National Risk Assessment of Money Laundering

SEPTEMBER 2020

Bailiwick of Jersey

National Risk Assessment of Money Laundering

R.107/2020

Table of Contents

Foreword  4 1  Introduction 5

Part A National risk 8

2  Economic and Geopolitical Position 9 3  Legal, Supervisory and Law Enforcement Framework 17 4  Risk Assessment Methodology 28 5  Residual Risk 35 6  Recommended Actions 40 7  National Money-Laundering Threat 43 8  National Money-Laundering Vulnerabilities 66

Part B Sectoral risk 101

9  TCSP Sector 102 10  Securities Sector - Funds 125 11  Banking Sector 145 12  Investment Business 158 13  Legal Sector 171 14  Money Service Business (MSB) Sector (non-bank) 183 15  Accountancy Sector 194 16  Lending Sector (non-bank) 203 17  Immovable Property Sector 211 18  Casino Sector 219 19  Other Financial Institutions 226 20  Insurance Sector 232

Annex A Glossary 237

3

Foreword

Financial crime is constantly evolving and becoming more sophisticated and complex, meaning that new threats are regularly emerging for Jersey. As an International Finance Centre, Jersey is inevitably exposed to money laundering threats. We have a social and economic duty to detect and prevent these threats and we undertake this responsibility with the utmost diligence. Jersey has had legislation in place to prevent money laundering since 1988 and we are committed to combatting financial crime and upholding international standards as they are revised and updated. Jersey is proud to be involved

in the setting of standards internationally and the development of reports, best practice and guidance in the areas of financial crime prevention and transparency by organisations such as the FATF, the OECD, the IMF and the World Bank. The island equally takes its responsibility and commitments to implement those standards seriously.

I am therefore pleased to publish Jersey s first National Risk Assessment Report of

Money Laundering, in line with FATF s requirement for jurisdictions to identify, assess and understand the ML risks they face and to take action to effectively mitigate those risks.

This report is the first public report of its kind in Jersey and is the result of a significant collaborative effort by numerous professionals in our local finance industry, the Jersey Financial Services Commission, the Law Officers Department, the States of Jersey Police and the Government of Jersey. The report makes use of an established methodology developed by the World Bank, which was used and enhanced where appropriate to suit the characteristics of Jersey. A substantial amount of data was collected and analysed

to determine the threats faced by Jersey on a National basis as well as threats which are specific to individual sectors of our finance industry. I am grateful to everyone involved in the development of this report for their extensive work and ongoing commitment to combating financial crime.

As a result of the assessment, we were able to confirm the areas where Jersey has adequate systems and controls in place to mitigate risks. We also identified a number

of areas where additional action is required if we are to counter potential risks satisfactorily. The report includes a summary of the action points, split into key themes.

There should be no doubt that Jersey is committed to addressing each of these themes to ensure that appropriate measures are taken, and continue to be taken, to better mitigate our money laundering risks going forward. This report represents Jersey s next step in the continually evolving call upon jurisdictions by the global community to assess in more detail the financial crime risks that they face and do more to prevent illicit finance worldwide.

Senator Ian Gorst

Minister for External Relations

SECTION 1

Introduction

FATF Recommendations

1. In February 2012, the Financial Action Task Force (FATF) published revised international standards on combating money laundering and the financing of terrorism and proliferation (FATF Recommendations). These set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering (ML) and terrorist financing (TF), as well as the financing of proliferation of weapons of mass destruction.
2. FATF Recommendation 1 calls on countries to identify, assess and understand their ML and TF risks, and to take action to effectively mitigate those risks. Many countries have responded to this call by undertaking a national risk assessment (NRA) and publishing action plans. FATF Recommendation 24 also calls on countries to assess the ML/TF risks associated with all types of legal persons that may be created under a jurisdiction s legislation.
3. Some countries have developed their own methodology to undertake such assessments; others have taken advantage of methodologies developed by the Council of Europe, International Monetary Fund and World Bank. For ML, Jersey has opted to use the World Bank national risk assessment tool (NRA tool) as its basis for identifying, assessing and understanding ML risk. The World Bank NRA tool was selected as a tool that has been developed by a significant International Financial Institution and which has been used as the basis to conduct a ML risk assessment by many countries worldwide and notably several International Finance Centres with similar characteristics to Jersey. Where required, the methodology has been enhanced by specific factors relevant to certain sectors.

Objectives of the NRA

4. The NRA is the first time Jersey has, in a centrally co-ordinated way across all authorities, looked to examine ML risk to Jersey. The overarching objectives of the NRA have been to:

Identity ML threats and understand those threats in terms of the type of predicate offence[1], origin (domestic or foreign) and sector;

Analyse ML threats from foreign jurisdictions;

Identify Jersey s overall vulnerability to ML, which was examined separately to specific vulnerability at sectoral level, e.g. the banking sector; and

Prioritise actions to improve Jersey s ability to prevent and detect ML(AML).

5. The output of the NRA the NRA report will allow Jersey to: (i) demonstrate that it understands itsML risks based, wherever possible, on factual evidence; and (ii) put additional controls and/or resources in place to address vulnerabilities that have been identified. The NRA report is accompanied by an action plan which will be used for reference by the national authorities and will be updated and amended as progress is made against actions. A thematic summary of these actions is provided in Chapter 6.
6. The NRA report will also provide a basis for considering whether any supervised activities might be exempted from some ML requirements in strictly limited and justified circumstances where there is a proven low risk of ML.
7. Where higher risks are identified, it will be necessary to ensure that the AML/CFT regime appropriately addresses such risk, including through requiring supervised persons to: (i) take enhanced measures to manage and mitigate the risks; or (ii) ensure that this information is incorporated into their risk assessments.

Data and analysis period for the NRA Report

8. Whilst conducting the NRA, it was noted that data collected on different sectors in Jersey had not been uniform and contained varying levels of detail.
9. Authorities have held certain data sets at authority level for some significant time. That data was provided for the NRA covering the period 2013-2017. However, this information was not suitably detailed in terms of sector level information to carry out the initial NRA. In order to try and address this, various data collection exercises were carried with industry in 2018/19, one objective of which was to gather a more comprehensive data set from industry. However, certain data

fields in respect of some sectors was still not readily available. Predominantly the data used in this report covers the period 2017/18 but in some specific sectors this is supplemented by 2019 data. It is therefore important to note that Data across the report is non-uniform and is taken from different parties at different times.

The following must be particularly noted when considering the report:

1. Authority Level Data was collected between 2013-2017
2. Industry Level Data was collected between 2017/18 (occasionally 2019)

10. The non-uniform data collection has impacted on analysis in the process, and therefore the report should be considered in this manner. In a number of areas, as the data analysis progressed it became apparent that the data available still did not allow for a detailed analysis of ML risk and further data would be required to be collected. Data is now being collected on an annual basis and a major finding and action of the NRA is the need for more regular, sufficient and uniform data to be collected through a single mechanism to allow ongoing detailed analysis of ML risk to be conducted. This is being prioritised as an action from the NRA as Jersey moves to ongoing detailed analysis of ML risk on a regular basis.
11. It should be noted that the progress of the NRA has been disrupted by significant changes in Government resource and notably change in individuals leading the Island s work on the NRA. This has meant that the project has taken 12-18 months longer to reach completion than was initially planned. The impact of COVID-19

from March 2020 onwards also caused further delay to the work required to progress the publication of the NRA report.

Organisation of Report

12. The Report is structured in two parts:
    1. PartA: National ML Risk
    2. Part B: Sectoral ML Risk
13. PartA: After several contextual chapters there is an analysis of Residual

Risk (Chapter 5) and Recommended Actions (Chapter 6). The report goes

on to analyse Jersey s overall national ML threat (Chapter 7) and national ML vulnerabilities (Chapter 8).

14. Part B: ML risk is considered sector-by-sector, including sectors that are supervised by the Jersey Financial Services Commission (JFSC) for conduct and prudential risks as well as sectors that are supervised by the JFSC only for compliance with requirements to prevent and detect ML and TF. Consistent with PartA, the ML threat and ML vulnerabilities of each sector are assessed.

