeing and developing financial  services in Jersey

 Enforcing the Commission Law

 Reporting, advising, assisting and informing the Government of Jersey  (Government) and public bodies

 Developing policies

 Operating the Companies Registry.

01.

Priorities for 2017 The Industry that we regulate

Our strategic priorities for 2017 centered around focusing regulation on the  Jersey continues to be an attractive international finance centre thanks to its areas of greatest risk, interacting efficiently and effectively with Industry,  effective and proportionate regulation, its modern and respected legal system facilitating market access, safeguarding the sustainability, efficiency and  and flexible corporate law regime, its political and economic stability, and its independence of the JFSC, and delivering our business-as-usual.  independence and tax neutrality.

Considerable progress was made throughout the year in these areas.

The key Industry sectors include:

Banking

Jersey's 28 banks attract clients from more than 200 countries and a sizeable share of the Island's total Performance against 2017 Business Plan Objectives deposits are held in foreign currencies - a reflection of Jersey s international appeal as a banking centre.

The sector is a sizeable employer and a significant contributor to the local economy.

2017 Priority Objective Commentary

 Jersey's banking model is stable and diversified and the sector s average capital ratios remain

strong and well above Basel III requirements

 There has been a trend of decline in licence numbers. In part, this has been prompted by

rationalisation due to the prolonged low interest rate environment and also by structural reform of the UK banking sector. However, this is now largely stemmed and the sector is well placed to benefit from any future interest rate increases

 Re-structuring to comply with the UK s ring-fencing regime is well under way and will be finalised

in 2018. These changes provide opportunities for banking businesses in Jersey to develop more profitable asset books

 The JFSC s Banking Business Licensing Policy provides a workable and flexible framework

for a wide variety of banks to operate within a strong regulatory framework.

01.

Trust and Company Business Investment Business

Jersey was one of the first jurisdictions to regulate trust and company service providers, and the  At the end of 2017, 84 businesses were licensed to undertake investment business in Jersey, ranging from sector consequently reflects a maturity and breadth of firms ranging from trust businesses owned  small owner-managed firms to branches and subsidiaries of large multinational financial services groups. by the largest banks through to owner-managed businesses of many years standing. Services provided by those businesses to both local and international clients included discretionary

investment management, investment advice and other services.

At the end of 2017, Jersey was home to 180 regulated trust and company service providers,

holding between them 843 trust company business licences. In 2017 we saw a slight increase in the number of clients of discretionary investment managers from

14,030 with £20.6 billion of assets under management to 14,172 clients with £22.2 billion. The number of Jersey also remains a key player on the international stage: Qualifying Segregated Managed Accounts increased from 16 to 22 in the same period, however the assets

under management dropped from £1.9 billion to £1.6 billion.

 Jersey first introduced its own Trust Law in 1984 and leads the field in the continuing development

of the principles of trusts globally We granted seven new investment business licences during 2017 and we continue to receive enquiries

from potential new applicants.

 Jersey is an active contributor to the ongoing development of regulatory standards under

a dedicated Working Party of the Group of International Finance Centre Supervisors (GIFCS).

Funds Capital Markets

Jersey has been a prominent player in delivering fund services since the 1960s, with the emphasis today  Jersey is considered to be a jurisdiction of choice for corporate entities seeking to list. The Island has on institutional, specialist and expert investors. Funds in Jersey may be established as companies, limited  been attracting deposits and investments from institutions and private clients across the world for partnerships, limited liability partnerships or unit trusts, and can be open or closed-ended, providing more than 50 years.

significant flexibility for investor needs.

Having developed specialist expertise, Jersey supports cross-border capital markets transactions structured by the world's leading investment banks and professional services firms.

£291.1

The total net asset value (NAV) of funds under administration in Jersey stands

at £291.1 billion

1,104 £323.42 89

£220

Jersey has 1,104 regulated collective  Jersey listed companies on global  Jersey has 89 companies listed on global investment funds exchanges held a total combined  stock exchanges from the LSE to the NASDAQ

market capitalisation of £323.42 billion

(compared to £220 billion in 2016)

£3,000,000, 81 FTSE100

000

The Private Placement Fund regime  The JFSC introduced the Jersey Private Fund

was introduced in May 2013 and there  Guide in April 2017 to modernise the Island s

are currently 57 Private Placement Funds  private funds regime, amalgamating the Private  Jersey still has the greatest number of with a reported collective NAV of £3 billion. Placement Fund, the COBO-only fund and the Very  FTSE 100 companies registered outside

Private Fund. The Jersey Private Fund can be  the UK

marketed to up to 50 professional investors and

as at year end 81 funds had been approved.

Figures source: Jersey Finance

_  0  2 . VChisaiiornm farno0 ms s tthaete tmope:nt 2

 02 . Vision from the top: On a more positive note, whilst it is very difficult  On the theme of working together, once again

Chairman s statement tyand propportunities for the Island. Once aoo prearsf vieedicw is that the r time, with the innooduct what Industry will look likts that Fintegulatech will bring, thervory enations in prvironment will e in fivgain, rocesses e will be e tegulato ten or  I thank the Commissioners for their time and dedication tmonths, during what has been anochallenging but successbeen a grProsser who continues teat support to the JFSC oo me in mvful yo prer the past twoear. Thevide iny position as ther vy haaluable elvve e

and Industry will need to work together to exploit

these. What is predictable from the JFSC s point  Chairman, in particular Deputy Chairman Debbie need to change, and change rapidly, to facilitate  advice, as does Commission Secretary Lizzy

beneficial innovation. We will become inevitably  Roe who I must acknowledge for her exemplary a digital regulator. So whilst our investment in  assistance in co-ordinating Board activities.

the Change Programme has been an important  In 2017 we welcomed Commissioner Annamaria

step down the digital road, it is the beginning  Koerling to the Board, following the retirement

not the end. of Commissioner Stephan Wilcke. With further The activities described in this Annual Report amount, at one and the  Commissioners reaching the end of their tenures

This Annual Report describes the progress made  imminently, succession planning continues to same time, to a culmination and a preparation. by the JFSC over the past year. The main lesson  be very much at the forefront of our minds.

is that Industry and the regulator must work  Therefore we will be recruiting again in 2018. together with the Government of Jersey to build

The culmination is the near completion of our Change Programme. This has  a financial services environment that is flexible  My thanks also go to the Director General and already and will continue to transform the way we work within the JFSC and  and forward-looking. We have to. In the most  all the staff at the JFSC for their continued efforts how we relate to Industry. Building the digital infrastructure required has  competitive of markets that is what is necessary  and commitment. None of the enhancements

in order to survive. I believe that we are heading in  we are making to the way we operate or our involved a substantial investment of time and money and we are already the right direction and I must thank Government  other significant achievements would be possible

beginning to enjoy some of the benefits. The shift to entity risk-based  and especially Industry for this progress. It is  without the teamwork, expertise and pride they supervision is resulting in a better informed supervisory process and the  not always easy engaging with the regulator,  display in delivering a first-class public service

particularly with the increasing regulatory  to both Industry and the Island.

new digital portal is now saving time and money, whilst accommodating an  requirement we place upon local businesses.

enhanced information flow to and from Industry. But as every Chief Operating  I ask Industry regularly to communicate with

Officer knows, these days digital investment never stops. We have moved the  us and I am delighted that this interaction is  John Eatwell

increasing in frequency and positivity. Chairman

JFSC s operations onto an entirely new trajectory - sustaining and updating

are now the challenge.

The preparation involves building the capability to handle what we believe will be a period of significant and even disruptive change in Industry.

Top of the list will be the impact of whatever deal

the UK reaches with the EU, as Jersey will inevitably be caught up in the backwash (we have seen

already the postponement of Jersey s assessment for Alternative Investment Fund Managers Directive (AIFMD) equivalence). At the JFSC we have worked hard over the past year to enhance our already

good relationships with regulatory authorities in

EU member states in the hope of mitigating any adverse circumstances. We will also be liaising

with the UK Financial Conduct Authority (FCA) in their Brexit preparation programme . The FCA

is, like all of us, still in the dark as to the likely outcome, but the UK regulator has launched

a very comprehensive options study from

which we hope to benefit.

We have also been preparing to deal with other political waves. The outstanding work done by the Registry team and Industry, to ensure that our updated Central Register of Beneficial Ownership and Control was completed to the deadline agreed with the UK government, has placed Jersey in a

strong position in an ongoing political debate. Much will depend on the outcome of the review of the UK s own Companies House Register, currently being undertaken by the Financial Action Task Force - the intergovernmental organisation founded on the initiative of the G7 to develop policies to combat money laundering and terrorism financing.

Preparing to deal with the impact of technological change on Industry is another focus of our Change Programme investment. As we all know the impact is both bad (cyber-crime) and potentially good (the development of Fintech).

As an organisation, we are investing heavily to combat cyber-crime. But, as with the fight against terrorism, we have to be successful all the time, whilst the criminal only needs to be successful once. Recent events, such as the Paradise

Papers with which we are all familiar, have demonstrated that data loss can be the source of serious reputational damage. Serious incidents in Jersey pose a risk to the reputation of Industry as a whole. We and Industry must work together to prevent cyber-crime and secure Jersey s data and reputation.

Working with Industry and Government to build a financial services environment that is flexible and forward-looking

_  0 p.13  3 . DoDSuteiarrlt eieovcmbetojreeirnnc Gttg0i veanegsea:rianls st  3p.14 Annual Report 2017

03.

 Delivering against  particularly prin this regard - and on time. Ooud that we me vt all our obligations er the past few Director General s With our incrthematic renbEach yuvisat alsge nooear wagervieet just addre endeaeasingly preiwngs and onsitearvlyour tessing anc oacoro host eree etivct e apprxivaminations wey kavceents oty risk aroach tion wf ito heas e firms. ysignificantly strttho engaears, our reir invge closely with the UK authorities titatielationship with the Fon foengthened, most rr our staffto partCicecently thrA has also beenipate ino build traough ining

our objectives:  participants. During the year we delivered a  pconfidence in the stability and prrogrammes and related activitiesobity o. We wf the ill continue particular interest and benefit for Industry

financial services industry in Jersey. Statement cofUrybernNomc; and inogm-lsecurity mastobbaat vitilneged dirxtpeerrrto ecsr ifserrttoors fr ficlass for local Industry mnaIsnrom the Serious Fcai enlg, Fwraithncpereasnedn tt raud hateions  Owith the signing ointuernational rr regulatoryegulatrelaf the Multilattioory standarnship bui eral Memoranda oldids, especially ng also continuefd

leaders; co-hosted a conference with Government

Understanding with the GIFCS - a long-established Office to speak at a joint event with the Law group of financial services supervisors with Officers Department. a core interest in promoting the adoption of

Working together with Government and the Law  in banking, fiduciary and Anti-Money Laundering Officers Department in this collaborative way was /Countering the financing of terrorism (AML/CFT). a current theme throughout 2017. Three areas where In 2017 Jersey was the first jurisdiction to be

this was particularly relevant were assisting with  assessed against these standards and the

the Island s response to EU Code of Conduct  review findings will be published in early 2019.

matters; working with Government Departments  We have a prominent role within the GIFCS, Regulatory engagement has been a central focus for the JFSC in recent times  and Law Officers to achieve Jersey s fully compliant  providing secretariat services, and during the

rating in tax transparency from the Organisation  year this involved organising the two plenary

and in 2017 we made substantial progress in becoming a more interactive and  for Economic Cooperation and Development  meetings in London and Bermuda.

engaged regulator. We have developed this engagement both at home and  (OECD); and undertaking with Government the

abroad, working closely with overseas authorities, international standard preliminary work on the National Risk Assessment. Oprvesenting terseas visits which stand out fro Tracfin in Paris on trust rom 2017 wegulation ere setters, regulator and registry counterparts, and interacting locally with  There is no doubt in my mind that our  (as we were the first overseas jurisdiction to visit

Industry, Government, other Island agencies and of course the people of  engagement with the media, on a local,  the French intelligence agency) and accompanying Jersey. To do our job and achieve the regulatory goals laid down for us in  national and intprogressed in recent yernational leears. Thervel, has significantly e are inevitably  Jwith US authorities following interseys Attorney General to Was ernational hington to meet

statute, we have to achieve high level and constructive interaction with  times when this interaction can be less than  collaboration on a criminal case. That case, after those stakeholders who have a bearing on our current and future success. comfortable, as in the case of the Paradise  many years of hard work, led to confiscated assets

Papers in late 2017, but we know that keeping  of circa £6 million being shared between the two open and transparent lines of communication  jurisdictions and a clear message that Jersey is with the various agencies is paramount for the  no hiding place for the proceeds of crime. reputation of the organisation and the Island.