Terrorist Financing

15. The NRA process also involved consideration of TF risk to Jersey. However, Jersey will be publishing two separate reports:

1. This report is the NRA report on ML Risk
2. There will be a separate publication of the NRA on TF risk - which will be published in the first half of 2021

The reports will use different methodologies relevant to the subject matter.

Part A National risk

SECTION 2

Economic and  Geopolitical Position

1. The Bailiwick of Jersey is a self-governing dependency of the Crown. Jersey is autonomous in all domestic matters, and has its own financial, legal and judicial systems. It is not a sovereign state, but it is not and has never been part of the United Kingdom (UK), a British colony or a dependent territory.

Geographical Position

2. The island of Jersey has a total surface area of 122 square kilometres and is located 22.5 kilometres off the north-west coast of France and 137 kilometres from the English coast.

Population

3. Jersey s resident population at the end of 2018 was estimated as 106,800.
4. The last population census was undertaken in March 2011 and the total number of inhabitants reached 97,857. At the time of the 2011 census, half the Island s population were Jersey-born; 31% were born elsewhere in the British Isles; 7% were from Portugal or Madeira; 8% from other European countries; and 4% from the rest of the world. Persons wishing to buy and occupy property in Jersey must meet certain legislative criteria to become residentially qualified and 85% of the relevant population was so qualified.

Constitutional Position

5. Jersey is a Crown Dependency (CD) and not part of the United Kingdom (UK). The Island is not represented in the UK parliament and UKActs of Parliament only extend to Jersey if expressly agreed by the Island that they should do so. Jersey belongs to the Common Travel Area and the definition of UK in the British Nationality Act 1981 is interpreted as including the UK and the CDs together. Persons who are born, adopted, registered or naturalised in Jersey are British citizens.
6. While the UK is formally responsible for Jersey s international relations and defence, the Island has developed its own international identity, which was expressed formally in a Framework Agreement between the Island s Chief Minister and the UK Secretary of State for Constitutional Affairs. In line with this

agreement, the UK will not act internationally on Jersey s behalf without prior consultation. Within the UK government, responsibility for relations between Jersey (and the other CDs) and the UK lies with the Privy Counsellor for the CDs

- the Secretary of State for Justice and Lord Chancellor.

7. Although Jersey cannot sign or ratify international conventions in its own right, unless entrusted to do so by the UK. According to a Framework Agreement,

and following a request by the Jersey authorities, the UK may arrange for its ratification of any international convention to be extended to Jersey. In line with this agreement, the UK will not act internationally on Jersey s behalf without prior consultation. Jersey enters into a variety of agreements at Government level and at organisation level (such as MOUs), which are non-binding in international law, which advance its policy and operational goals.

Government Structure

8. Executive powers are exercised by a Chief Minister and twelve ministers, known collectively as the Council of Ministers. The Chief Minister is elected by the members of the Assembly of the States of Jersey (the States) and he or she nominates the other ten ministers, who are then voted on also by the States.
9. Other executive powers (of a parochial/municipal nature) are exercised by

the ConnØtables and a Parish Assembly in each of the twelve parishes. The ConnØtable is the head of each parish by virtue of his or her office, has a seat in the States where he or she represents the municipality and may speak and vote on all matters

10. The States is responsible for adopting legislation and scrutinising the Council of Ministers. Forty-nine elected members (Senators, Deputies and ConnØtables) sit in the unicameral assembly, together with ten non-elected, non-voting members, including the Bailiff , the Lieutenant Governor, the Dean of Jersey, the Attorney General (AG) and the Solicitor General (SG).
11. The Queen s representative and adviser on the Island is the Lieutenant Governor who is the formal point of contact between the Government of Jersey (GoJ) and the Crown.

Jersey s Business Model

12. Jersey s financial sector is dominated by banking, Trust and Company Service Providers (TCSPs), fund administration and fund management, all of which benefit from a simple and transparent tax neutral environment.
13. Traditionally, the UK market has provided opportunities for the Island s financial services sector. Changes to UK taxation legislation over the years have

lessened opportunities for new business from that jurisdiction, and European markets more generally; there has been an increasing tendency to seek business in new markets. The strategy identifies countries in a number of key regions (Asia, the Middle East, sub-Saharan Africa and North America) based

on common interests with Jersey. A number of these jurisdictions are also priority markets for Jersey Finance which has offices in Dubai, Hong Kong, China (HKC) and opened an office in New York in 2019. Jersey Finance is the financial industry promotional body for Jersey. The strategy was further updated in 2019[1], and now includes a broader matrix of indices used to evaluate countries with

which to pursue engagement in order to position Jersey as a more influential partner internationally, with maturing commercial and political relationships. These indices include data from the JSFC on higher risk countries and the Basel Anti-Money Laundering Index. The updated strategy was not considered in NRA analysis due to timing of publication being after the main analysis period.

14. Over the last 50 years, Jersey has established a relationship with the City of London and there are strong links between businesses in the two jurisdictions. Jersey Finance[1] explains: Jersey represents an extension of the City of London for corporate treasurers, institutional bankers and treasury specialists, fund promoters, brokers and other corporate financiers . Many of the legal persons and arrangements established under Jersey law that are used in international transactions are instigated by large London law firms. Some local law firms have also established a presence in London to further develop this business model.

Banking

15. The banking sector has been through a period of consolidation; at its peak there were over 70 Banks in Jersey. At the end of 2018 there were 26 banks in Jersey,

of which 6 are subsidiaries and the remainder are branches. Jersey subsidiary

banks and branches are subject to supervision by the JFSC and additionally by overseas regulators as the majority are part of group consolidated regulation

(incl. UK (8), other EU countries (5), North America (5), Switzerland (4), Africa (3) and Middle East (1)). The banking services provided across different banks are diverse, representing private banking for high-net worth individuals, banking services for the funds and trusts industry, services to corporate treasury

functions, and international banking services for expats. Prior to the introduction of the UK ring-fencing of retail banking in the UK, it was a common practice

for deposits to sit in Jersey branches which then funded UK retailing banking balance sheets. The ring-fencing rules have impacted the ability of subsidiaries

of UK banks to up-stream deposits to their UK group.

Customers are generally: (i) retail and high net worth clients from Jersey and the UK; (ii) UK expatriates; (iii) non-residents with international needs; and (iv) trust and company structures and funds administered in Jersey by TCSPs and FSBs.

16. A number of international banks use Jersey as a base for servicing overseas customers. This means that those customers do not select Jersey to do their banking; rather Jersey is selected by the deposit-taker s group.

TCSP business

17. Jersey continues to be a leading jurisdiction for trusts, reflecting the significance of the Trusts (Jersey) Law 1984 where Jersey was one of the first jurisdictions in the world to place common law Trusts provisions in legislation. The law has since been copied by many jurisdictions seeking to develop trust activities, but this

has not detracted from Jersey s leading position.

18. TCSP structures range from simple trusts and underlying company structures for UK and local families, through to high value and complex structures working with trusts, companies, limited partnerships and foundations for families that operate cross-borders. The majority of trusts administered in Jersey are discretionary where decisions are left to the discretion of the trustee.

19. Family office services, to manage the interests and affairs of ultra-high net worth families are also available, as are structures for corporates looking to support and reward staff.
20. The ownership base for TCSPs is changing: banks are selling non-core business and owners of TCSPs established in the 1980s are looking to retire and sell their business. Recent years have seen an emergence in private equity ownership of TCSPs.

Fund administration and management

21. Jersey has a global market for fund administration and management, targeting professional and institutional investors. The Jersey Private Fund vehicle, launched recently, is designed to enable small numbers of sophisticated investors to bring their funds to market quickly and efficiently.
22. Alternative asset classes account for more than three quarters of Jersey s total funds business with private equity continuing to be the largest industry sub- sector, followed by hedge funds, real estate funds and infrastructure funds. In recent years, significantly well-established fund managers have brought some of the largest funds ever raised in Jersey to the market.
23. Jersey is also proving increasingly popular as a host to asset managers and now includes some of the most significant international asset managers.
24. Jersey legislation permits globally focussed fund managers to market their pan- European funds through a European Union (EU)-compliant regime to European investors, and non-European funds through a rest of the world regime . Jersey was amongst the first jurisdictions to be approved by the European Securities and Markets Authority for the granting of passport rights to market alternative investment funds into the EU when this becomes available to third countries.