One of our core responsibilities as a regulator is As everyone is well aware, many of the decisions  to protect the public from financial loss. We take

Five years ago, we set ourselves the goal of  Once fully implemented, the shift to focusing  that will affect Jersey s future are made outside of  financial education seriously and have a number being an agile regulator, responsive to the  on the entity rather than individual licences will  the Island. A concern for us all must be the terms  of initiatives that we continue to develop locally. ever-changing financial services markets,  enhance interaction between supervisors and  on which the UK leaves the European Union. We do not promote this work enough so I want and to being a listening regulator, working with  firms, as will the flow of reciprocal information  Whilst Jersey has never been a member of the  to take this opportunity to commend our Policy Industry to build an efficient regulatory system.  through our digital portal. These are significant  EU, we have sought to engage with EU members,  team for the successful and ongoing roll-out of Our Change Programme, now in its third year,  advancements on our side to make it easier for  both individually via Memoranda of Understanding  our comprehensive outreach programme for local has focused on those objectives and central to  firms to interact with us. with national regulators and collectively through  secondary schools. During the year our teachers its success is the consistent and greater Industry  the various EU-wide regulatory organisations.  reached more than 2,000 students, educating engagement that has been made possible thanks  But our engagement with Industry will only be  Nonetheless, the Island is caught up in the  them about finance and financial crime,

to our new digital information systems  successful if it is a two-way process; we need  slip-stream of the UK negotiations. Not least  a commendable element of our corporate

and revised supervisory structure. Industry s observations and ideas to help us  because the EU is re-thinking its financial  social responsibility activities which are

to continue to improve our service to regulated  relationships with third countries, now that a  set to grow further in the coming years.

Our Supervision and Operations teams  entities. In particular we look forward to receiving very large third country will be sitting right on its

worked incredibly hard in 2017 to implement  feedback on our new supervisory systems and  doorstep from next March. At the time of writing,  In January we ramped up our consumer activities what were undeniably demanding changes,  structure once they are fully embedded in 2018.  it is impossible to say exactly what will be the  with an Island-wide public awareness campaign from both technical and personnel perspectives.  Industry reaction is vital we are all in  outcome of the negotiations between the UK and  to highlight the growing issue of investment This work is ongoing and so is the burden for  this together. the EU, but we will continue to build on the already  mis-selling. This was the first time that we had staff, particularly with the restructuring that  good relationships we have with EU regulators in  ever embarked on such an initiative and we were was naturally unsettling for all. I wish to commend  Engagement is not always comfortable.  order to mitigate any harmful outcomes. incredibly pleased with the results, particularly the my colleagues in Supervision for successfully  On occasion, we need to take enforcement  response from Islanders but also the support we adopting this new methodology in my mind their action to ensure that regulatory codes are  We see interaction with overseas counterparts  received from Government and the local community exemplary efforts to implement this proportionate adhered to. But we are proud that well over  and other agencies as a crucial component of our of independent financial advisers. We partnered approach to regulation will reap long-term benefits, 90% of cases result in agreed remediation.  engagement strategy, the most important being  with the Personal Finance Society for the campaign bringing value for money and better outcomes  Moreover, our approach to settlement, adopted  the UK government and regulatory institutions.  and this has led to an ongoing relationship with for Industry. over the past few years, is intended to make sure  2017 saw increased interfacing with the former  the UK professional body and further initiatives

that any differences between the regulator and  to enhance the Island s Central Register of  planned for 2018.

regulated entities are dealt with effectively.  Beneficial Ownership and Control, and I am

03.

As a jurisdiction, we are proud to have mounted this initial effort, which saw us leading the way internationally with our consumer awareness initiatives and we intend to remain at the forefront of this activity. This is destined to be a permanent feature for us, especially given the increasing expectation for regulators globally to undertake such work. The two week campaign had significant reach in Jersey and, following its success, we have presented our work to fellow regulators, law enforcement, international bodies and other overseas agencies including the FCA, the Isle

of Man, Financial Crime Information Network (FIN-NET), GIFCS and IOSCO (International Organization of Securities Commissions).

An active member of IOSCO s Committee 8, which is committed to investor protection through education and financial literacy, we were one of more than 70 jurisdictions globally to take part in the organisation s first World Investor Week in October, flying the financial education flag in the Island. Our campaign involved media interviews, a public talk at our offices for Islanders to learn more about finance, competitions for young children, and a comprehensive social media strategy.

Our engagement with the public using our digital platforms saw very positive results in 2017. We used Facebook, Twitter and LinkedIn extensively to publicise our consumer awareness messages, to communicate warnings instantly about frauds and scams, to promote our latest news events, to recruit talented individuals, and to share the work our employees do for the community.

As I look back on yet another pivotal and productive year for the JFSC, I am reminded that the great progress we have made must

be attributed to our people. It is their hard work, dedication, and commitment that drives the organisation and ensures that we realise our objectives. Their enthusiasm and engagement is evident across the many varied activities that we undertake, both locally and overseas, and I am exceptionally proud of the team and the work that we do.

I take this opportunity to thank the Chairman

and the Commissioners for their invaluable insight and wise counsel, my fellow directors for their continued support, and every member of the JFSC community for their significant and invaluable contributions to the organisation and the Island.

John Harris Director General

Hard work, dedication

and commitment drive the organisation and ensure we realise

our objectives

03.

 Leading the way  

internationally with  our consumer  awareness activities  

_  04 .  0   4

 04 . Principal Risks  Transparency and the external view of International Finance Centres

& Uncertainties In 2017 wtransparcontinue, in particular following the rin the Dirence saector General y ow the intf international finance centrernational focus on the s statement, in Noelease ovember es  f  Our commitment trintaecognised in Mauternational ahorities in thweary 2017 when wUd for implementing the securo the transparK. And, as mee won a prnenctiony aedgenda welestigioussewhe eas re the Paradise Papers. Jersey continued to counter  channel to exchange highly sensitive information

these negative perceptions and, as mentioned  and intelligence with law enforcement and tax

the Island was given a fully compliant rating by  in this Annual Report, the Island met its international the OECD s Global Forum on Transparency and  obligations on transparency by our Companies Exchange of Information on Tax Matters. Registry collecting the extensive data required for

beneficial owners and controllers and meeting the Working with Government, we continue to  UK Government s requirements.

contribute in this arena, playing an important

In 2017 we continued to develop further our Enterprise Risk Management  role in demonstrating that Jersey is a well-

regulated jurisdiction that complies with

framework. This framework covers the risks and uncertainties that we face  international standards.

from a number of directions - from complex global political and economic issues

to the local risks presented by regulated firms and our own JFSC operations.

This section of the Annual Report focuses on identifying those key risks  The UK leaving the EU

whereas the subsequent pages dedicated to our Supervision activities

outline how we manage them (see p33). The uncertainty surrEU continued througounding the UK h 2017. Followings ethxit fre trigom the gering Jersenot looking ty has maintained a consisto change the relationship with the ent line that it is Through a robust assessment, our Board of Commissioners, in partnership  of Article 50, and as negotiations progressed and  EU, but the risk remains that the loss of the UK as

major issues around border controls, trade and  a liberal EU member state may have implications with key stakeholders and our own internal Risk Unit, identified what we  immigration were discussed, there was a danger  for the perceptions of Jersey as an international

currently consider to be our principal risks. that Jersey s interests could be overlooked. finance centre among the remaining EU members.

In March 2017 the House of Lords EU Committee  

called on the UK government to remember its  

responsibilities to the Crown Dependencies,  Loss of data/cyber-security ensuring that they are fully engaged in  

Brexit negotiations.

In 2016, the loss of data from cyber-attacks was  mainly positive and indicated a reasonably high  

at the forefront of our efforts to manage risk, in  level of cyber-security maturity, albeit developing.

particular the fallout from the Panama Papers.  

This threat has far from receded and in 2017  We demonstrated our commitment to highlighting  

we faced the next instalment with the Paradise  the critical importance of cyber-security to local

Papers. Once again this was a targeted attack  firms by hosting a masterclass in March, in  

on the Island s financial services sector and  partnership with the Security Awareness Special  

how to better protect their firms. We have since  Regulator and Industry  fellow offshore centres which resulted in negative  Interest Group (SASIG). We brought a number  

international media coverage, although shortlived. of global cyber-security experts to the Island to  

speak to Industry leaders about the threats and  

In 2017 wUan estimatkraineb e also sauted $1.2 billion oquicklyw the impacspread f damaarouts ond ge. Botf the Whewoth attackrl annaCry d,causis ng From our own perspective, we have been, and will prevent cyber-crime  

working together to  

attack on the NHS and the global spread of the  worked with the SASIG to develop our own in-house  

NotPetya ransomware attack, which started in the cyber-security training programme for staff.

prompted us to issue guidance to Industry  continue to remain, vigilant about the amount and

around cyber-security.  

In rwe continued our efforts tesponse to this growing thro proaceat, during the ytively manage ear sensitivity oand commitments such as data collecCentral RegistControl and the National Risk Assessment in f the data wer of Beneficial Oe hold. Ongoing ewnership and tion for thexercises and secure Jersey s  

and mitigate the risk to our own operations and  2018 ensure that we prioritise this risk.

also looked at the control frameworks Industry  

had in place. While wlhow companies arocal firms cyber-se assessing and rec e do nourity pr t eact xplicitly rices,educing the we egulatdo mo enitor Although the security oostartf paramount concern for the JFSC, in 2017 wed work in readiness for the intrf data has alwoducays been tion oe f  data and reputation

risks to their business and we expect them to  the General Data Protection Regulations (GDPR)  

notify us if a cyber incident has taken place. which sees a significant increase in the penalties  

associated with failing to protect personal data.  

Our cyber-security survey, conducted in mid-2017,  We appointed a Data Protection Officer and began  

gave Island firms the opportunity to examine their  a review of all our policies and procedures for  

own controls and we highlighted some of the key  handling information in anticipation of the new  

areas for improvement in our feedback paper,  GDPR regulations which came into force in  

issued in September. Overall the findings were  May 2018.

p.25 Principal Risks & Uncertainties p.26 Annual Report 2017

Consumer protection

Consumer protection has always been a key  It followed a number of cases where local  

feature of our work and in 2017 we took a number  investors had lost some or all of their life savings  of actions to address the risks to consumers of  through high risk investments. In a low-interest  financial services. economic environment, investors seeking higher  

returns were increasingly at risk. The campaign  Other than for bank deposits, Jersey does  included television, radio, social media and press  not have a financial services compensation  coverage, advertising and a dedicated website. scheme, and ensuring that Industry has adequate

Professional Indemnity Insurance (PII) cover to  During the year we continued to progress all our  protect clients was a key focus. A number of  consumer engagement activities with the primary  supervisory cases raised concerns over the  aim of educating all Island demographics about  adequacy of PII cover and in April our Supervision  making more informed financial decisions and  team reviewed a cross-section of policies from the  protecting themselves from falling victim to financial Investment, Fund Services, Trust Company and  crime. Other highlights included our community  General Insurance Mediation Business sectors.  work as a leading member of the Jersey Fraud  Following the review, we identified some concerns  Prevention Forum, our social media warnings  

and published additional guidance to help firms  to the public about frauds and scams, and our  understand the need to provide adequate cover. secondary school education programme. We also

issued warnings to the public on Initial Coin Offerings In January, as already mentioned in the Chairman  following international concerns surrounding the  and Director General s statements, we launched a  risk of financial loss to the investing public.

major public awareness campaign to highlight the  

growing issue of investment mis-selling.

Increasing litigation costs

2017 saw a marked increase in the cost of litigation in respect of our enforcement action. The issues  under investigation are growing in complexity, are being harder fought, and potentially involve novel  issues that need to be tested before the Courts. All of this exposes the organisation to spiralling costs.  As a relatively small regulator, these rising litigation overheads are a concern for us and we have to  make difficult risk-based decisions around which cases to pursue and how far they will be taken.

Reliance on key JFSC personnel

Recruiting and retaining staff is challenging for any organisation but, as a financial regulator in a small jurisdiction, we face the more specific issue of requiring a particularly niche and specialist workforce. Sourcing these relevant skills can be difficult and in-house training and development is critical to  bolstering existing expertise and corporate knowledge. Ensuring we proactively mitigate the risk  of losing unique skillsets is a key focus for the organisation and we have retention strategies in  place to lessen the potential impact of high turnover.

_  0  5 . Sofu mAcmtiavriyti0 es 5

05.1

   Policy

Fintech enquiries/ requests for support

Our policy work is primarily split between two teams: the Financial Crime Policy   team which focuses specifically on AML/CFT and Sanctions matters and the  

Policy team which covers other areas. Both teams work closely with our  Initial Coin Offerings (ICO)  4 Supervision teams.

Developing proportionate policy responses to changes in international regulatory standards is one of  the key responsibilities for the teams. In fulfilling this responsibility, both engage extensively with our  stakeholders, including Government, Industry, overseas agencies, standard setting bodies and financial services regulators across the world.

Payment services:   1

Other policy responsibilities include acting as a knowledge resource for fellow JFSC staff and leading  other one-off significant pieces of work such as evaluations by external standard setters.

Stakeholder engagement formed a major part of our policy work in 2017 as we continued to build on  

Other:  3 significant areas of work. Working closely with colleagues in other JFSC divisions and external agencies,

we realised significant policy achievements including:

 Supporting Supervision in identifying Industry data for risk-based supervision and working

with Government on the data requirements for the Island s National Risk Assessment

 Continuing to progress local adoption of Basel III standards through completion of a consultation

and feedback exercise on revised liquidity management requirements. Working on implementing the revised capital quality for banks in order to meet the Basel Committee s deadline on these areas by 1 January 2019

 Rationalising and consolidating Jersey s private funds space with the launch of the Jersey Private

Fund in April 2017, achieved by working closely with Government and Industry.