FinTech

25. Jersey has a thriving digital business community with more than 400 digital and creative companies based on the Island and more than 3,000 professionals employed in the digital-tech economy. The majority of Jersey s digital businesses provide enterprise solutions, apps and software, or support telecoms infrastructure.
26. Digital Jersey promotes the Island as a technology hub. The Government of Jersey has recently announced a GBP 4m cash boost for Digital Jersey over the next four years in order to help attract more start-up businesses, create new jobs and develop the use of FinTech in the Island.

Other

27. Jersey has sought to develop itself as a leading centre for Sharia-compliant international investment. It also presents itself as a centre for family offices and philanthropy.
28. In recent years, extractive industry companies have established head offices in Jersey.

12

Materiality and Contextual Factors

Economy

29. The main economic indicator used to measure the value of the economy is the GVA (Gross Value Added) and the size of Jersey s economy, as measured by GVA, was GBP 4.7bn in 2018.
30. Jersey s economy is based on financial services (39.2% of GVA in 2018), public administration (8.7%), construction (7.1%) and wholesale and retail (6.7%).Finance and legal activities accounted for 26% of private sector jobs at 31 December

2018[2] . Most are employed by TCSPs (4,290) followed by banking (3,380), legal activities (1,630), accounting and compliance (1,270) and fund administration (1,250). Since December 2013, the sub-sectors seeing the largest increases in

jobs have been trust administration (up 590) and fund administration (up 440).

The number working in banking is down 340. Looking further back, the number

of jobs in the banking sub-sector in December 2018 was around 2,000 lower

than that recorded ten years earlier. Over the same period, employment by

TCSPs, fund administration and legal sub-sectors (combined) has increased by around 2,000.

Financial sector

31. The JFSC collects data from regulated entities in order to support risk-based supervision. An annual data collection exercise commenced in 2018, requiring 2017 data to be collected. Consolidated data from such annual exercises has been made available for the purposes of the NRA.

Table 2.1: Sector size indicators as of 31 December 2017 (source: JFSC)

Number of  Number of  Number  Assets under customers non-Jersey  of BO&C management customers (GBP bn)

Banks 692,703 496,709 614,257 69 TCSPs 67,061 43,101 68,757 660 Funds 77,986  74,8951 - 339 Investment business 89,759 54,570 58,254 102 Lending by banks 37,089 14,308 30,941 33 Lending 23,947 2,070 22,631 0.88 Legal sector 20,980 4,072 12,176 - Accounting sector 19,604 3,397 12,349 - Estate agents 1,645 35 924 -

32. A private survey issued in 2013 considered the business conducted by Jersey as an international financial centre and estimated, at that time, that Jersey was custodian of GBP1.2tn of wealth.

Other indicators of size and importance of finance sector

33. Jersey ranks 47 (out of 102 centres) in the Global Financial Centres Index[3]. New York, London and HKC top the list.

Taxation

34. Jersey has a simple and transparent taxation system. Jersey has effective exchange of information relationships with more than 110 jurisdictions through its Tax Information Exchange Agreements, Double Tax Agreements and the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. It regularly exchanges information with foreign authorities. Tax residency must be disclosed to the Comptroller of Revenue and carries an annual filing requirement and therefore is subject to control mechanisms
35. Companies were originally subject to a tax system which exempted foreign investors from corporation tax and levied a 20% rate on Jersey residents. Since 2009, the rate of corporation tax has been set at 0%, except for persons carrying on financial services (with certain exemptions) at 10%, utility companies, landlords and property developers and some retailers (most paying 20% on profits).
36. Jersey has received negative publicity for its use in tax avoidance. However, this criticism often fails to note the approach to addressing this risk that Jersey has applied for many years, namely regulating the financial services community, transparency and information exchange.
37. Despite being criticised by certain NGOs for its tax practices, the OECD concluded in July 2019 that Jersey s tax regime is not harmful to the rest of the world. Conducted by the OECD s Forum for Harmful Tax Practices (FHTP), the review tested the strength of Jersey s economic substance requirements a series of measures put in place to avoid the establishment of shell companies .
38. The Island has also engaged with the EU Code of Conduct Group on Business Taxation, being listed as a cooperative jurisdiction in November 2017. The EU s positive assessment came as a result of the Island s collaborative dialogue with the COCG. The EU Council tasked the COCG with assessing jurisdictions in the following three areas: tax transparency, fair taxation and compliance with anti base erosion and profit shifting (BEPS) measures. While Jersey s standards of tax transparency and anti-BEPS compliance were positively assessed, the lack of

a legal substance requirement for entities doing business using the Island was highlighted as a concern. In response the Government of Jersey introduced the Taxation (Companies Economic Substance) (Jersey) Law 2019 (Law), which came into effect on 1 January 2019. The law makes provision for imposing an economic substance test on companies which are tax resident in Jersey. Tax resident companies must be able to demonstrate that they meet the relevant criteria, in order to pass the test. After a number of months of being in force, the law was assessed by the EU finance ministers as meeting the requirements for demonstrating economic substance.

2.40  Jersey is also amongst the leaders in the implementation of the OECD BEPS programme, a measure designed to stop multinationals from shifting profits between countries to avoid paying tax. Jersey is a BEPS Associate and member of the Inclusive Framework, set up to ensure the effective global implementation of BEPS. It formally signed up to the OECD Multilateral Convention on BEPS in 2017.

Transparency

40. The majority of Jersey s activities focus on the pooling and deployment of assets that have already been taxed. Tax neutrality is not a form of, and does not facilitate, tax evasion; lack of transparency does.
41. Jersey has adopted international standards designed to prevent tax evasion. In particular:

Jersey was an early adopter of the OECD s Common Reporting Standard, the global standard on the automatic exchange of information. It also shares information under the US Foreign Account Tax Compliance Act model.

It is a signatory to the Multi-lateral Convention on Mutual Administrative Assistance in Tax Matters.

It is a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes. In 2017, the OECD s Peer Review Group on Transparency rated Jersey fully compliant in all 10 of the areas reviewed.

It has signed 38 Tax Information Exchange Agreements and 15 full Double Tax Agreements[4], all of which provide for information exchange on request in regard to tax matters.

As an associate of the OECD s BEPS initiative, Jersey exchanges information under the Country-by-Country Reporting regime, as well as information on cross-border tax rulings. It was the third jurisdiction to bring into force the Multilateral Legal Instrument to ensure that its Double Tax Agreements could not be used for the purposes of tax avoidance or tax evasion.

42. In addition, Jersey has also maintained a central register of the beneficial ownership of companies for more than two decades. Jersey has held a leading position globally in transparency of beneficial ownership which has been recognised by the IMF, the World Bank, the OECD Global Forum and MONEYVAL in its 2016 report on Jersey. This position is underpinned by a verified central register of beneficial ownership, with requirements for legal entities owned by non-residents to be incorporated and administered by

a regulated TCSP. There is also the ability to add significant conditions to incorporation, obtaining information on all beneficial owners and controllers and imposing conditions on the activity of the entity. Jersey has exchanged information to the declared satisfaction of competent authorities and law enforcement agencies worldwide for decades and continues to review the effectiveness of its regime and make updates based on emerging international standards and published best practice.

44. There is a well-publicised, long standing debate around public access to beneficial ownership registers. Jersey holds a beneficial ownership register and whilst this is not public, it is verified data. Jersey believes its model of verified information available to law enforcement provides superior information to public non-verified information.
45. In 2017, under a direction issued pursuant to Article 12 of the Financial Services Commission (Jersey) Law 1998, the Chief Minister issued a direction[5] to the JFSC in relation to the exchange of information on Beneficial Ownership and control with the JFCU of the States of Jersey Police. This allows the JFCU direct access

to beneficial owner and controller information held by the JFSC Registry in order to fulfil the obligation to support the worldwide fight against financial crime. This means in practice LEAs can have full access to the beneficial owner register.

46. The effectiveness of Jersey s register has been assessed recently by the UK as part of a bilateral agreement (referred to as the Exchange of Notes) which came into force in 2017 and which commits Jersey to providing UK law enforcement agencies with information about the beneficial owners of Jersey companies (on a reciprocal basis). A report presented to the UK Parliament[6] has found that Jersey s ability to share company beneficial ownership information with UK law enforcement agencies is effective. The report found that, during the first 18 months of operation, 26 requests for information on the Jersey register were made. Responses were provided for all requests made and almost all within the agreed timeframe.