 Commencing, in partnership with Government, the modernisation of the Control

of Borrowing legislation

 Publishing additional guidance for the application of AML/CFT requirements

to Funds and Fund Operators

 Formulating enhancements to the investment business regulatory regime through engagement

with Government, Industry and other stakeholders. This followed the 2016 consultation, related JFSC feedback paper, and a number of working group meetings on the potential implementation of MiFID II

 Publishing the JFSC s amended outsourcing policy

 Expanding significantly the JFSC s financial education outreach, including participating in the

first IOSCO World Investor Week and developing our student programme which in 2017 covered two thirds of the Island s secondary schools

 Managing enquiries and requests for support from businesses and individuals looking to launch

or utilise Fintech products or services

Other key areas of work

We also progressed a number of other important policy areas during 2017 such as:

 Amending legislation to maintain market access to the EU s Single Euro Payments Area

 Receiving recognition from the Swiss Federal Audit Oversight Authority regarding the auditor

oversight system of Jersey as equivalent, following EU recognition in 2016

 Delivering a consultation and feedback paper in respect of annual maintenance

amendments to Codes of Practice

 Attending Government meetings with both HM Treasury Department of International Trade

and the Foreign and Commonwealth Office in relation to the UK leaving the EU

 Attending Channel Islands Brussels Office meetings with EU Commission staff and

EU member states regarding EU equivalence, Capital Markets Union and AIFMD

 Performing, in conjunction with other members of the Jersey Financial Crimes Strategy Group,

a gap analysis of the AML/CFT regime against the Financial Action Task Force 2012 Recommendations and 2013 Methodology

 Coordinating the Island s assessment of compliance with the GIFCS Standard on the Regulation

of Trust and Company Service Providers, a recently implemented peer review process of GIFCS

 Signing a Memorandum of Understanding with the Jersey Gambling Commission and the

Multilateral Memorandum of Understanding with the GIFCS

 Developing further our outreach programme for AML/CFT with more than 1,000 Industry

participants attending our events during the year.

05.1

A proportionate approach to regulation will reap long-term benefits, bringing value for money

and better

outcomes

for Industry

05.2

   Supervision

Our core responsibility as a regulator is to supervise firms by establishing how they comply with the relevant regulatory standards. As we communicated in 2016, we have adopted a risk-based approach to supervision to make sure that we are deploying our resources to the firms that pose the greatest potential risk to our guiding principles (see page 03).

Our approach to risk-based supervision focuses  As part of the move to risk-based supervision,

on impact risk - those risks that have a direct and  we drew up supervisory plans for three categories negative impact, causing harm, and are the result  of supervision - enhanced, proactive and reactive of an individual or set of actions/omissions by a   and these were communicated transparently firm. We consider the firm s strategy, business  to each entity. We subsequently undertook an model and structure, together with other inherent  increased number of face-to-face meetings and risk factors. To identify and assess risk, we operate interactions with those we regulate, leading to

a combination of on-site visits, desk-based  more focused and better informed supervision. reviews, business review meetings, business

risk assessments and fit and proper  In 2017 three new units became fully operational: evaluations of regulated persons. the Supervision Examination Unit, the Central

Support Unit and the Supervisory Risk Unit. Throughout 2017 we laid the foundations to  Establishing these teams was essential to

move towards this more risk-based approach  achieving efficiencies and demonstrating further to supervision. This involved transitioning to  compliance with international standards, where new systems, incorporating the risk model,  the emphasis is on proving that our regulatory and embarking on a restructure of the division,  framework works in practice.

all of which were understandably disruptive and

burdensome for our supervisory teams, but  Aligned with the need to demonstrate our ongoing conducted with absolute professionalism and  effectiveness and to ensure future supervisory the sole aim of providing a better and more  capacity and capability, we introduced a grow your cost-effective service for Industry. own talent policy in 2017 with a comprehensive

learning and development framework for all

As with many organisations, we had a number  Supervision staff. This was in addition to

of old legacy systems that were reaching the end  recruiting a number of Trainee Supervisors.

of their lifespan; they were expensive to maintain

and did not have the flexibility required to provide  Desk-based reviews enable us to assess key a modern and adaptable platform to serve the risks across Industry and more specifically within needs of our Supervision division. To improve  particular sectors. Such reviews are particularly interactions between us and the regulated  beneficial for assessing areas of concern. community, we replaced some of these legacy  We undertook two desk-based themed reviews systems with a new Customer Relationship  in 2017 cyber-security and PII. We published Management (CRM) system. While this replacement the findings of both reviews in September and does not seem an obvious and externally visible  December respectively and further follow-up change, implementing CRM is often considered  work is planned for 2018.

to be the most difficult phase of any organisation s

Change Programme. Its successful implementation

is a significant step forward for us and will enable

more evident change for Industry in 2018 and beyond.

Running alongside the CRM project, we undertook an intensive exercise to determine what additional system development we needed for the structured recording of activities. This will give us, regulated firms, and international standard setters insight into Jersey's finance sector, providing evidence that

the Island is a well-regulated and safe jurisdiction.

Key visit findings

Responsible for coordinating and delivering our  The unit also carried out entity risk and event on-site examination programme, the Supervision driven examinations, which allowed for a more Examination Unit in its first full year of operation  targeted approach with particular entities. focused on themed examinations. In particular  As well as delivering the above and learning

the team looked at enhanced and simplified due  from early experiences, the team evolved and diligence across the Fund Services Business,  refined its examination process and issued an Trust Company Business and Designated  Examination Guide to help firms.

Non-Financial Business and Professions

sectors, as well as the suitability of investments  We published detailed feedback papers on our across the Investment Business sector. themed examinations and below are some of the

key areas where further improvement is required:

Investment Business

 We once again found customer fact finds and  controls for recognising and handling vulnerable suitability letters did not clearly document all the  clients (those requiring additional care, assistance or advice or recommendations being provided.  support) were not always in place. There were also Both documents are key for evidencing the  failures to record changes in client circumstances, suitability of investments for clients. In addition,  which again could impact the suitability of any we found fees and charges were not always  current investment product or services

transparent and consequently the investor had  provided by the firm.

to work out any associated costs. Systems and

Banking

 We found group influence led to instances  insufficient. It was surprising to note that on where group policies and procedures, followed by  numerous occasions the differences between the Jersey branch or locally incorporated banks,  source of funds and source of wealth were not did not fully reflect all relevant Jersey regulatory  always fully understood, which in turn led to requirements. There were continued instances of  generic references for both being recorded.

a failure to recognise local AML/CFT requirements  Further findings related to account operation when identifying a politically exposed person.  (trigger events and red flag indicators) and Consequently related client due diligence and  the control environment.

ongoing monitoring were considered to be

p.35 Supervision p.36 Annual Report 2017

05.2

Trust Company Business and Fund Services Business

 We noted a number of failings relating to AML/CFT control weaknesses, for example failing to maintain up-to-date policies and procedures for identifying and scrutinising business relationships with persons, countries or territories subject to financial sanctions. With regard to business risk assessments, businesses continued to insufficiently reflect the risks relevant to their business model and operations, or the considerations were too high level in nature to be fully effective. The absence of formalised compliance monitoring programmes and effective board oversight of the compliance function were again repeat findings and did

not appear to be receiving sufficient priority. Further results related to conflicts of interest (non-identification or appropriate handling)

and record keeping.

We were disappointed that some of the above are repeat findings which we identified and addressed in previous publications such as our Thematic Feedback Papers, Guidance Notes and Annual Reports.

It would, however, be remiss not to mention

the good practice that we saw in our thematic exercises and we shared these with Industry in our feedback papers. For example, when we conducted themed examinations on the suitability

of investments, we noted that some firms set up committees to review investments for consistency quality and suitability, they sent clients clear, concise and balanced letters explaining their investments, and staff attended regular meetings to discuss good practice and suitable advice.

When we reviewed practices for dealing with vulnerable clients, we were pleased to see that some firms had internal policies and procedures in place to identify and treat these clients accordingly. And we highlighted areas of good practice in

our PII thematic study including Boards taking responsibility for the appropriate levels of cover for firms.

Our cyber-security survey equally revealed some positive findings about the control frameworks firms have in place, for example two thirds of those surveyed had a documented risk assessment process and expected to increase spending on cyber-security in the coming years, 80% reviewed their policy at least once a year, and on average three quarters of employees at surveyed firms received cyber awareness training.

Other activities

 During the year we continued to engage and  We worked closely with Jersey s banking sector maintain close links with key external stakeholders  and, as a result of UK ring fencing, oversaw changes including meeting with trade bodies, providing  to some banking business models. We also speakers for a variety of Industry events, responding progressed our development of banking policy

to regulatory requests and working with law  in respect of the Basel III liquidity requirements. enforcement agencies. We also continued to

build strong relationships with overseas regulators. Our supervisory approach towards Trust Company

Business was assessed in October 2017 by the We saw a number of new entrants and products  GIFCS against its set of international standards enter the Funds sector and several large public  and the report is expected to be published no alternative asset funds were launched in 2017,  later than early 2019.

seeing net assets under management rise to

a five year high by the end of year.

05.3

   Enforcement

01

Enforcement is responsible for conducting investigations into serious or

serial regulatory breaches, dealing with cases of unauthorised financial services business (including policing the perimeter enquiries), and

responding to formal requests for assistance from overseas, relevant

supervisory authorities.

02  03

As a division, wSupervision colleaworking construcWe also manage the JFSC e otivftgues, with the primary aim oen acely with rt in conjuncs integulatelligence funced businesses tion with our tion, f  Thrlowtr2017 prend ooughout 2017, we continued tof members oved highly effec, as into obf the public falling vicerservtivest rate and demonstrate the ongoing es remained tim ted o  1Livin 2017e cases 06 4Cases carried ofrom 20162ver  6Nein 2017w cases 4

and individuals to seek remediation as our first  investment mis-selling, as they seek out higher

port of call, rather than action. returns without properly understanding the risks.

The JFSC s public awareness campaign in early

receiving, collating and disseminating intelligence  the regulator s pro-active stance on educating  

to ensure that we focus our resources on those  Islanders about the unsuitable buying and selling  entities and individuals considered to pose the  of investments. The campaign also helped to   04  05  06

greatest risk. expose additional cases of mis-selling, as Islanders

subsequently contacted the JFSC to raise their  

In 2017 we conducted 64 new investigations which  concerns. The JFSC expects regulated businesses,

led to 14 interviews and 105 Notices being issued.  which advise clients on high risk products, to  

We formally referred two cases to the Police and/ clearly outline those risks in writing and explain  

or Attorney General and, due to the complexity of  the suitability of a particular product to the client.  

many of the cases we are investigating, we carried  If regulated investment advisers fail to meet these  

57 active investigations forward into 2018. regulatory standards then they may be expected  

to compensate clients for any loss suffered. Cases carried  Requests for assistance  Formal Notices

When wis trpenalties rfnooegulatrt issue anmo work with entities tal wory standare conducaregime in 2015 allowniy civil penalties in 2017ngs ift an inads. The intrbusvio achienestigation, our kess f s the JFSC toducavilse compliance witht , wotion on e did issue otifyf the civil e o issue y aim us of a Seserious misconducthe finance secand spiralling ledeal overal enforf investigativcement cases in 2017 featurt vor locallyels oe rt o f personal debesourf individuals, emplo, who had unrce for the division. t and ealistic yed the ed in  5into 20187 0from overseas r3egulators 1issued 05 reportable issue. If further failures occur then we  used clients money for personal use and loan

have the power to levy a civil penalty. While we did  repayments. These cases consumed a great

three formal warning notices and agreed six  Enforcement remains committed to giving priority  remediation plans. Regarding the latter, if a  to such cases in order to protect the investing  business does not adhere to a plan to remediate  public and Jersey s reputation.  07  08  09 regulatory short comings then we can issue a civil  

penalty. The introduction of civil penalties has  The consumer awareness work that we do as  

resulted in firms engaging meaningfully in tough  an organisation and as a founding partner of the  

discussions with Enforcement to ensure that  Jersey Fraud Prevention Forum is key to helping  

remediation plans are achieved within agreed  Islanders safeguard themselves from falling victim  

time frames and to required standards, rather  to financial crime. In 2017 we continued to provide  

than incurring penalties. the secretariat for the Forum and worked with  

the other member agencies to devise a detailed   schedule of campaign activity to be rolled out  Notices compelling individuals Public statements issued  Calls to whistleblowing line

in 2018. to attend an interview

14 09 28

Three of which prevented/ Eight of which led to active restricted the individual from  investigations

working in financial services

05.4

   Registry 2Central Regist017 by the Central Rer oegisf Beneficial Oter of Beneficial Owwnership and Contrnership Ownership and Control ol was a tremendous effort Registry activities were dominated throughout  The work on the Central Register of Beneficial

and Control. While managing our business-as-usual by the Island and it is right that we celebrate the requirements, we worked tirelessly to satisfy the  delivery success. Over the last 27 years, Jersey Exchange of Notes signed between the Island  has been a leading jurisdiction with regard to and the UK government in 2016 to ensure that  the collecting and vetting of beneficial owner our existing Register was adequate, accurate  and controller information and meeting the UK

and current. The agreement enables, on request  government s deadline was vital to upholding this One of our functions at the JFSC is to operate Jersey s Companies Registry  and in appropriate circumstances, the sharing of  reputation. We achieved the enhancements on which registers Jersey companies, partnerships, foundations and business  highly sensitive information to trusted international time and on budget, reinforcing our position on law enforcement and tax authorities. transparency. We were recognised with a Merit

names. Through this service, we aim to maintain a customer-centric approach  Award from the International Association of

so that all users have access to accurate and reliable information. In addition, The work was predominantly digitally focused  Commercial Administrators (IACA) for our work

and this offered technical opportunities for local  to deliver the enhanced Register.

we operate the Security Interests Register and the Trademarks Register. businesses and technical teams within trust and

company service providers to engage with us and  The UK government publicly stated their

Our responsibilities include: take a proactive role in the process. We amended  commitment to perform a six monthly review

the existing annual return system so that beneficial of Jersey s implementation of the Exchange owner and controller information could be filed  of Notes on beneficial owner and

 Acting as Jersey s first line of defence (second line for regulated businesses)  in tandem with the 2017 annual return and we  controller arrangements.

  for AML/CFT defence checks developed a new application programme interface

solution for bulk filings of data for larger service

providers, ahead of the 30 June 2017 deadline.