General business environment

47. Jersey is the third simplest jurisdiction for businesses to operate in, according to

a report by the TMF Group. The Global Business Complexity Index (2019)9, which compares key administrative and compliance demands across 76 jurisdictions worldwide, ranked Jersey as the 74th least complex jurisdiction out of 76

surveyed.

48. The report, which was based on a combination of statistically weighted data and research among market experts, focuses on three areas: rules, regulations and penalties; accounting and tax; and hiring, firing and paying employees.
49. Jersey was found to be an unusually simple location to operate in due to: (i) alignment of policy and legislation with international standards; (ii) a fast process for company incorporation; and (iii) a stable regulatory environment.

SECTION 3

Legal, Supervisory and Law Enforcement Framework

1. This chapter outlines Jersey s legal, supervisory and law enforcement framework.

AML Framework

2. The AML/CFT framework has high convergence with the FATF Recommendations. The UK s ratifications of the key international instruments (the Vienna Convention (1998), the Palermo Convention (2000), the UN Convention against Corruption (2003) and the Terrorist Financing (TF) Convention (1999)) have also been extended to Jersey which has implemented the provisions of the said conventions. The ratification of the Strasbourg Convention (2005) has also been extended to Jersey and it is in the process of extending the ratification of the Cybercrime Convention (2001).

Money Laundering (ML) offences

3. ML offences are provided for in Part 3 of the Proceeds of Crime (Jersey)

Law 1999 (POCL) which criminalises: (i) dealing with criminal property (using, acquiring or possessing/controlling criminal property or knowingly entering into an arrangement to facilitate the same); or (ii) concealing criminal property (concealing, disguising, converting/transferring or removing from Jersey).

4. Criminal Property is defined in Article 29(1) to be property which: (i) is derived from or obtained, directly or indirectly, through criminal conduct or used in or intended to be used in criminal conduct ; and (ii) is known or suspected by the alleged offender to constitute/represent such proceeds. Criminal conduct

is defined in Article 1 to mean conduct that constitutes an offence specified in Schedule 1 or, if it occurs outside Jersey, would have constituted such an offence if occurring in Jersey. Offences specified in Schedule 1 are those for which a person is liable on conviction to imprisonment for a term of one or more years (whether or not the person is also liable to any other penalty).

5. ML therefore extends to all serious offences where the maximum statutory penalty is one year or more, and all customary offences where the maximum penalty is at large i.e. not circumscribed by statute. Self-laundering is also an offence (Article 29(2)).
6. A person guilty of ML shall be liable to imprisonment for a term not exceeding 14 years or to an unlimited fine or to both.

17

Restraint and confiscation/forfeiture of crime proceeds and terrorist property

7. Under Articles 15 and 16 of the POCL, the AG may apply to the Royal Court for a freezing order (Saisie Judiciaire):

1. where a confiscation order has been made;
2. where:

1. proceedings have been instituted against a defendant for an offence carrying a maximum penalty of one or more years imprisonment or for confiscation, such proceedings are not concluded, or the court is satisfied that such proceedings are to be instituted; and
2. the Court is satisfied that there is reasonable cause to believe the offender has benefitted from the offence etc; or

8. On the making of a saisie, all realisable property of the defendant vests in the Viscount.
9. Part 2 of the POCL provides for confiscation where a person has benefited from any relevant criminal conduct. Relevant criminal conduct means the offences for which the defendant appears to be sentenced together with any other offences which the Royal Court may take into consideration in sentencing the defendant. The amount which the defendant is required by a confiscation order to pay shall be the amount assessed by the Royal Court to be the value of the defendant s benefit from the relevant criminal conduct.
10. Property corresponding to the property laundered or the proceeds of crime may be confiscated. Instrumentalities may also be confiscated. Instrumentalities are capable of forfeiture at civil law but may also add to the value of a POCL confiscation order where they additionally amount to a defendant s benefit from crime.
11. Jersey s consent regime (Article 32 of the POCL) means that, if funds identified in a suspicious activity report (SAR) are suspected to be potentially linked to criminality, consent for a transaction may be withheld. This has the effect of restraining assets without recourse to the courts of Jersey and has no time limits so long as it can be justified in the prevailing circumstances.

Civil Forfeiture

12. Pursuant to the Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018 (Forfeiture of Assets Law), an authorized officer may seize cash for up to 96 hours if he has reasonable grounds for suspecting that it is tainted cash (Article 5), and the AG may apply to the Bailiff for an order authorizing the detention for a longer period. Where the AG has reasonable grounds to believe that property held in any bank account is tainted property, the AG may apply for a property restraint order prohibiting the withdrawal, transfer or payment out of the bank account of the property, or part of the property, as specified in the application.
13. Tainted cash/monies in bank accounts may be forfeited unless the defendant proves to the Court that the property is not tainted (Articles 11 and 15 of the Forfeiture of Assets Law). Property is tainted if it is used in, or intended to be used in, unlawful conduct or obtained in the course of, from the proceeds of, or in connection with, unlawful conduct.

General preventative measures

14. The Money Laundering (Jersey) Order 2008 (Money Laundering Order) and the AML/CFT Handbooks[1] sets out the requirements that regulated financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs) must follow when carrying on financial services business: (i) in, or from within, Jersey; or (ii) anywhere through a Jersey company.
15. Article 11(1) requires a relevant person (defined in Article 1) to establish and maintain appropriate and consistent policies and procedures (that take account of risk in respect of the person s financial services business, and financial services business carried on by a subsidiary), in order to prevent and detect ML.

Customer due diligence (CDD)

16. Article 13 of the Money Laundering Order prescribes that a relevant person must apply identification measures before the establishment of a business relationship or carrying out a one-off transaction equal to or above a set threshold.

 Identification measures is defined under Article 3 and is consistent with customer due diligence (CDD) measures required under FATF Recommendation 10. CDD is also required when there are suspicions of ML and where there are doubts about the veracity or adequacy of documents, data or information previously obtained. Identification measures must be applied to the customer, the beneficial owner/controller of the customer and any third parties for whom the customer acts.

17. Article 15 requires a relevant person to apply enhanced CDD measures to a number of specific relationships and in any situation which, by its nature, can present a higher risk of ML. Articles 17 and 18 set out exemptions from the application of full CDD measures in certain specified circumstances.
18. Article 13 (through Article 3(3)) mandates ongoing monitoring which consists of: (i) scrutinising transactions undertaken throughout the course of a business relationship and (ii) keeping documents, data or information up to date and relevant.

Record-keeping

19. Under Articles 19 and 20 of the Money Laundering Order, a relevant person must keep a record comprising: (i) a copy of evidence of identity obtained pursuant to the application of CDD measures and all of the supporting documents, data or information for at least 5 years after the date on which the relationship ends or one-off transaction is completed; and (ii) a record containing details relating to each transaction carried out in the course of any business relationship or one-off transaction for a period of five years commencing with the date on which the transaction is completed.
20. Additionally, the JFSC AML/CFT Handbooks also require that all documents related to risk assessments, suspicious activity reports, corporate governance and information regarding screening, awareness and training of employees must be kept for a period of 5 years.

Reporting of suspicion

21. Relevant persons are required to make a report under Article 34D of the POCL where they know or suspect, or have reasonable grounds for knowing or suspecting, that another person has committed an ML/TF offence. The report must be made to: (i) a police or customs officer; or (ii) a money laundering reporting officer (or other designated officer) in line with procedures established by an employer. It is an offence to fail to make a report and a person who is guilty is liable to imprisonment for a term not exceeding 5 years or to a fine or to both.
22. In addition, protective reports may also be made under Article 32 of the POCL such that, so long as certain conditions are met, the person shall not be guilty

of an ML offence. Protection is available if the person making a disclosure does so in good faith and: (i) if the disclosure is made before the person does the

act in question, the act is done with the consent of a police officer; or (ii) if the disclosure is made after the person does the act in question, it is made on the person s own initiative and as soon as reasonably practicable after the person does the act in question.

Cross-border cash controls

23. Part 5A of the Customs and Excise (Jersey) Law 1999 (Customs Law) imposes a regime requiring cash to be disclosed to a customs officer on request and describes the penalties that may be imposed for anyone who refuses to make a disclosure, makes an untrue disclosure or fails to produce cash or baggage when requested to do so.
24. An officer may require a person who is exporting or importing goods (accompanied or unaccompanied freight), or entering or leaving Jersey with cash in baggage or on their person, to disclose if they are exporting or importing cash with a value in excess of EUR 10,000 (or equivalent) and to answer questions in respect of any such cash.

Non-Profit Organisations (NPO)

25. The Non-Profit Organizations (Jersey) Law 2008 (NPO Law) requires NPOs to register with the JFSC, except where administered by a trust and company services provider (TCSP) (regulated NPO). Information required for registration includes: the amount of funds to be raised in a year; the amount of funds to be disbursed; and jurisdiction in which funds are to be raised and disbursed. In addition, it is necessary to present a brief statement of purpose, objectives, and activities.
26. Article 9 of the NPO Law requires an NPO to update the information provided to the JFSC at the time of registration, or subsequent to registration, where it changes. Article 11 of the NPO Law requires an NPO to keep financial records and to retain them for at least five years. It must also make those records available to the JFSC if required to do so to enable it to carry out its functions under the NPO Law.

Legal persons

27. A TCSP must be used to form a legal person, except in the case of a company with locally resident shareholders whose identity must be found out and verified

by the JFSC. Following registration, each legal person must maintain (at least) a registered office in Jersey, and all providers of registered office by way of business must be TCSPs or FSBs providing a registered office for a fund vehicle.

28. All legal persons, except foundations, are required to submit details of beneficial ownership to the Companies Registry, which is held on a central register. Data collected is run through external data sources. Following an agreement between the UK and Jersey, a formal mechanism has been established to permit beneficial ownership information to be exchanged between the two jurisdictions within 24 hours for non-urgent requests and one hour for urgent requests.
29. The JFSC applies a sound business practice policy[2] to legal persons which sets principles regarding activities that are considered to be sensitive and which are considered likely to present a reputational risk. Legal persons are also expected to follow a Government of Jersey statement on abusive tax schemes[3].

High-Level Commitment and Institutional Framework

30. Jersey recognises the importance of maintaining a comprehensive and robust AML/CFT regime. This requires high-level political commitment from the government and close collaboration and coordination among policy-making bodies, financial regulators, law enforcement authorities and others.
31. The Government of Jersey is committed to fighting ML. The GoJ website[4] explains that: (i) Jersey is committed to upholding international standards in the area of financial crime; and (ii) Jersey follows the FATF Recommendations. In addition, the Policy Framework for the Jersey Financial Services Industry[5] (2014) includes complying with international standards and initiatives having a global application as a key objective. The Government Plan 2020-2023[6] for Jersey forms an important part of the strategic framework for the Island and brings to life the priorities set out in the Common Strategic Policy of the GoJ[7]. That document specifically notes the importance of underpinning capability in international tax policy, financial crime policy, financial services supervision and enforcement.

Minister for External Relations

32. Ministerial responsibility for all financial services areas, including overarching responsibility for financial crime policy, sits with the Minister for External Relations. The Minister also exercises responsibilities in accordance with the Council of Ministers Common Policy on External Relations with regard to the implementation of UN and EU financial sanctions. The Minister also facilitates treaty extension to Jersey and is responsible for fulfilling the island s external relations and financial services treaty obligations. In addition, the Minister of External Relations MER is the Competent Authority for financial sanctions in Jersey and is therefore responsible for implementing UN and EU financial sanctions, and receiving licence applications and suspected breach notifications.
33. Other ministers have a role in tacking financial crime. The Minister for Home Affairs is responsible for the States of Jersey Police (SoJP) and the enforcement responsibility of the Jersey Customs and Immigration Service (JCIS) in respect

of financial crime. The Minister for Treasury and Resources is responsible for administering the Criminal Offences Confiscation Fund which exists for the confiscation of the proceeds of crime.

34. The GoJ has established a multi-agency co-ordinating group - the Jersey Financial Crime Strategy Group (JFCSG) - to support the Minister.

Law Officers Department (LOD)

35. The LOD comprises the AG and the Solicitor General, his deputy, together with other advocates, solicitors and legal professionals.
36. The AG has statutory investigatory powers in respect of cases of serious or complex fraud, under the Investigation of Fraud (Jersey) Law 1991 (Investigation of Fraud Law). Along with the SoJP, the LOD is also responsible for the investigation of ML and FT. The AG is also the prosecuting authority in Jersey and all prosecutions are brought in his name.
37. The LOD consists of the Criminal Division and the Civil Division supported by a small Administration team. The Criminal Division is divided into three teams: the Criminal Court Team; the Economic Crime and Confiscation Unit (ECCU) and; the Mutual Legal Assistance Team. An operating protocol agreed between the AG and the SoJP lists specific criteria that must be met before investigations are accepted within the ECCU which is expected to investigate and prosecute complex fraud, ML and TF cases. The ECCU also identifies and prosecutes systems and controls failings (preventative measures) contrary to the Money Laundering Order.
38. The AG is also responsible for mutual legal assistance. The work involved in this area includes gathering written and oral evidence for use in overseas criminal or civil asset recovery investigations and proceedings, as well as freezing and confiscating the proceeds of crime and drug trafficking.
39. The ECCU is the sole agency within the LOD that also investigates and applies for civil asset forfeiture orders under the Forfeiture of Assets Law. This process is used where a criminal prosecution against a natural person is not possible due to technical or other evidential deficiencies.

Joint Financial Crimes Unit Financial Intelligence Unit (JFCU-FIU)

40. The JFCU-FIU is prescribed as Jersey s financial intelligence unit under the Proceeds of Crime (Financial Intelligence) (Jersey) Regulations 2015, which are made under Article 41B of the POCL. It operates independently from the SoJP s Force Intelligence Bureau which handles all non-financial police intelligence.
41. In addition to dealing with SARs, the JFCU-FIU also receives and responds to requests for assistance (typically from overseas units on AML/CFT enquiries), as well as miscellaneous information reports from a variety of sources.
42. As a matter of law (Article 34 POCL), consent must be obtained from the

AG to disclose SAR intelligence outside Jersey for the purposes of criminal proceedings/investigation outside Jersey or to a competent authority

outside Jersey. However, in practice, the JFCU-FIU disseminates intelligence spontaneously and upon request under the authority of the AG s Guidelines which give broad consent to share intelligence, particularly to other FIUs

belonging to the Egmont Group. Where the JFCU is in any doubt, or where, even in circumstances where JFCU is authorised to make a disclosure it would prefer to obtain AG s specific agreement, then it may approach the AG on individual case basis. The JFCU-FIU can also request intelligence from overseas units (via the Egmont Group), law enforcement agencies and the JFSC.States of Jersey Police (SoJP)

43. The allocation of financial crime investigations within the SoJP is dependent upon the value and complexity of the crime. Certain frauds (and related ML cases) are likely to be investigated by the Serious Crime Unit (SCU) and domestic high value illicit drug trafficking investigations by the Priority Crime investigation team (PCT).
44. JFCU - Operations is responsible for the investigation of higher level, more complex predicate fraud, corruption and ML/TF and asset tracing cases that may impact on the integrity of Jersey s financial sector.

Jersey Customs and Immigration Service (JCIS)

45. JCIS has a team of officers working within JFCU-Operations who have responsibility for asset-tracing investigations that run parallel to drug trafficking investigations. JCIS also conducts asset-tracing investigations where commercial importations of illegal drugs are involved.
46. JCIS also has responsibility for policing the Island s border, including under Part 5A of the Customs Law.

Jersey Financial Services Commission

47. The JFSC is an independent statutory body established under the Financial Services Commission (Jersey) Law 1998 (Commission Law).
48. The JFSC is the supervisor for AML purposes, tasked with monitoring and supervising compliance by FIs and DNFBPs with AML obligations. The Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 (Supervisory Bodies Law) provides the JFSC with supervision powers with regard to AML/CFT matters. Article 5 provides that the JFSC is to be the supervisory body to exercise supervisory functions in respect of any regulated person and in respect of any supervised business carried on by that regulated person.
49. Supervisory powers are established by Article 8 of the Supervisory Bodies Law, which gives the JFSC power to do anything that is calculated to facilitate, or that is incidental or conducive to, the performance of any of its functions under that Law. This includes a general power to conduct reasonable routine examinations. The JFSC is also able to require the provision of information and documents under Article 30, to conduct investigations under Article 31, and, with appropriate authority, to enter and search premises under Article 32.