 Monitoring and vetting adherence to the Sound Business Practice Policy We also built the capability for ongoing filing

should beneficial owner and controller

information need to be changed/updated.

 Assessing and recording beneficial ownership and control details

To assist local businesses and residents

with providing their data, we ran an extensive Within the international registry community, Jersey is regarded as a  programme of outreach and this included social

centre of excellence for our registries. This can be seen for example by  media updates, mailshots, published guidance, our agreement to provide shared services to Government on request.  briefing seminars, one-to-one drop-in sessions,

and generally made ourselves available to assist

Registry stakeholders.

The Registry manages global continuance, cross-border mergers and

international transparency requirements. We met the 30 June deadline with new policy,

guidance and processes in place, enabling a 99.7% filing of eligible entities. Jersey was one of the few jurisdictions to meet its requirement.

Beneficial owners

& controllers (current & historic)

379,855

Changes to  Statements beneficial owners  received through

& controllers new secure

API channel

3,332  7,793

One hour access to  Extended opening HMRC and UK law  hours and drop-in enforcement clinics to assist

Industry and

the public

60 MINS

50,000 letters  Statements  Compliance rate received from  of beneficial  by 30 June 2017 Jan - June and  ownership  deadline

60 emails per day  & control

50,000  31,433  99.7%

p.41 Registry p.42 Annual Report 2017

05.4

Other activities

New fee rates came into force on 1 January  In addition to the legislation, policy and guidance  2017. We saw an increase in business volumes  associated with the launch of the Central Register  in relation to additional data requirements and  of Beneficial Ownership and Control, we worked  document searches during the year and we  closely with Government to continue developing  met all registry service targets. the new Limited Liability Partnership (Jersey) Law  

and the Companies Law de-mergers provisions.

Together with Government, we attended and  spoke at a number of international registry  meetings during 2017.  

Registry Efficiencies 2017

01  02  03

Companies  Companies  Total Live Incorporated Dissolved Entities

2,564 2,849 55,306

887 x 2 hour  

Fast tracks  

561  x 1 day   04  05

214 x 2 day  

400 x 3 day  

502 x 5 day

Total Total Dissolutions /  

Registrations Cancellations 3,446 3,109

[a] 05.5 Finance &  Operating costs

Resources [b](2016: £15.6 million). The most noincrthat, based on the currotal eeases during the yxpenditure increased tear went enero £16.9 million vire depronment, wtable cost eciation, e  Prelerthe deThese costs aresourovfessional services costs rated levce relopment oequirvel, £372,000 re eements, and £69,000 rxpecf Got ved ternment relato decline as the ed temained at an o tegistemporary elaters, for ed to

computer expenditure, professional services

and litigation costs. It is also important to note  which a similar amount of income was recognised. appear to be experiencing a shift in the levels  Change Programme comes to an end and

of litigation costs and cyber-related costs. we fill open vacancies.

Overall operating costs reflect the structural  Expenditure is continually reviewed to identify cost changes that have taken place during the course  savings and efficiencies, even in the constantly

of the Change Programme. Higher computer  evolving environment in which we operate.

systems and depreciation costs were due to the  Through cost initiatives, we have considered Pressures on our finances continued throughout 2017 but did not worsen  introduction of digital and automated processes.  alternate approaches to learning and development

dramatically following meaningful increases in fee income from both registry These reflect the level of investment in systems  and travel costs. These costs were reduced further and supervisory fees. Total fee income increased by 11% in line with budget.  over the past three years. by 12% (2016: 31% decrease) and 23% respectively

(2016: 8% decrease). It is important to note that these Total income exceeded budget by 1%, predominantly due to income from the  The sensitive nature of the information we hold and decreases do not reflect declining importance in

development of registers initiated by Government. oneuer din tcor ecaosnitningulya ldlyig dietavle il no fpr aa sntdru mcatuinrtea min eaapnp rtohparti awtee these areas but rather greater effectiveness in

deploying our resources.

levels of cyber defences. The international scale and

Total expenditure for the year exceeded budget by 3.1% which was predominantly due to higher  complexity of cyber-crime continues to rise and  Investigation and litigation costs increased

depreciation and litigation costs. The higher costs in these categories resulted from early  poses a significant risk, both now and for the  significantly in 2017 compared to the historic implementation of computer systems and an ongoing enforcement case respectively. foreseeable future. We therefore maintained our  average. This was due to an ongoing enforcement

level of investment in cyber defences and anticipate case. Costs incurred for the year were £872,000

The result for the year was a net deficit of  these costs will continue tStaff costs remained the most significant ito rise in future years.em  (2016: £613,000). While we do not anticipate

significant further increases in these costs,

current enforcement cases indicate that we £320,000 (2016: £430,000). at 131 full-time employees from 130 in 2016.

of expenditure. The average number of staff

may be experiencing a step change to greater

employed at the JFSC was fairly stable in 2017

levels of expenditure. This could mean that

enforcement costs are sustained at similar

Staff costs achieved budget, even after

levels in future years.

accounting for contractors covering temporary

Regarding capital expenditure for computer systems, the principal investments during the year related

capacity shortages during the year.

to the Central Register of Beneficial Ownership and Control, our CRM system, information security and

core operational systems replacements. £1.6 million was invested in fixed assets with a consequent rise

in annual depreciation charges. The net book value of fixed assets increased to £4.4 million by year end.   (2016: £3.4 million).

Financial position

Our financial reserves consequently decreased to

£5.5 million by 31 December 2017.

While cash balances increased to £8.9 million (2016: £7.7 million), short-term liquidity deteriorated by £0.5 million. After accounting for increases in creditors, net current assets (excluding pre-payments and income received in advance) decreased to £5.9 million (2016: £6.4 million). The decrease was due to investment in systems and IT infrastructure.

The overall financial position remains under pressure, having sustained losses in four of the last five years. Financial reserves remained below target levels, declining to £5.5 million by year end. We have an ongoing requirement to return to the target level of reserves necessary to demonstrate our resilience. To achieve this we need to develop additional sources of income and continue to manage costs very tightly in future years.

Cash balances improved, increasing by £1.1 million to £8.9 million (2016: £2.2 million outflow to £7.7 million), but overall short-term liquidity (net current

Central Register of Beneficial Ownership and Control, Supervision systems and core operational systems replacements accounted for most of the total capital costs.

Depreciation and amortisation charges rose to £799,000, reflecting the extent to which we have invested in systems related to the Change Programme. Depreciation was slightly ahead of budget due to early implementation of completed systems.

Provisions were raised where probable future liabilities are material to ensure that funds are

05.6

   Operations

The great progress  

we have made must be  The primary objecefficiencCommunications, FManadivisions in the egement ty and effeceams haxecution otivacilities, Finance, Human Resourtive oeness ovf our Operations division is te workf their duties.f all JFSC aced to develop and delivtivities. For the past thro facilitatces, ICer ke T and Pry components oe the ee yogramme ears, f  attributed to our people

our Change Programme, while managing systems and supporting other  

2017 was yet another busy year for Operations and a number of milestones were achieved in addition  to meeting business-as-usual requirements and managing internal and external challenges and  opportunities. We continued to lay foundations for our future in what was the penultimate year of  our Change Programme and the culmination of these developments will benefit our stakeholders  from 2018 and beyond.

As ever, recruiting, retaining and developing our staff and leaders of tomorrow to take this work forward  is a priority for the organisation. More information on our people can be found on pages 47 and 48.

There were numerous divisional highlights during the year including:

 Pro-actively engaging with Industry on cyber-security, such as hosting events, undertaking speaking

engagements and sharing intelligence

 Completing a major storage infrastructure upgrade, preparing the organisation  

for the next four years

 Working with an external creative agency to devise and deliver the public awareness campaign  

on investment mis-selling, managing the advertising across television, radio, print and digital  and liaising with local media for the campaign launch and follow-up coverage

 Delivering a new website content management system to support our existing website,  

while preliminary work continued on the new website project which is a key deliverable for 2018

 Delivering Change Programme priorities within budget. This included the Central Register

of Beneficial Ownership and Control programme which led to a new collaborative working environment for Industry and developers on APIs. The team also undertook further development  of the CRM implementation programme to support the work of Supervision and risk  management priorities

 Managing the communications and media relating to the Paradise Papers

 Providing further online payment systems via the JFSC Portal to facilitate the fee collection

processes, making it easier for our stakeholders to interact with us

 Developing our human resources processes to focus on attracting, developing and retaining staff.

The targeted use of social media as a recruitment tool has led to a huge increase in the quality and quantity of applicants seeking to join the JFSC

 Improving further our finance system and controls by the successful deployment of upgraded

Microsoft Finance System

 05.7 Our People 7 200

6

150

5

A key component of our people strategy is employee engagement and we work  4

hard to nurture this, making sure that the JFSC is a stimulating place to work,  100

where people feel valued. 3

2017 was a year of significant investment in our people. We continued to  2

train, develop and educate our staff to the highest possible standard and  50

our development programme focused on professional competency as well  1

as skills and capabilities. This included resilience, communication skills

and leadership training. 0 0

Male 46.56% Average length of service  Full-time employees In addition to utilising external providers, in 2017  Our dedicated absence management strategy   Female 53.44% 5.55 years 131

we appointed a dedicated Training & Competency saw a reduction in both long and short-term

Assessment Manager to facilitate a more structured sickness rates in 2017, thanks to our increased

approach to learning and development. This is  support in this area, as well as our enhanced  initially being rolled out in Supervision and the  wellness programme and improved benefits  benefits are already being realised; our people  scheme. This is yet another indication of our  Key staff survey results

are now being better equipped with the skills  commitment to looking after our people.

they need to be fully effective in their roles. I am proud to say I work for the JFSC  84%

In 2017 our proactive approach to recruitment

While we secured talented individuals from outside focused on making direct approaches to candidates, Working here, I want to do the best work I can  99%

the JFSC, we also continued to build upon our  advertising on social media and, to a lesser extent,

'grow your own' strategy by training and promoting using local recruitment agencies. We also hosted  I care about the future of the JFSC    97%

our trainee population within the organisation.  our own in-house careers event which saw more

During the year a number of staff achieved  than 70 people come through our doors to find

professional qualifications, while others embarked  out more about working at the JFSC from our  

on the initial phases of their studies. Our training  own workforce. Adopting these new approaches  strategy evolved and broadened in 2017 and we  to recruitment has led to a significant decrease  will continue this approach throughout 2018  in local agency costs.

and beyond.

Our headcount remained broadly static  

Linked to this, we made 18 internal promotions  throughout 2017, although we did have a degree  during the course of the year based on performance of turnover which is inevitable in any modern  

and contribution to the organisation, as well as  organisation. While we acknowledge this can  several inter-divisional secondments and job  cause potential disruption for our regulated  rotations, which demonstrate our commitment  community, we believe that the increased  

to career enrichment and staff retention. capability and improvements to our learning  

and development strategy will help deliver  

We consolidated our Performance Management  sustained performance from our workforce. Framework, which was introduced in 2015 and  

sees staff being formally recognised for their  Our efforts to invest more in our people were  contribution with our Pay for Performance  supported by the results of our 2017 internal  strategy. Looking back on 2017, there was a  survey which indicated that our overall staff  significant uplift in performance which is clear  engagement score was 85%, placing us in the  evidence that our strategy is working and  upper quartile of benchmarked organisations.  improving employee engagement. Even though much of the survey was positive, we  

have taken steps to make immediate and tangible  Regarding our commitment to flexible work  improvements to our working environment and  practices, in 2017 we made a number of  culture, listening to our people but also empowering appointments on a reduced hours basis and  them to help bring about positive change. We will  accommodated several existing staff members  be undertaking a follow-up survey to gauge progress requests to work from home or change their  in September 2018.

work patterns to improve work-life balance.

05.8

   Corporate Social  Responsibility

Winning the 2017 Jersey Chartered Institute of Personnel & Development award for our corporate social responsibility initiatives was recognition of the JFSC  staff s commitment to making a difference for local and overseas charities.  Every year our people dedicate their time to numerous initiatives and donate  thousands of pounds in charitable fundraising, all while doing their day job.

2017 was our most successful year to date, with more staff volunteering on  community projects and more than £11,000 raised for worthy causes, including  Mind Jersey, Macmillan Jersey, Children in Need, Jersey Women s Refuge  

and Brighter Futures.

Jersey Mencap was nominated once again as  Staff also developed further the organisation s  our chosen charity for the year. In addition to  programmes for health, well-being and  raising much needed funds to help support  environmental protection with dedicated  

adults and children with learning difficulties,  internal awareness weeks which focused on  

teams from various JFSC divisions volunteered  mental and physical health and practical steps  

at the organisation s Pond Project, helping to  for reducing consumption, reusing and recycling.  develop and maintain the environmental site.  