Entry Controls

50. Dependent upon the type of financial services business to be provided, a

person may need to apply to the JFSC for registration under at least one of the laws. The JFSC will undertake a fit and proper assessment of such applications in line with the relevant legislation, its published licencing policies and guides.

51. Specifically, the JFSC is required under law to satisfy itself that the applicant is fit and proper to be licenced having regard to:

Integrity, competence, financial standing, structure and organisation of the applicant;

Persons employed by or associated with the applicant for the purposes of the applicants business or principal persons in relation to the applicant

Description of the business which the applicant proposes to carry on.

52. The JFSC will also take account of the Sound Business Practice Policy.
53. Such standards apply at an entity level but also for certain classes of business at an individual level where the individual is proposed to hold a principal personal for key person role (compliance office, money laundering reporting officer and money laundering compliance officer).

Approach to Supervision

54. The JFSC s approach to supervision is risk based and has been in place since 2016.
55. In its risk-based approach, impact (the potential harm that could be caused) and probability (the likelihood of a particular risk occurring) are combined to give a measure of the overall risk posed to the JFSC s Guiding Principles. This is then compared to appetite for risk to prioritise and select the appropriate response.
56. Regulated entities are categorised in three current approaches to supervision enhanced, proactive and pooled. Regulated entities categorised as enhanced and proactive have a dedicated named supervisor and are subject to a higher level of supervision. Those categoised as pooled are supervised on a collective basis, with a team of supervisors responding to risks outside appetite.
57. The JFSC supervises via desk-based supervision and on-site examinations. A dedicated team of examiners, the Supervision Examination Unit, undertakes thematic examinations, entity examinations and risk led examinations. In 2019, the JFSC established an additional examination unit, the Financial Crime Examination Unit, as a specialist team to undertake comprehensive financial crime examinations.
58. The JFSC also launched a new risk model in 2018 in support of its approach to risk-based supervision. The overarching vision of the Risk Model is to deliver a solution that will allow the JFSC to centrally capture relevant up-to-date entity information and allocate resources to the highest areas of regulatory risk.
59. The JFSC can use a number of powers to sanction failure to comply with AML/ CFT requirements. Inter alia, it can:

Apply a civil financial penalty for a breach of the AML/CFT Code of Practice (Article 21A of the Commission Law). However, a civil penalty can only be issued against lawyers, accountants, estate agents, high value dealers and those persons carrying on a regulated business i.e. registered with the JFSC under one or more of FS(J)L, BB(J)L, IB(J)L, CIF(J)L and AIF Regs

Revoke a previously granted registration (Article 18 of the Supervisory

Bodies Law).

Apply a condition to the registration (Article 17 of the Supervisory Bodies Law).

Issue a direction to do, or cease doing, something (Article 23 of the Supervisory Bodies Law). This includes the power to require that any individual: (i) not perform a specified function (or any function at all); (ii) not engage in specified employment (or any employment at all); or (iii) not hold a specified position (or any position at all).

Apply to the Royal Court for the issuance of an injunction restraining a

person from committing (or continuing or repeating) the contravention (Article 24 of the Supervisory Bodies Law).

Issue a public statement in a variety of circumstances (Article 26 of the Supervisory Bodies Law).

Apply to the Royal Court for intervention in defined circumstances (Article 25 of the Supervisory Bodies Law).

60. In addition, the JFSC also operates the Companies Registry which registers Jersey companies, partnerships, foundations and business names, administers the Control of Borrowing Law.

Viscount and Viscount s Department

61. The Viscount is the executive officer of the Royal Court and they also carry out other functions such as being the executive officer of the States and administering bankruptcies, juries, and being the Coroner for Jersey). The Viscount s Department is therefore principally required to execute orders of the Courts. The Viscount enforces saisie judiciaires, manages civil asset recovery orders and property restrained or forfeited under the Forfeiture of Assets Law. The primary duty of the Viscount is to ensure that the assets are realised in such a manner as enables orders to be paid.

Judicial process

62. Complex financial crime cases are heard before a court consisting of a legally qualified judge and: (i) in the case of statutory offences (ML and breaches of the Money Laundering Order) and asset forfeiture, the judge is joined by two Jurats (full time lay judges) who are the fact finders; and (ii) in the case of customary offences (fraud, perverting the course of justice etc.) the fact finders are a jury of 12 citizens.

Multi-agency approach

63. The JFCSG is responsible for co-ordinating the actions of the Island to mitigate the risk of financial crime. The Group is expected to: (i) co-ordinate actions to assess risks, to develop policies and apply resources aimed at ensuring the risks of financial crime to Jersey are mitigated effectively; (ii) ensure that national AML/CFT policies, informed by the risks identified, are regularly reviewed;

and (iii) act as the coordination mechanism that is responsible for delivery and implementation of such policies.

64. Interagency cooperation on investigations is promoted through the Tripartite Group, which has overall responsibility for identifying, investigating and prosecuting matters related to ML/TF in Jersey. During the relevant period

for the NRA analysis, the Tripartite Group was constituted by: (i) the Strategic Tripartite Group which comprises the LOD (including ECCU), JFCU- Operations, JFCU-FIU and JFSC - meets quarterly to review all matters related to Strategy; and (ii) the Operational Tripartite Group which comprises the same agencies and evaluates and considers instigation of criminal or asset forfeiture investigations. In 2019, part i) was disbanded to streamline cooperation and now is constituted by a single group.

International Co-Operation

65. Effective international co-operation is essential in tracing proceeds of crime

and uncovering the identity and background of criminals. As a member of MONEYVAL and the Egmont Group, Jersey participates in international efforts to combat ML and TF. Mechanisms are in place for providing assistance to

other jurisdictions, including mutual legal assistance (MLA), financial intelligence exchange, and co-operation amongst law enforcement and financial regulators. Jersey has a strong record in assisting other jurisdictions in recovering the value of significant illicit assets and returning them.

Mutual Legal Assistance (MLA)

66. Jersey has authority to exchange information with counterparts without entering into memoranda of understanding (MoUs).

Financial intelligence exchange

67. The JFCU-FIU has authority to exchange information with counterparts without entering into MoUs. Formal MOUs have been entered with 8 overseas counterparts.
68. As a member of the Egmont Group, the JFCU-FIU works worldwide with other units to support cross-jurisdictional law enforcement and intelligence exchange. In addition, the JFCU-FIU provides assistance to overseas law enforcement authorities whenever appropriate. JFCU-FIU officers participate in Egmont Group meetings with a view to exchanging financial intelligence and sharing experience.

Law enforcement

69. Jersey is a member of the Camden Asset Recovery Inter-Agency Network (CARIN).
70. The LOD participates in Jersey s representation at MONEYVAL, providing an assessor for one mutual evaluation under the current round of assessments.

Regulatory co-operation

71. The JFSC is a member of the International Organisation of Securities Commissions (IOSCO), the International Association of Insurance Supervisors (IAIS), the Enlarged Contact Group on the Supervision of Collective Investment Schemes (ECG) and the Group of International Insurance Centre Supervisors

(GIFCS).

72. It is a signatory to the GIFCS, IOSCO and IAIS multilateral MoUs, which are global information-sharing arrangements among supervisors that facilitate cross-border enforcement. The JFSC participates in Jersey s representation at MONEYVAL, providing an assessor for mutual evaluations under the current round of assessments and recently seconding a member of staff to the secretariat for 18 months.
73. The Supervisory Bodies Law does not require bilateral agreements to be in place in order to co-operate internationally. The JFSC has, however, concluded numerous bilateral MoUs and letters of intent with overseas supervisors. A summary of bilateral memoranda is published on the JFSC s website[1]. The purpose of each memorandum is to establish an agreed mechanism under which both signatories commit to using their statutory powers of co-operation.

3.65  The JFSC co-operates and coordinates with counterparts in supervising firms regulated by multiple authorities and participates in supervisory colleges which share information and develop better understanding or risk profiles and activities of globally active firms.