We also funded and planted a further 42 trees,  As an organisation, we also updated our  

bringing our total to 66 since 2016. Jersey s  environmental policies and introduced further  Lieutenant Governor assisted with the  energy saving and sustainable work practices  

final plantings. including LED office lighting, eco-friendly printing  

paper, and a Commission-wide 'reduced use'  

In 2017 we entered two teams in the Jersey work ethic.

Marathon, with the men crossing the line  

marginally before the ladies, and a gang of  None of this work would be possible without  hirsute heroes tinkered with their taches  the enthusiasm and commitment of our people.  

and buffed their beards for Movember in  The organisation is justifiably proud of the staff s  aid of men s health. efforts in this area, which in turn creates a real  

sense of teamwork and community within the  JFSC. We will continue to facilitate these activities  in the future, enabled by our policy to allow  employees up to two days per year to support  local charitable initiatives.

_ 06

 06 .

06

   Governance

Constitution Delegation of powers

The JFSC is a statutory body established under Article 2 of the Commission Law The Board delegates its powers where  In view of the potential for significant impact which provides that the JFSC shall be governed by a Board of Commissioners  appropriate to one or more Commissioners  on the JFSC s finances or reputation, the

or to a JFSC officer to ensure that the regulator  Board retains certain powers in a number comprising persons with financial services experience, regular users of such  can respond promptly, efficiently and effectively  of areas including:

services, and persons representing the public interest. to events and circumstances.  The revocation of any permit or registration

The Board reviewed its delegation of powers    The final stage of a contested during 2017. Relevant JFSC documents were  enforcement action

assessed in comparison with the UK Financial

 The determination of the amount

Conduct Authority s Board powers delegation

Accountability arrangements document. It was agreed that, while key powers

of a civil penalty

should remain with the Board, some further

The Board also agreed to delegate all litigation

The JFSC is an independent body, accountable to the Article 12 of the Commission Law provides that  delegation to the Executive should occur,

decisions to a standing sub-committee of the

public through the Island s elected representatives, the Chief Minister may give the JFSC general  including the power to refuse applications

Board. The sub-committee consists of the

namely the Chief Minister and the Government of  directions, subject to significant safeguards. for entity authorisation and from individuals

Director General and other Commissioners

Jersey. The relationship with ministers is set out  In 2017 the Chief Minister issued a direction  to be key or principal persons.

in a Memorandum of Understanding to ensure  under Article 12 as a means of implementing the  to be nominated on a case by case basis.

the independence of the JFSC, whilst facilitating  Exchange of Information on beneficial ownership

effective dialogue and working practices.  and control agreement with the UK. The effect is

that officers of the Joint Financial Crimes Unit of   the States of Jersey Police are now given access

to the JFSC s relevant information on beneficial

ownership and control with a view to sharing it  Composition of the Board and appointment of Commissioners with authorised UK requesting authorities.

The Board currently consists of the  The Board then works with the Jersey

There are appropriate safeguards.  Chairman, Deputy Chairman and eight other  Appointments Commission, appoints a

The intention is that the Direction will be  Commissioners, including the Director General.  recruitment firm if appropriate, and advertises withdrawn once the necessary substitute  All of the Commissioners are considered to be  the position. The candidates are evaluated by

legislation has been enacted. independent with the exception of the Director  the Nomination Committee and a recommendation General. A chart of the current Commissioners is  is made to the Board. The appointment of

set out on page 87 & 88 of this Annual Report and  Commissioner Annamaria Koerling was made

further information on their skills, knowledge and  in 2017 following this process.

Governance arrangements experience is detailed on the JFSC s website

www.jerseyfsc.org In the case of a Commissioner being willing to be considered for reappointment for a second term,

The Board believes that high quality effective  The JFSC complies with the vast majority of  the Chairman additionally consults with fellow governance arrangements are essential for  the high-level principles in the Code. For example,  Commissioners are formally appointed by the  Commissioners on whether to recommend the

well-run organisations. It notes that there are  there is a clear division of responsibility between  Government of Jersey after being proposed by  reappointment of the Commissioner concerned no comprehensive Codes or Standards for the  the Chairman and the Director General, no individual the Chief Minister on the recommendation of the  for a second term, taking into consideration the governance of a financial services regulator,  has unfettered power of decision-making, and there full Board of Commissioners. A maximum term  needs of the Board and the contribution that he/ but believes that the UK Corporate Governance  are transparent procedures for the appointment  is set out in the Commission Law. she has made. A person may hold office as a

Code (the Code) is an appropriate benchmark.  and reappointment of Commissioners. The Board seeks to ensure that there is an  Commissioner for a maximum of nine years.

The Code requires Boards to comply with its  appropriate degree of knowledge, experience

high-level principles or explain how the objectives  Additional explanations are set out subsequently  and diversity amongst its members. When a  The Board is currently in the process of recruiting behind those high-level principles have been  on where the JFSC meets the objectives behind  vacancy becomes available, the Board evaluates  as a number of Commissioners will shortly reach met through other arrangements. the high-level principles through an alternative  the current balance of its membership and identifies the end of their second and final terms of office.

mechanism. For example, the JFSC does not have  the characteristics, skills and experience that

shareholders but recognises that it has a wide  would most enhance its effectiveness.

range of stakeholders instead.

06

Board meetings and attendance

The Board met ten times during 2017 to consider Board members consider carefully the  strategy, risk and regular business. All board  potential for conflicts of interest to arise and  members attended all ten meetings with the  excuse themselves should any perceived or  exception of three Commissioners, of whom two  actual conflict be identified.

were unavailable for two board meetings and one  

unavailable for one meeting. The Board also met  

to review and consider enforcement settlement  

cases and contested matters. In addition,  

Commissioners and the Executive met for a  

strategy day and participated in events with  

fellow regulators, Industry representatives,  

ministers and States of Jersey Police.

Board activities

2017 saw a major effort by the JFSC to  The Board found it necessary in 2017 to make  deliver a verified Central Register of Beneficial  proposals for fee increases and a number of  Ownership and Control which is possibly the most  fee consultations were completed during the  comprehensive in any major financial jurisdiction.  year. In the interests of Industry and the Island s  The Board closely monitored progress towards  reputation, the Board is ever keen to ensure that  the 30 June 2017 deadline, which the JFSC met  the JFSC continues to strive to meet the level of  successfully. The Board was pleased with the  regulatory performance expectation amongst   Island-wide support from Industry and non-Industry  international bodies, which today incurs large  stakeholders as well as the interest from other  costs due to the scale and capacity of that  

Crown Dependencies and the UK. expectation. The JFSC continues to face cost  

pressures from responding to ever-increasing  With the support of the Board, 2017 also saw  cyber threats. Significant costs were also incurred  the successful phasing out of Jersey Private  with the automisation of several JFSC systems to  Placement Funds (in addition to Jersey Very  provide an improved service to Industry, which  Private Funds and COBO Only Funds) and the  in 2017 included the introduction of online  introduction of one single private COBO fund  submissions of annual returns and electronic  product known as the Jersey Private Fund. submissions of beneficial owner and controller  

data. The future digitalisation of the JFSC will  The Board remains very aware of potential  continue to be a strategic consideration. cyber-security threats to the JFSC, Industry  

and the Island as a whole. The JFSC conducted a  The Board was encouraged by the results of the  cyber-security survey in 2017 and issued a report  internal staff survey (conducted in March 2017)  containing the results. The survey provided the  the results of which were considered to be very  JFSC with an understanding of threats that  positive given the circumstances of the Change  businesses were facing and how Industry Programme and the introduction of the Pay for  was seeking to control and manage risks. Performance appraisal and bonus structure.  

The encouraging results undoubtedly highlight  Risk strategy continued to play a large part in the  the progress being made regarding the  

Board and Executive team s considerations during  development of the organisation s culture.

2017. The risk capture process is a major step  

forward as the JFSC is now better able to actively  During the latter part of 2017 the Board  

track and record what is happening in Industry  undertook an internal governance effectiveness  and internally. review, facilitated by the Commission Secretary.  

The purpose was to compare the Board with best  The Board receives monthly reports from the  practice consistent with selected areas of the  Executive on various matters and is therefore  Code. A number of opportunities for improvement  able to probe, offer suggestions and make  were identified, including fewer Board meetings  recommendations to address issues as  with greater focus on strategic themes. It was  

they arise. noted that positive changes and progress had  

been made in line with suggestions arising from  the independent review that was undertaken in  late 2015/early 2016.

06

Commissioners remuneration Nomination Committee report

Commissioners receive a fixed annual amount. No additional amounts are paid for participating or chairing subcommittees, dealing with enforcement cases or attending to other matters.

Fees paid to Commissioners were not increased in 2017 following increases in 2015. The existing annual amounts are frozen until 2019 whereupon market rates will be evaluated and the views of the Chief Minister taken into account.

Towards the end of the year, the Board concluded  The Board acts as its own Nomination Committee its annual evaluation of the performance of the  as all but one of the Commissioners are considered Chairman, noting in particular that his activities  to be independent and generally there is insufficient had helped to enhance the visibility and reputation  nomination activity to justify a separate committee of the JFSC both on-Island with local media,  arrangement. Where the requirement to consider Industry, Government ministers and States of  nominations arises, the Board follows a fully inclusive Jersey Police, and off-Island with politicians,  approach in identifying potential candidates, regulators and industry practitioners in London. prioritising relevant knowledge and experience

in relation to their role.

Commissioner Stephan Wilcke retired in July 2017. Annamaria Koerling was approved to act as a Commissioners by members of the States of

Jersey on 26 September 2017, following a thorough process in partnership with the Jersey Appointments Commission and recruitment firm Odgers Berndtson. She was sworn in as Commissioner on

29 September 2017.

Commissioner Ian Wright was reappointed as

a Commissioner for a second term of four years by the Government of Jersey on 18 April 2017.

There were no unexpected vacancies during the year.

Fees paid to Commissioners during the year were as follows: Remuneration Committee report

2017  2016 Deputy Chairman Debbie Prosser continued as  One of the Committee's principal functions is to

Chairman of the Remuneration Committee with  approve the staff salary and bonus allocations for

£  £ Committee members Markus Ruetimann, Michael  the year and this process took place in November

John Averty (Retired 21 Jan 2016)  -  2,223 de la Haye and Annamaria Koerling (appointed to  2017, with the final figures falling within the annual

the Remuneration Committee on 5 October 2017).  budget allocation. Remuneration and bonus

Lord Eatwell of Stratton St. Margaret (Chairman)  150,000  150,000 The Committee's Terms of Reference are available  payments are awarded strictly by reference to John Harris  -  - on the JFSC's website www.jerseyfsc.org performance and the Committee was pleased

Michael de la Haye (Appointed 1 January 2016)  26,000  26,000 to note a successful year at the JFSC, reflected

The Committee met on five occasions during the  by high performance ratings for several individuals Peter Pichler (Appointed 21 January 2015)  26,000  26,000 year and all committee members attended the  in 2017. The Committee assists in approving and

Simon Morris (Appointed 21 January 2015)  36,500  36,500 scheduled meetings. Certain members of the  providing oversight for the awards of bonuses

Executive and the JFSC's Human Resources team  to the highest achieving members of staff,

Debbie Prosser  attended the meetings as required. The remit of  rated exceptional .

(Appointed Deputy Chairman 21 January 2016)  33,350  32,840 the Committee, being fairly broad, encompasses

Markus Ruetimann  36,500  36,500 a wide range of remuneration and human  The Committee has the responsibility of

resources functions. recommending to the Board the salary and

Cyril Whelan  26,000  26,000 bonus award for the Director General. This takes Stephan Wilcke (Retired 31 July 2017)  21,292  36,500 The Committee continued its work of previous place in February each year, simultaneously with

Ian Wright  26,000  26,000 years in assisting, where necessary, with the  the Board s annual assessment of the Director

human resources element of the Change  General s performance. During the year, he received Annamaria Koerling (Appointed 29 September 2017)  9,262  - Programme. The Committee noted that the  total remuneration of £335,000 (2016: £330,000).

 Pay for Performance strategy continued to

390,904  398,563 achieve tangible results in performance  During December 2017, the Committee reviewed management. its Terms of Reference and undertook a review

John Harris is not paid any fees in his capacity as a Commissioner but rather is paid as an Executive  of its own performance.

Director in his capacity as JFSC Director General. (Refer to Remuneration Committee report on page 58

for further details).

A more interactive and engaged regulator

06

Audit Committee report Responsibility for Annual Report and accounts

The Audit Committee is constituted of Commissioners with relevant knowledge, experience and qualifications to carry out an effective audit committee function. All eligible members attended all four meetings.

The Terms of Reference for the Audit Committee are available on the JFSC s website www.jerseyfsc.org

The Committee agreed specific plans by internal and external audit to the coverage of internal financial controls and was able to confirm to the Board that it was reasonable to conclude that such financial controls had been effective during the period.

At the completion of the 2017 audit the committee met with the Audit Partner, Neil Dimes. The committee re-confirmed the auditor s continued independence, reviewed the scope of their audit and discussed the results of their work. The committee probed in detail the accounting for the recognition of leasehold reinstatement provisions that were recorded for the first time this year and the accounting for the portion of the increase in registry fees which have been deferred in accordance with the agreement with the Government of Jersey. The Auditors confirmed that they had no objections to the way that the Finance team had managed the capitalisation

of costs following a recent review.

Over the year, the Audit Committee considered internal financial controls risks. The Committee requested that an exercise be undertaken to determine what fee income or application fees were outstanding or may have been missed.