SECTION 4

Risk Assessment Methodology

1. This chapter outlines how Jersey has approached its national risk assessment (NRA).

Introduction

2. Work on the NRA started in September 2017 with the appointment of an individual to lead the Island s work on the NRA. The NRA process has involved three stages: (i) introductory workshop (May 2018); (ii) assessment of threat and vulnerability using assessment tools (June 2018 to August 2019); and (iii) wrap-up workshop (November 2019).
3. The Government of Jersey has taken a lead role in coordinating the NRA, which has involved: (i) key government departments; (ii) public sector agencies, e.g. the JFSC, JFCU and Law Officers Department (LOD); and (iii) the private sector.
4. It should be noted that the progress of the NRA has been disrupted by significant changes in Government resource and notably change in individuals leading the work on the NRA. This has meant that the project has taken 12-18 months longer to reach completion than was initially planned. The impact of COVID-19 from March 2020 onwards also caused further delay to the work required to progress the publication of the NRA report.
5. Despite publication in September 2020, it should be noted that the majority of analysis work for the NRA was conducted in 2018 and 2019. Data relevant to the activity of the authorities in the Threat module was predominantly taken from authority level data. The relevant period for authority data is 2013-2017.

Assessment Tools

6. The NRA tool defines risk as the product of money laundering (ML) threat and national ML vulnerability and consists of the following modules:

ML threat.

National ML vulnerability.

THE TOOL FOLLOWS THE DEFINITION OF ML/TF RISK

RISK

IMPACT IMPACT

THREAT VULNERABILITY

7. Sectoral assessments of ML vulnerability for: the banking sector; securities sector; trust and company service provision (TCSPs); other financial institutions (FIs), e.g. lenders and bureaux de change; and Designated Non-Financial Businesses and Professions (DNFBPs), e.g. lawyers, accountants and estate agents. Ratings (low, medium-low, medium, medium-high and high) are assigned to ML threats and vulnerabilities to generate results that can be represented graphically on a risk-level heat map.

ML threat

8. Inter alia, the ML threat module calls for: (i) compilation of a list of predicate offences that are considered most relevant on the basis of legislation and prevalent criminal behaviour patterns within the jurisdiction; (ii) collation of enforcement data about these predicate offences and ML cases related to these predicates; (iii) systematic collection of detailed information from available ML cases in order to analyse trends and patterns of ML; and (iv) compilation

of data on economic and business relationships with other jurisdictions. Given the limited number of ML cases in Jersey, data has also been complied on suspicious activity reports. All of this data supports an analysis of the types of criminal proceeds found in Jersey, origin of predicate offences (domestic or foreign), sectors involved in ML, and cross-border threats.

National ML vulnerability

9. National ML vulnerability is determined by: (i) the overall ML vulnerability of the various sectors banking, securities (split between funds and investment business), TCSPs, other FIs and other DNFBPs weighted to reflect sector significance; and (ii) the national ability to combat ML. The Island s ability to combat ML at national level is based on assessments of 22 input variables , which include quality of AML policy and strategy, quality of FIU intelligence gathering and processing, and capacity and resources for investigations and prosecutions. For each variable, the NRA tool sets out the criteria that are to be used to assess vulnerability and suggests possible sources of data.

Sectoral assessments of ML vulnerability

10. Sectoral assessments of ML vulnerability take account of twotypes of variables:

(i) general AML control variables; and (ii) inherent vulnerability variables. The former relate to the quality, effectiveness and level of general AML controls at sectoral level, e.g. comprehensiveness of the AML legal framework and effectiveness of supervision procedures and practice18. The latter considers whether certain products and services are inherently more vulnerable to ML. This increased vulnerability may arise from characteristics of the product or service, or clients. For both sets of variables, the NRA tool sets out the criteria that are to be used to assess vulnerability and suggests possible sources of data.

11. Where products and services offered in a particular sector are considered to present different inherent vulnerabilities, then sectoral assessments should take account of these differences. The following products and services have been identified as presenting different inherent vulnerabilities.

Table 4.1: Products and services presenting different inherent vulnerabilities Sector Products and services

12. A number of factors determine the assessment of the national ability to combat ML and vulnerability of each sector, in particular: (i) assessment ratings for each of the variables; (ii) the relative weight attached to those variables (which is built into the NRA tool); and (iii) the underlying relationships between each of the variables (again this is built into the tool).

Sectoral assessments of ML vulnerability

13. Whilst the NRA tool assesses the vulnerability of the TCSP sector in Jersey, it does not address the extent to which legal persons and legal arrangements themselves (not all of which are administered in Jersey by TCSPs) present ML vulnerabilities.
14. Consistent with the NRA tool, the approach followed has been to: (i) identify the extent to which legal persons and arrangements that can be established under Jersey legislation may be more inherently vulnerable to ML; and (ii) consider the quality, effectiveness and level of general AML controls.

30 18  For banking and securities, there are 13 general AML control variables. In other sectors there are 12.

15. During the period of conducting the NRA, authorities started a piece of work looking at the ML risks associated with legal persons and arrangements in addition to the modules set out in the World Bank model. This work will inform an ongoing workstream which will include a full assessment of the risks posed by legal persons in line with FATF Recommendation 24. It is anticipated work on this will be ready for publication in 2021.

Wider economy ML risks

16. Whereas the focus of the NRA tool is on products and services that are already regulated and supervised for AML/CFT purposes, the NRA report considers the following vulnerabilities in the wider economy: (i) prevalence and use of family offices; (ii) use of financial technology; (iii) operation of shipping and aircraft registries; (iv) promotion of residence/citizenship by investment schemes; (v) global activities of Jersey-headquartered mineral extraction companies; and (vi) use of security issuance vehicles.
17. Further work on family offices, aaircraft registry and ship registry has not been completed but will form an ongoing workstreams for risk analysis which will be progressed as part of Jersey s future ongoing process of ML risk assessment.

Data Collection

19. The ability to conduct a sound and robust analysis and develop a thorough understanding of the ML/TF risks that Jersey faces relies heavily on the collection and analysis of an extensive amount of data. Assessment tools

require quantitative and qualitative data to be provided by: (i) the public sector,

in particular the JFSC, JFCU and LOD; and (ii) the private sector (see also private sector involvement below).

20. Issues concerning data availability and sufficiency of data are outlined in the Introduction to this report.

Aggregated data from JFSC

21. Quantitative data collected by the JFSC in order to support risk-based supervision has been shared using statutory information sharing gateways. The JFSC has collected this data for 2017 and 2018 and it covers the vast majority of FIs and DNFBPs operating in Jersey. Sectoral data has been aggregated such that it is not possible to identify underlying FIs and DNFBPs.
22. The introduction of data to support risk-based supervision has coincided with the NRA. For many, this was the first time that comprehensive data had been collected to support risk-based supervision and so data has been complied and submitted to the JFSC on a best efforts basis.

Private sector survey

23. Other data has been collected through a Government survey (2018). The broad objectives of the survey were to obtain a better understanding of private sector perceptions of:

How it complies with existing AML/CFT requirements;

The compliance culture that prevails amongst FIs and DNFBPs;

The supervision and enforcement in Jersey of AML/CFT requirements; Enforcement of AML/CFT requirements by law enforcement agencies; and Threats and vulnerabilities that may exist.

24. 137 organisations responded to the survey in respect of at least 231 business registrations; this represents a response rate of 32%, which is typical of business surveys of this nature. Most responses came from FIs and DNFBPs employing larger numbers of staff. Conversely, there was a poor response from lawyers, accountants and estate agents, particularly those operating as sole practitioners.

Consulting firms

25. Jersey-resident consulting and legal firms have also provided input into the NRA in order to better understand: (i) the extent to which ML/TF risk is managed and effective corporate governance arrangements are in place; (ii) matters that FIs and DNFBPs struggle, or request assistance, with and why; (iii) how the JFSC and law enforcement agencies administer AML/CFT legislation; and (iv) ML/TF threats and vulnerabilities.

International co-operation

26. The NRA has also collected information from competent authorities outside Jersey on their international co-operation experience with Jersey counterparts. Only a limited number of responses were received to requests for feedback on co-operation.