The Committee also reviewed and confirmed its current Terms of Reference, subject to minor amendments.

In 2017 the Committee was chaired by Ian Wright and its members included Crown Advocate Cyril Whelan and Peter Pichler. The Committee had appropriate financial and other experience detailed below:

 Ian Wright:

Qualified chartered accountant (ACA), former Senior Partner of the Price waterhouseCoopers Global Corporate Reporting Group, former Deputy Chairman of the UK accounting regulator and current member of the Audit Committee of the States of Jersey.

 Crown Advocate Cyril Whelan:

Senior Crown Advocate of the Island of Jersey, current Senior Consultant at Baker & Partners and former Senior Legal Adviser in Jersey s Law Officers Department.

 Peter Pichler:

Qualified chartered accountant (FCA), member of the Canadian Institute of Chartered Accountants, former Chief Operating Officer and Finance Director of Mourant Ozannes, former CEO of Deutsche Bank Offshore (Jersey), former Director of a FTSE 350 company and Chairman of its Audit Committee.

This Annual Report and accounts comply with the requirement in the Commission Law to produce an Annual Report to the Chief Minister and to be presented to Government no later than seven months after the end of the financial year.

The statutory obligations on the Board of Commissioners are not extensive, requiring

only that the annual accounts shall be prepared

in accordance with generally accepted accounting principles and show a true and fair view of the surplus or deficit for the period and state of affairs at the period end. The Board has elected

to prepare the financial statements in accordance with Financial Reporting Standard 102 (FRS 102); the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland.

Taking into account general practice, the Board confirms that it is responsible for:

 Keeping adequate accounting records

sufficient to show the financial position within a reasonable period of time

The Board has reviewed the effectiveness

of the principal financial controls over its financial accounting systems with the internal and external auditors and did not identify any material deficiencies.

The Board has considered the financial position

as shown by these financial statements, the latest management accounts and recent projections of the JFSC s income and costs for the period ended December 2020. This was considered to be an appropriate period in relation to the assessment of the JFSC s future prospects as it forms the

most reliable period over which the JFSC s forecast cash flows, forecast income and expenditures

are based. Forecasting over longer periods is considered to be less accurate due to the

degree of uncertainty in relation to key underlying assumptions. As a consequence, the Board believes it appropriate to prepare the accounts on a going concern basis and is satisfied that there are no significant threats to the viability of the JFSC within the projection period.

The Board has considered the financial statements on pages 67 to 84 and is satisfied that they show a true and fair view of the deficit for the year and the financial position of the JFSC at 31 December 2017.

The Board has considered the Annual Report and, taken as a whole, confirms that it believes the Annual Report is fair, balanced and understandable.

 Preparing the accounts on a going concern basis unless it is inappropriate to presume

that the JFSC will continue in business.

Auditors

BDO LLP (the auditors) undertook the annual audit. They are half way through a three year term, which will come to an end after completion of the 2018 financial statement audit.

For and on behalf of the Board of Commissioners

L Roe

Commission Secretary 7 June 2018

PO Box 267

14-18 Castle Street St Helier

Jersey

Channel Islands JE4 8TP

_  0p.617 . Independent AReport tMinistStat es oer o0o the Chief f Jersef theyuditor s   7p.62 Annual Report 2017

[a] 07 . Independent Auditor s  Key audit matters

Report to the Chief  Kperoyf aeussdiiot nma al tjutedrgsmaeren tt,hwoseere moaf tmteor ss t t shiagt n, ii fin c oaunrc  e aTonuhdre sadeuir dmeictatotinft egthrsteh wfie neeraffeno acrditasdl  sroe tfas ttsheeemd e  ei nnng ttahsgeae  scmoaenwntehtx ottel  eoa,fm. Minister of the ic[b]onusr osrnrueoerstn asdteu upddee  i r trti iosoo kffd rs t aha ounef dd  fim) niwna act enelucir ddi ia aeel ln  mstthtifii aes ets emdt m,aoit nese cntm lstusei dgnoinnt fi  g fi( tw hctheah one stth eer  provide a separate opinion on these matters.

and in forming our opinion thereon, and we do not

 which had the greatest effect on: the overall audit

strategy, the allocation of resources in the audit;

States of Jersey

Key Audit Matter   How we addressed

the matter in our audit

Revenue recognition existence around year end

Revenue consists of regulatory and registry fees,  For regulatory fees we reconciled the revenue in the

for which annual fees run from different dates  financial statements to system generated reports Opinion throughout the year depending on the specific  containing details of the licences held. We tested

fee. There is a risk that revenue recognition policies  these reports through performing walkthroughs We have audited the financial statements of Jersey In our opinion the financial statements: are not appropriate, revenues in the accounts do of the relevant systems. We also tested on a sample Financial Services Commission (the JFSC) for the  not exist, or that revenue may be incorrectly basis that fees for regulated entities had been year ended 31 December 2017 which comprise    give a true and fair view of the state of the  recorded in the wrong year resulting in a  calculated in accordance with fee notices published the income and expenditure account, the balance  JFSC s affairs as at 31 December 2017 and  misstatement of revenue. by the JFSC, agreed to payment, and recognised sheet, the statement of changes in accumulated  of its deficit for the year then ended in the appropriate period.

reserves, the statement of cash flows and notes  The details of the accounting policies We recalculated deferred income to ensure it had to the financial statements, including a summary    have been properly prepared in accordance  applied during the year are given in note 1 been correctly accounted for in accordance with the of significant accounting policies. with United Kingdom Generally Accepted  to the financial statements. JFSC s accounting policies, and that the appropriate

Accounting Practice proportion of fees had been deferred. We tested a The financial reporting framework that has been  sample of regulatory fees and receipts processed applied in their preparation is the Financial Services  have been prepared in accordance with the  specifically around year end to ensure the related Commission (Jersey) Law 1998 and United Kingdom requirements of the Financial Services  income had been recognised in the appropriate period. Accounting Standards, including Financial Reporting Commission (Jersey) Law 1998.

Standard 102 The Financial Reporting Standard  For registry fees we tested on a sample basis that in the United Kingdom and Republic of Ireland  fees had been calculated in accordance with fee (United Kingdom Generally Accepted  notices published by the JFSC and agreed to payment.

Accounting Practice). We recalculated annual return income based on

the number of registered companies. We tested

a sample of registry fees and receipts processed specifically around year end to ensure the related

Basis for opinion income had been recognised in the appropriate period.

We conducted our audit in accordance with  ethical requirements that are relevant to our audit

International Standards on Auditing (UK) (ISAs  of the financial statements in the UK, including  Completeness of income

(UK)) and applicable law. Our responsibilities  the FRC s Ethical Standard, and we have fulfilled  

under those standards are further described in  our other ethical responsibilities in accordance  

Given the number of income streams and the We tested the completeness of regulatory and the Auditor s responsibilities for the audit of the  with these requirements. We believe that the

ad-hoc nature of some of these fees, there is registry income throughout the year by selecting financial statements section of our report. We are  audit evidence we have obtained is sufficient

a risk that certain fees had not been billed a sample of Financing Statement numbers and independent of the JFSC in accordance with the  and appropriate to provide a basis for our opinion.

to the customer, or that the income had company numbers and vouching to supporting been recognised in the incorrect period due fee income, ensuring that the fees had been

p.65 Independent Auditor s Report p.66 Annual Report 2017

07.

Key Audit Matter   How we addressed  Other information

the matter in our audit

The Commissioners are responsible for the other  other information is materially inconsistent

information. The other information comprises the with the financial statements or our knowledge Annual return fee surplus information included in the annual report, other  obtained in the audit or otherwise appears

than the financial statements and our auditor s to bematerially misstated. If we identify such During the year, an increase in the annual return fee  We reviewed the JFSC s paper on the accounting  report thereon. Our opinion on the financial  material inconsistencies or apparent material per entity led to surplus funds being received by the  treatment of the surplus. We obtained and reviewed statements does not cover the other information  misstatements, we are required to determine JFSC. The surplus funds have, on agreement with the all correspondence on this matter, including third  and, except to the extent otherwise explicitly  whether there is a material misstatement in the States of Jersey, been retained by the JFSC, partly  party confirmation of the position at year end. stated in our report, we do not express any  financial statements or a material misstatement as an agreed recurring uplift in the JFSC s portion of form of a ssurance conclusion thereon. of the other information. If, based on the work the total Annual Return fees, and otherwise allocated We reviewed the accounting entries that had been  we have performed, we conclude that there is a to various projects and expenditure, including the  made and compared those to our expectations  In connection with our audit of the financial  material misstatement of this other information, development of the Beneficial Ownership Registry  having reviewed all available documentation. statements, our responsibility is to read the other we are required to report that fact. We have which took place during the year. information and, in doing so, consider whether the  nothing to report in this regard.

A risk arose over the accounting treatment as a

degree of judgement was involved to ensure that   the accounting treatment reflected the substance

of the agreement with the States of Jersey. Responsibilities of Commissioners

The details of the accounting policies applied during As explained more fully in the statement of  In preparing the financial statements, the

the year are given in note 1 to the financial statements. Commissioners responsibilities, the Commissioners  Commissioners are responsible for assessing

Note 12 to the financial statements provides further are responsible for the preparation of the financial  the JFSC s ability to continue as a going concern, information on the treatment of the surplus funds. statements and for being satisfied that they give a disclosing, as applicable, matters related to going

true and fair view, and for such internal control as  concern and using the going concern basis of

the Commissioners determine is necessary to accounting unless the Commissioners either enable the preparation of financial statements  intend to liquidate the JFSC or to cease operations, that are free from material misstatement,  or have no realistic alternative but to do so.

Our application of materiality whether due to fraud or error.

We apply the concept of materiality both in planning  Commissioners, and is consistently referenced and performing our audit, and in evaluating the  within the annual report. Average income was  effect of misstatements. In order to reduce to an  used to calculate materiality to ensure any Auditor s responsibilities for the audit of the financial statements appropriately low level the probability that any  significant increases in fees or aspects of

misstatements exceed materiality, we use a  non-recurring income did not bring materiality

lower materiality level, performance materiality, to an unacceptably high level. Our objectives are to obtain reasonable assurance  Misstatements can arise from fraud or error and

to determine the extent of testing needed.  about whether the financial statements as a whole are considered material if, individually or in the Importantly, misstatements below these levels  We determined performance materiality to be  are free from material misstatement, whether due  aggregate, they could reasonably be expected to will not necessarily be evaluated as immaterial as  £193,575 (2016: £189,000). In determining this in to fraud or error, and to issue an auditor s report  influence the economic decisions of users taken

we also take account of the nature of identified  both the current and prior year, we based our  that includes our opinion. Reasonable assurance  on the basis of these financial statements.

misstatements, and the particular circumstances  assessment on a level of 72.5% of materiality.  is a high level of assurance, but is not a guarantee

of their occurrence, when evaluating their effect Insetting the level of performance materiality  that an audit conducted in accordance with ISAs  A further description of our responsibilities for o n the financial statements we considered a number of factors including  (UK) will always detect a material misstatement  the audit of the financial statements is located

the expected total value of known and likely  when it exists. onthe Financial Reporting Council s website at:

We determined planning materiality to be  misstatements (based on past experience  www.frc.org.uk/auditorsresponsibilities.

£252,000 (2016: £209,000) and final materiality for  and other factors) and management s attitude  This description forms part of our auditor s report.

the financial statements as a whole to be £267,000  towards proposed adjustments.

(2016: £252,000). In determining this in both the current and prior year, we based our assessment  We agreed with the Audit Committee that we

on a level of 1.75% of average income over a 3 year  would report to the Committee all audit differences Use of our report

period. We used income as a benchmark as this  in excess of £13,350 (2016: £12,000) as well as

is the primary Key Performance Indicator used to  differences below that threshold that, in our view, This report is made solely to the Chief Minister  no other purpose. To the fullest extent permitted

address the performance of the business by the  warranted reporting on qualitative grounds. in accordance with Article 21(3) of the Financial by law, we do not accept or assume responsibility

Services Commission (Jersey) Law 1998. Our audit  to anyone other than the JFSC and the Chief Minister, work has been undertaken so that we might state for our audit work, for this report, or for the

to the Chief Minister those matters we are required opinions we have formed.

to state to them in an auditor s report and for

An overview of the scope of our audit

Our audit of the JFSC was undertaken to the  Our audit approach was developed by obtaining

materiality level specified above and was  an understanding of the JFSC s activities and  BDO LLP 6 July 2018

performed at the JFSC s office in Jersey. theoverall control environment. Based on this  Chartered Accountants

understanding we assessed those aspects of  Bristol BDO LLP is a limited liability partnership registered

the JFSC s transactions and balances which were  United Kingdom in England and Wales (with registered number OC305127). most likely to give rise to a material misstatement.

_ 08

 0 8 . Financial Stat ements

08.

   Financial Statements

Income and expenditure account

For the year ended 31 December 2017

2017  2016 Note  £'000  £'000

Regulatory income

Regulatory fee income 4  12,146  11,560 Registry fee income  5  4,248  3,206

Total regulatory income 16,39  414,766

Other income  6  192  378 Interest income  19  43

Total income  16,605  15,187

Expenses

Staff costs  7  (11,572)  (11,102) Computer Systems (1,172)  (1,055) Premises costs (782)  (758) Professional services (729)  (676) Investigation & Litigation  (872)  (613) Other operating costs (653)  (510) Depreciation, amortisation and impairments (799)  (484) Staff learning and development (191)  (217) Travel costs  (155)  (202)

Total expenses (16,925)  (15,617) Deficit for the year  8  (320)  (430)

All the items dealt with in arriving at the net deficit relate to continuing operations.

There are no recognised gains and losses in the current and preceding year other than those included in the net deficit above, therefore no separate statement of other comprehensive income and expenditure has been presented.

Balance sheet as at 31 December 2017

2017  2017  2016  2016 Note  £'000  £'000  £'000  £'000

Fixed Assets

Intangible assets 9  3,694  2,899 Tangible fixed assets 10  720  487

4,414  3,386

Current Assets

Trade receivables  768  454 Sundry debtors  102  46 Prepayments  923  943 Cash and bank balances 11  8,886  7,740

10,679  9,183 Total Assets  15,093  12,569

Creditors - Amounts falling due within one year

Fee income received in advance 5,441  4,753 Creditors  12  3,628   1,717 Provisions  13  210  152

9,279   6,622 Total Assets less Current Liabilities 5,814  5,947

Creditors - Amounts falling due after one year

Provisions  13  303   116 Total Assets less Total Liabilities 5,511   5,831

Represented by

Accumulated reserves 5,511  5,831

The notes on 72 to 84 form an integral part of the financial statements.

The financial statements on pages 67 to 84 were approved by the Board of Commissioners on 7 June 2018, and signed on its behalf by:

The notes on pages 72 to 84 form an integral part of the financial statements.

John Eatwell  John Harris Chairman   Director General

08.

Statement of changes in accumulated reserves

Accumulated reserves

£'000 Balance at 1 January 2016  6,261

Deficit for the year  (430)

Balance at 31 December 2016 5,831

Balance at 1 January 2017  5,831 Deficit for the year  (320)

Balance at 31 December 2017 5,511

Statement of cash flows

For the year ended 31 December 2017

2017  2016 £'000  £'000

Cash flows from operating activities

Net deficit for the year (320)  (430) Interest receivable (19)  (43) Depreciation, amortisation and impairment charges 799  484 Utilisation of provision  (111)  (267) Movements in provision for long leave 112  80 Deferred rental incentive 6  (15) (Increase) in debtors and prepayments (350)  (556) Increase in income received in advance 688  129 Increase in creditors 1,906  203 Net cash generated from/consumed by operating activities 2,711  (415)

Cash flow from investing activities

Interest received 19  48 Purchases of tangible and intangible fixed assets (1,584)  (1,851) Net cash used in investing activities  (1,565)  (1,803)

Net increase/(decrease) in cash and bank balances 1,146  (2,218) Cash and bank balances at 1 January 7,740  9,958 Cash and bank balances at 31 December 8,886  7,740 Cash and bank balances consists of:

Cash at bank and in hand 205  205 Short term deposits  8,681  7,535

Cash and bank balances 8,886  7,740

The notes on pages 72 to 84 form an integral part of the financial statements.

 Notes to the

Financial Statements

For the year ended 31 December 2017

01. Significant accounting policies Basis of preparation

The financial statements have been prepared in  The financial statements contain information accordance with FRS 102, the Financial Reporting about the JFSC as an individual entity, and do not Standard applicable in the United Kingdom and  include consolidated financial information as the the Republic of Ireland. parent of a group. The JFSC is exempt from the

requirement to prepare consolidated financial

The financial statements are prepared on a  statements because the inclusion of its subsidiary going concern basis, under the historical  is not material for the purpose of giving a true and cost convention. fair view.

The principal accounting policies applied in preparation of the financial statements are set out below. These policies have been consistently applied in all the years presented.

Income

Income is accounted for on an accruals basis.  Recoveries of enforcement costs are accounted Regulatory and Registry annual fees received  for only when they have been awarded and it has in advance are recognised as income on a  become virtually certain that they will be received. straight-line basis over the relevant period.  Interest received on bank deposits is accrued Annual registry fees and revenue from the  on a time basis by reference to the principal operation of Government of Jersey registers  outstanding and the effective interest rate

include only the share of income attributable  applicable. Sundry income is recognised on

to the JFSC. receipt as this approximates the timing of

the services provided.

Revenue from the rendering of services, including the design, development and operation of Government of Jersey Registers, is recognised based on the stage of completion method. Where uncertainty exists in relation to the stage of completion, revenue recognition is limited to the extent to which costs have been incurred.

Expenses

All expenses are accounted for on an accruals basis.

08.

Foreign currency Intangible assets

Foreign currency balances are translated to  date of the transaction. Profits and losses on  Intangible assets are stated at historical cost less  Gains and losses on disposal of intangible assets Sterling at the rate of exchange ruling on the  foreign exchange are included in the income  accumulated amortisation and any impairment  are determined by comparing any proceeds with last business day in the financial period. Foreign  and expenditure account. losses. Historical cost includes expenditure that  their carrying amount and are recognised in the currency transactions are translated into  is directly attributable to the development of the  income and expenditure account.

Sterling at the rate of exchange ruling on the  intangible asset. Subsequent maintenance and

support costs are charged to the income and  In the requirements gathering phase of an internal expenditure account during the period in which  systems development project, it is not possible to they are incurred. demonstrate that the project will generate future economic benefits and hence all expenditure

Amortisation of intangible assets is calculated so  incurred is recognised as an expense when

Investigation and litigation costs as to write off their cost on a straight-line basis  incurred. Systems developments are recognised

over their expected useful lives. as fixed assets from the development phase of Investigation and litigation costs are recognised as incurred. No provision is made for the cost  a project if, and only if, certain specific criteria

of completing current work unless a present obligation exists at the balance sheet date. The estimated useful lives used for this  are met in order to demonstrate the system will purpose are: generate probable future economic benefits and

that its cost can be reliably measured. If it is not

Computer software  Up to 7 years possible to distinguish between the requirements gathering phase and the development phase, the

expenditure is treated as if it were all incurred in Cash and bank balances The cost of computer software in respect of  the requirements gathering phase only.

major systems is capitalised within intangible

Cash and bank balances comprise cash in hand, deposits and other short-term liquid investments that  assets. All other computer software costs are

are readily convertible to a known amount of cash, are subject to an insignificant risk of changes in value,  expensed as incurred. Computer systems under

controlled by the organisation and to which the organisation attaches equitable ownership. development are not amortised until the system

has been completed and is ready for use.

Government registers Impairment

A financial asset is recognised in relation to the cost of design, development and operation of Assets that are subject to depreciation and  Cashflows from registry and supervisory Government registers on an accrual basis, provided such costs are contractually recoverable. amortisation are assessed at each reporting  income are separately identifiable and assets

date to determine whether there is any indication  are allocated between these cashflows based that the assets are impaired. Where there is an  on their operational application.

indication that an asset may be impaired, the

carrying value of the asset is tested for impairment.  Non-financial assets that have been previously

An impairment loss is recognised for the amount  impaired are reviewed at each reporting date to Tangible fixed assets by which the asset s carrying amount exceeds its  assess whether there is any indication that the

recoverable amount. The recoverable amount is  impairment losses recognised in prior periods Fixed assets are stated at historical cost less  The estimated useful lives used for this purpose are: the higher of an asset's fair value less costs to sell  may no longer exist or may have decreased.

accumulated depreciation and any impairment  and value in use. For the purposes of assessing

losses. Historical cost includes expenditure that   Motor vehicles   3 years impairment, assets are grouped at the lowest

is directly attributable to bringing the asset to   Office furniture, fittings  levels for which there are separately identifiable

the location and condition necessary for it to be  and equipment   3 to 5 years cash flows.

capable of operating in the manner intended by

management. Computer equipment  3 to 5 years

Leasehold improvements Over the lease period

Repairs and maintenance are charged to the

income and expenditure account during the

period in which they are incurred.

Depreciation of fixed assets is calculated so

as to write off their cost less estimated residual value on a straight-line basis over their expected useful lives.

Gains and losses on disposals of fixed assets are  Leases

determined by comparing the proceeds with the

carrying amount and are recognised in the income  Rent payable under operating leases is charged  For leases entered into after the date of adoption and expenditure account. to the income and expenditure account on a  of FRS 102, lease incentives received to enter into straightline basis over the term of the lease. operating lease agreements are released to the

income and expenditure account over the full The JFSC has taken advantage of the exemption  term of the lease.

available on transition to FRS 102, which allows

lease incentives on leases entered into before the

date of transition to continue to be released to the

income and expenditure account on a straight-line

basis over the period to the first lease break.

08.

Financial contributions   02. Critical accounting judgements and key sources of estimation uncertainty

Financial contributions received for the development and implementation of specific Government policies and objectives are accounted for in accordance with the guidance provided for government grants. Contributions received are recognised based on the accrual model and are measured at the fair value of the assets received. Contributions are classified as relating to revenue

or the development of assets. Contributions  Estimates and judgements are continually evaluated and are based on roelating tver the period in which the ro revenue are recognised as income elated costs  historical experience and other factors, including expectations of future

are recognised. Contributions related to the  events that are believed to be reasonable under the circumstances. development of assets are initially recognised

as deferred income and are recognised in income

on a straight line basis over the expected useful

life of the related asset.

Key accounting estimates and assumptions

Management is required to make estimates and assumptions concerning the future. The resulting accounting estimates may not equal the actual outcomes. The estimates and assumptions that have

a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within Government grants the next financial year are outlined below.

Amounts received from the Government of Jersey are accounted for under the accrual model.

Theseamounts are measured at their fair value and are classified as relating to revenue.

Amounts received are recognised as income over the period in which the related costs are incurred.

Provision for long leave entitlements

The balance of the provision for long leave has been determined based on a range of estimates

regarding the probability that the related leave entitlement will vest and be taken. This represents Pension costs management s best estimate regarding the expected future cash flows related to long leave

entitlements.

The costs of defined contribution pension schemes are accounted for on an accruals basis.

The costs of annual contributions payable to defined benefit schemes operated by the States of Jersey

are accounted for on an accruals basis because the JFSC is unable to obtain the information necessary

to apply defined benefit scheme accounting (see note 17). Provision for premises reinstatement

The balance of the provision for premises reinstatement has been determined based on the

applicable square footage of leased premises and the rate per square foot for such reinstatement

works published by the Royal Institute of Chartered Surveyors. The provision is adjusted annually Annual leave pay accrual based on movements in the published rate per square foot. This represents management s best

estimate regarding the expected future cash flows related to these costs. The balance is discounted

if the effect would be material.

A liability is recognised to the extent of any untaken annual leave entitlement which has accrued at

the balance sheet date and can be carried forward to future periods. The liability is measured at the

undiscounted cost of untaken annual leave that has accrued up to the balance sheet date.

Useful lives and residual values

Provision for long leave entitlements

Provision is made for the accrued entitlements to long leave as at the balance sheet date, even when such entitlements may not yet have vested. The provision is increased each year as additional entitlements are earned. The provision is decreased when long leave entitlements are taken and when such entitlements expire.

Fixed assets are depreciated over their estimated useful lives, taking into account residual values

where appropriate. The actual lives and residual values are assessed annually and may vary

depending on a number of factors. In re-assessing useful lives and residual values, a wide range The provision represents management s best  of factors are taken into account. Changes in these assessments are accounted for prospectively estimate of the amounts expected to be paid out, and therefore only have a financial effect on current and future periods.

taking into account long leave entitlements that

may be lost when an employee leaves the

employment of the JFSC. The provision is

discounted if the effect would be material.

3. Taxation

The JFSC is exempt from the provisions of the Income Tax (Jersey) Law 1961, as amended.

Provision for premises reinstatement

Provision is made for the expected cost of  The provision will be reduced when related costs reinstating office premises to their original  are incurred in future periods. Provisions for condition on termination of existing lease  premises reinstatement are discounted if the agreements. The balance represents management s  effect would be material.

best estimate of amounts to be paid for reinstatement.

The provision is assessed each year based on

changes in the expected cost of restoration and

discount rates where applicable.

08.

4. Regulatory fee income   06. Other income

2017  2016 £'000  £'000

Banking  1,489  1,482 Funds  5,310  4,976 Insurance companies 698  672 General insurance mediation 108  104 Investment business 1,355  1,228 Trust companies 2,545  2,498 Designated non-financial businesses and professions 599  557 Recognised auditors  19  26 Money services business 23  17

12,146  11,560

 07.

2017  2016 £'000  £'000

Income from hosted events  18  7 Investigation and litigation recoveries*  -  76 Registry development services  67  283 Recognised financial contribution income  71  - Sundry income  36  12

192  378

*As part of its regulatory responsibilities, the JFSC carries out investigations and enters into legal actions from time to time, the costs of which may be significant. In a few cases, some or all of the JFSC s costs may be recoverable.

Staff costs

2017  2016 £'000  £'000

Staff salaries  9,401  9,026 Commissioners' fees  391  399

5. Registry fee income Social security contributions  438  429 Registry fees arise from the operation of the Companies Registry, the Business Names Registry, the Pension contributions  740  765

Registry of Limited Partnerships, the Registry of Limited Liability Partnerships, and the Security Interests Permanent health and medical insurance  325  286 Register.

Other staff costs  150  149 Registry fees include annual return fees. The amount of the annual return fees payable to the Registry Long leave provision   112  80

include amounts collected on behalf of and remitted to the States of Jersey. Annual lea ve pay accrual   15  (32)

The number of annual returns received during the year was:

11,572  11,102

2017  2016 Annual returns received  33,515  34,052

2017  2016 £'000  £'000

Total annual return fee income  7,023  5,108 Less: collected on behalf of the States of Jersey  (5,025)  (3,916)

Retained by the JFSC  1,998  1,192 Other Registry income  2,250  2,014

Total Registry income  4,248  3,206

Contributions to staff pension schemes are payable monthly to pension scheme administrators. Contributions amounting to £95,000 (2016: £Nil) were payable to the schemes at year end. The average number of staff employed during the year was 131 (2016: 130).

8. Deficit for the year

Deficit for the year is stated after including the below:

2017  2016 £'000  £'000

Depreciation of tangible fixed assets  251  210 Amortisation of intangible assets  548  274 Foreign exchange differences  -  (2) Contributions to employee pension schemes (refer to note 17) 740  765 Operating lease expenditure  537  520 Audit fees  22  25

08.

9. Intangible assets   11. Cash and bank balances

Computer

systems

under  Computer

development systems  Total

£'000  £'000  £'000

Cost

Balance at 1 January 2017  1,106  4,570  5,676 Additions  1,392  15  1,407 Transfer to tangible fixed assets (64)  -  (64) Completed computer systems (1,307)  1,307  - At 31 December 2016  1,127  5,892  7,019

Amortisation

Balance at 1 January 2017  -  (2,777)  (2,777) Charge for the year  -  (548)  (548) At 31 December 2017  -  (3,325)  (3,325)

Net book value at 31 December 2017 1,127  2,567  3,694 Net book value at 31 December 2016 1,106  1,793  2,899

The principal expenditure during the year related to the development of the Central Register of Beneficial Ownership and Control, further development of the relationship management system related to the Change Programme and core information systems replacements and upgrades.

10. Tangible fixed assets

Office

furniture,

fittings & Leasehold Computer Motor

equipment improvements equipment vehicles Total

£'000  £'000  £'000  £'000  £'000

Cost

Balance at 1 January 2017  774  -  1,409  10  2,193 Additions  29  295  84  13  421 Transfer f rom intangible assets -  -  64  -  64 Disposals  (43)  -   (2)   (9)  (55) At 31 December 2017  760  295  1,555  13  2,623

Accumulated depreciation

Balance at 1 January 2017  (705)  -  (992)  (9)  (1,706) Charge for the year  (38)  (44)  (167)  (2)  (251) Disposals  43   -   2   10   54 At 31 December 2017   (700)  (44)  (1,157)  (2)  (1,903)

Net book value at 31 December 2017  60   251   398   11   720 Net book value at 31 December 2016  69  -  417  1  487

2017  2016 £'000  £'000

Current accounts  201  203 Deposit accounts  8,681  7,535 Petty cash  4  2

Cash and cash equivalents at bank  8,886  7,740

The JFSC s accumulated financial reserves less the funds invested in fixed assets and working capital are invested in bank deposit accounts. In order to mitigate the credit risk, these deposit accounts are maintained with five different banks.

Included in deposit account balances are funds amounting to £678,000 which have been identified as relating to Deferred registry fees (refer to Note 12).

12. Creditors

2017  2016 £'000  £'000

Trade creditors  1,333  979 Accruals  705  518 Deferred rental incentive  82  76 Financial contributions  422  - Deferred registry fees*  678  - Sundry creditors  408  144

3,628   1,717

* The JFSC has agreed with the States of Jersey that a portion of the additional registry fees charged, with effect from 1 January 2017, will be segregated and used for certain current and future enhancements to the Registry and its systems.

In the event of a sustained surplus of such deferred fees the residual amount is likely to be remitted to the States of Jersey at a future date. The balance represents the surplus of such fees collected in 2017 that exceeded the agreed expenditure on registry systems in the year.

08.

13. Provisions for liabilities   15. Financial instruments

The JFSC had minimum lease payments under non-cancellable operating leases as set out below:

Provision for  Reinstatement

long leave Provision Total

£'000  £'000  £'000 Balance at 1 January 2016  455  -  455

Amounts provided for during the year 173  -  173 Reversal of unused provision (93)  -  (93) Utilised during the year  (267)  -  (267) Balance at 31 December 2016 268  -  268

Amounts provided for during the year 120  244  364 Reversal of unused provision (8)  -  (8) Utilised during the y ear  (111)  -  (111)

Balance at 31 December 2017 269  244  513

Falling due within one year  210  -  210 Falling due after one year 59  244  303

269  244  513

Provision for long leave

The provision for long leave relates to the expected cost of long leave entitlements that have accrued up to balance sheet date. Long leave entitlements may continue to accrue up to June 2043 if all vesting conditions are satisfied up to that period.

Provision for premises reinstatement

The provision relates to the expected cost of reinstatement of office premises to their original condition (at commencement date) on termination of premises leases. The balance at year end has been determined based on a guideline rate of £12 per square foot as determined by the Royal Institute of Chartered Surveyors. The provision is adjusted annually based on movements in the guideline rate.

2017  2016 £'000  £'000

Financial assets

Financial assets measured at amortised cost  9,756  8,243 Financial liabilities

Financial liabilities measured at amortised cost  (2,277)  (1,014)

Financial assets measured at amortised cost comprise cash at bank and in hand, trade debtors and other debtors.

Financial liabilities measured at amortised cost comprise trade creditors and other creditors, accruals and deferred registry fees. Any amounts due in respect of taxes and social security have been excluded.

16. Premises reinstatement provision

During the year the expected future costs required The financial effect of raising this provision is an to reinstate existing leased office premises to their  increase in provisions of £208,000, an increase original condition, when the leases are terminated,  in the net book value of fixed assets of £169,000 became material to the overall financial position.  and an increase in the depreciation charge

A provision for reinstatement was raised as at  of £39,000.

1 January 2017 to reflect management s best

estimate of amounts to be paid for reinstatement

of office premises.

14. Commitments under operating leases

The JFSC had minimum lease payments under non-cancellable operating leases as set out below:

2017  2016 £'000  £'000

Not later than 1 year  560  516 Later than 1 year but not later than 5 years  2,015  2,063 Later than 5 years  -  172

2,575  2,751

Rentals payable under this operating lease are subject to periodic review and are based on market rates. The most recent rent review was agreed during the year. The resulting rental increase was effective from May 2016. The next rent review is due to commence in 2019.

08.

17. Pension costs

JFSC 2012 Staff Pension Scheme

In 2012, the JFSC closed the JFSC s Staff Pension Scheme and replaced it with a new defined contribution scheme, the JFSC 2012 Staff Pension Scheme. The new scheme is open to staffwhose initial employment by the JFSC occurred after 1 January 1999. Members interests in the previous scheme were automatically transferred to the JFSC 2012 Staff Pension Scheme. All transfers of interests were

completed in 2013.

 18.

The JFSC 2012 Staff Pension Scheme s assets are held separately from those of the JFSC, under the care of an independent trustee.

Salaries and emoluments include pension contributions for staff to the schemes of £716,850 (2016: £739,444). Contribution rates have remained unchanged. Aggregate contributions decreased

due to changes in membership numbers, ages

and employment grades.

Related party transactions

The JFSC has been established in Law as an  Remuneration of the Commissioners and the independent financial services regulator and as  Director General is set out on page 57 of this such the States of Jersey is not a related party. Annual Report. There were no other transactions

with key management personnel other than

Key management personnel include the  reimbursement of expenses incurred for Commissioners, the Director General and  JFSC purposes.

Executive Directors who together have

authority and responsibility for planning,

directing and controlling the activities of

the JFSC. Total compensation paid to members

of key management personnel during the year

was £2.2 million (2016: £2.4 million).

Public Employees Contributory Retirement Scheme

Staff employed by the JFSC before 1 January 1999 are members of the Public Employees Contributory Retirement Scheme (PECRS) which is a final salary scheme. The assets are held separately from

those of the States of Jersey. Contribution rates

are determined by an independent qualified

actuary, so as to spread the costs of providing benefits over the members expected

service lives.

Salaries and emoluments include pension contributions for staff to this scheme amounted

to £23,449 (2016: £25,531). The average contribution rate paid by the JFSC during the year was 13.6% (2016: 13.6%) of salary. The contribution rate has not been changed following the actuarial valuation because the valuation is within the funding parameters specified in the related regulations.

Actuarial valuations are performed on a triennial

basis, the most recent published valuation being

as at 31 December 2016, reported a deficit of

£68.5 million. The next actuarial valuation will    19. be undertaken to value the underlying scheme

assets as at 31 December 2019. No account has

been taken of the JFSC s potential share of this

deficit because the scheme is accounted for

as if it is a defined contribution scheme.

Copies of the latest Annual Accounts for the scheme, and for the States of Jersey, may be obtained from the States Treasury, Cyril Le Marquand House, The Parade, St Helier JE4 8UL.

Subsidiary undertakings

At 31 December 2017, the JFSC had an interest in one wholly owned subsidiary company (2016: one wholly owned subsidiary company). Further details are outlined below:

Name:  JFSC Property Holdings No.1 Limited Country of incorporation:  Jersey % of shares held:  100% Principal activity:  Property lease holding

The JFSC is unable to identify its share of the  JFSC Property Holdings No.1 Limited entered into an agreement on behalf of the JFSC to lease the JFSC s underlying assets and liabilities of PECRS in  office premises. All expenditure incurred by the Company is borne by the JFSC. The Company has no accordance with FRS 102 (Section 28) and  assets or liabilities and therefore has not been consolidated in the financial statements.

accordingly accounts for contributions to

the scheme as contributions to a defined

contribution scheme.

 09 . Appendices

 09

 09 . Appendices 01

Commissioners 2017

Lord Eatwell Chairman

Debbie Prosser Deputy Chairman

John Harris Director General

Michael De la Haye Annamaria Koerling Simon Morris Peter Pichler Markus Ruetimann Cyril Whelan Ian Wright Commissioner Commissioner Commissioner Commissioner Commissioner Commissioner Commissioner

09.

   Appendices 02

Executives & Heads  of Unit 2017

John Harris Director General

Mark Sumner Jill Britton John Everett Barry Faudemer Mike Jeacock Julian Lamb

Director of Supervision  Director of Supervision Deputy Director General Director of Enforcement Chief Operating Officer Director of Registry and Risk

Roy Geddes Tony Shiplee David Porter ** Caroline Morgan* Hamish Armstrong*

Head of FSB and TCB Head of IB, FSB and  Acting Director of Policy Acting Head of Financial  Acting Head of Financial

Insurance Crime Policy Crime Policy

Andrea John Darren Boschat Phil Robson

Head of Banking, TCB  Head of Supervisory Risk Acting Head of Policy and DNFBP

 As at 31 December 2017

* Andrew Le Brun currently on secondment with the Government of Jersey

Jason Carpenter Sam Davison

**  Mike Jones currently on Head of Supervision  Head of Central    Industry secondment

Examination Unit Support Unit

Kerry Petulla Sarah Kittleson Emma Mathew Wanda Adam

Head of Enforcement Head of Programme  Head of Communications Head of Registry Policy

Management Office and Service Delivery

Matt Ebbrell Stuart Keir Dawn Kennedy

Head of Human Resources Head of Finance Head of Registry

Operations and Processing

Denis Philippe Mark Syvret

Head of ICT Head of Facilities

10.

 Notes

International regulatory bodies with which the JFSC is either  associated or an active member:

1. Full member of:

 International Organization of Securities Commission (IOSCO)

 Group of International Finance Centre Supervisors (GIFCS)

 International Association of Insurance Supervisors (GIICS)

 International Federation of Independent Audit Regulators (IFIAR)

2. Participates fully in the processes, and is subject to the procedures, of:

 Committee of Experts on the Evaluation of Anti-Money Laundering Measures  

and the Financing of terrorism (MONEYVAL)

3. Participates in the work of the following through its membership of GIFCS:

 Basel Committee on Banking Supervision (BCBS)  Financial Action Task Force (FATF)

p.93 Annual Report 2017

11.

 Glossary  Building

  confidence   AIFMD AML/API  CFT  AltAnti-moneApplication PrInternational seernative Iny Laundering / Countv ogramme Intestment Ft of banking standarund Manaerfaceering Financial Tgers Dirds ectiveerrorism  in the

Basel III CIPD COBO CRM EU   ChartContrCustEuropean Unionomer Relationship Manaerol oed Institutf Borrowing Ore of Personnel & Deder gement velopment  stability

FFFIN-NET FRS 102 ACTF A UK  Financial AFinancial ConducFinancial Crime Information NeFinancial Reporting Standarction Tt Aask Foruthorityce d 102twork  and probity

GDPR GIFGovCS ernment   General Data PrGrGoIntJerseIntJerseMarkoup oernational Association oernational Organizvernment oey y Financial Services Commissionts in Financial Instruments Dirs financial services industryf International Finance Centrf Jerseotection Regulationyation of Commerf Securities Commissionsece Supervisorscial Ay) Lativedministratw 1998ors  financial

  of the

IAIndustry IOSCO JFSC MiFID II OERegistry the Commission LaCCD A  w  Companies RegistryFinancial Services Commission (JerseUnited Nations  services

Organisation for Economic Co-operation and Development

 UN

  industry

  in Jersey

Jersey Financial Services Commission

PO Box 267

14-18 Castle Street, St Helier Jersey, JE4 8TP

Channel Islands

Telephone:  +44 (0)1534 822000 www.jerseyfsc.org