Other sources

27. In order to provide context for NRA discussions and report drafting, the following data has been considered:

Credible reports and studies of proceeds generating offences, ML, TF etc. that will be relevant to the NRA; and

Relevant media coverage.

Relative Importance of Sectors

28. determining the ML threat that is presented by different sectors, the NRA

tool calls for the size of sectors and/or their share in the economy to be

taken into account. The NRA tool calls for sectors of financial activity that are most important to a country s economy to be appropriately weighted when determining the overall ML vulnerability through aggregation of sectoral control assessments.

29. The following data has been used in order to assess size/share and importance:

(i) GVA per sector published by Statistics Jersey; (ii) average headcount per sector published by Statistics Jersey; (iii) revenue per sector published by Statistics Jersey; (iv) total number of beneficial owners and controllers; and total assets under management by sector. The following table sets out how each sector has been assessed.

Table 4.2: Size of sectors and/or share in economy

Sector Size/share/importance

Insurance Low

Private Sector Involvement

30. The NRA tool strongly recommends that the private sector (representatives of

FIs and DNFBPs) should be involved in sectoral assessments of ML vulnerability. Such an approach ensures that industry s perspectives are taken into account in assessing risk and also raises awareness of the NRA, which is important as

FIs and DNFBPs are amongst the primary audience of the NRA report. In many countries, this involvement in itself has helped to enhance the public/private sector dialogue and co-operation in the area of AML/CFT.

31. Industry has participated through: (i) membership of sectoral teams where participants have provided information at regular meetings (which is one source of evidence for assessing variables); and (ii) the Government survey.
32. The feedback from the private sector (and the public sector) during the NRA process and subsequently has been very positive with views expressed that the public-private sector dialogue had been constructive and had helped to enhance cooperation and risk awareness.

Academic Involvement

33. The Government of Jersey also decided to include the impact of a leading academic on economic crime in the process of risk assessment analysis. Professor Bill Gilmore is a leading academic whose more recent research has focused on the law and practice of transnational criminal legal co-operation. His publications in this area cover such matters as money laundering, extradition, and mutual assistance in criminal investigations. Professor Gilmore is a previous Scientific Expert to MONEYVAL and in December 2017 he was awarded the medal of honour of the Council of Europe (Pro Merito) for his contribution to international efforts to combat money laundering and the financing of terrorism. The Government of Jersey is grateful to Professor Gilmore for his contribution to process.

Limitations of the Assessment

34. The assessment faced a number of limitations as outlined below:

National risk threat data available to Authorities (relevant to part A of the NRA) covers 2013-2017. Aggregated sectoral data (relevant to the sectoral analysis in part B of the NRA) used 2017 and 2018 data. Data is being collected on an annual basis moving forward to support updating the NRA going forward.

Law enforcement agencies maintain data on separate standalone systems and there is no centralised database of suspicious activity reports, investigations, prosecutions and confiscations that could be accessed.

It should be noted that throughout the process of the NRA, working groups were established to consider each section and worked on the basis of consensus to reach agreement on ratings. An exercise of moderating these modules and groups to achieve consistency of ratings centrally was not undertaken during the NRA process. There is therefore some inconsistency in ratings (which is also compounded by data set differences), particularly across the sectoral modules. However, it remains possible to draw out general themes from the analysis.

The duration of the total assessment process (2017-2020) and publication in September 202 was too long. This has resulted in publishing a report which, in part, may seems historic and based on non-recent data.

SECTION 5

Residual Risk

1. This chapter outlines how Jersey has considered the overarching national risk assessment (NRA) residual risks. The assessment has considered the entire NRA process and provides a table of 10 residual risk findings which Jersey should prioritise and action.
2. Jersey s main risks are heavily influenced by the sectors and jurisdictions

in which key business relationships are conducted. As an IFC, Jersey has a significant exposure to cross-border threat, as outlined in the threat module.

The cross-border threat is further increased by a more recent focus on

specific jurisdictions with which Jersey is building business relationships for international finance. A number of these jurisdictions present risks to Jersey due to vulnerabilities in their domestic regimes which allows criminality to occur with proceeds potentially being transferred to Jersey for ML.

3. As described in Chapter 5 (Risk Assessment Methodology), Risk is the product of national ML threat and national ML vulnerability which also brings together the analysis of sectoral modules. The process of determining Residual Risk is a more holistic process which looks to consider where the greatest risks lie when considering these factors together and therefore where the higher level of action should be prioritised. It should be noted that throughout the process of the NRA, working groups were established to consider each section and worked on the basis of consensus to reach agreement on ratings. An exercise of moderating these modules and groups to achieve consistency of ratings centrally was not undertaken during the NRA process. There is therefore some inconsistency in ratings (which is also compounded by data set differences), particularly across the sectoral modules. However, it remains possible to draw out general themes from the analysis which have formed the basis of the Residual Risks highlighted in this chapter. In the future, during the ongoing process of ML risk assessment, a mechanism to achieve consistency across future ML sector risk rating will be developed alongside the ongoing risk assessment and data collection work.
4. In considering residual ML risk in Jersey, the predominance of the TCSP and banking industry must be considered, where private wealth activities are inherently more likely to be at risk of ML. Equally the size of the Securities sector should be noted and consideration should be given to what may be

a more limited understanding of how that sector is exposed to ML risk (both internationally and in Jersey). There is also the involvement of lawyers to consider, where they are particularly exposed to corporate structuring in higher risk areas (PEPs, complex structures, cross-border transactions) and the risks they pose is inherently interlinked to the private wealth industry.

5. The below table outlines the vulnerabilities Jersey faces at a national level, displaying the assessed strength of various aspects of the framework that act as mitigating controls/factors which are rated according to their effectiveness. A low score represents a weak control and thus a potential vulnerability.

Table 5.1: National Vulnerability Table

Quality of AML policy and  Effectiveness of ML  Comprehensiveness of  Quality of FIU strategy Crime definition Asset Forfeiture Laws  Intelligence Gathering

and Processing

4. 0.9 0.7

0.4

Capacity of Resources  Integrity and  Capacity and Resources  Integrity and for Financial Crime  independence of  for Financial Crime  Independence of Investigation (Including  Financial Crime  Prosecutions (including  Financial Crime Asset Forfeiture) Investigators (Including  Asset Forfeiture) Prosecutors

Asset Forfeiture)

5. 0.7 0.9

0.9

Capacity and Resources  Integrity and  Quality of Border  Comprehensiveness of for Judicial Processes  Independence of  Controls Customs Regime on Cash (including Asset  Judges (including Asset  and Similar Instruments Forfeiture) Forfeiture) 0.8

0.7

0.7 0.9

Effectiveness of Customs  Effectiveness of  Effectiveness  Availability of internal Controls on Cash and  Domestic Cooperation of International  audit

Similar Instruments Cooperation

0.6 0.7

0.6 0.5

Level of Financial  Effectiveness of Tax  Level of formalisation of  Availability of Integrity Enforcement the economy Reliable Identification

Infrastructure

0.8 0.5 0.9

0.8

Availability of  Availability and Access Independent Information  to Beneficial Ownership Sources Information

0.6 0.7

6. The sectoral risk assessment produced a series of outcomes based on control vulnerabilities sector by sector which are described in Part B of the report. The decision was taken not to apply the full WB methodology to certain sectors due to their relative size in Jersey. It should be noted that these were produced by consensus only within the individual working groups and therefore the lack of a consistent mechanism to regularise the ratings across sectors (highlighted above) means that caution should be taken in comparing sector by sector.

7. The World Bank NRA tool produces the following heat map to highlight the risks associated with the various financial services sectors. The resultant diagram is based on the following:

importance of the sector to Jersey (represented by size of the bubble ) the vulnerability rating (X axis)

threat rating for each sector. (Y Axis)

Residual Risk Heatmap for Jersey

6

5

4

3

2

1

0 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Overall Vulnerability

8. The above heat map is generated using the World Bank methodology and provides a general overview of where money-laundering risks lie in Jersey.
9. It is important to note that the map provides only a generalised graphic representation of ML risk across the ecosystem in Jersey. It does not illustrate, at a detailed level, the specific levels of types of risk that exist inside a specific sector and reference should be had to the sectoral chapters in this regard.
10. Overall, the heat map is an indicator of the risk of money laundering occurring in a particular sector having regard to both threat and vulnerabilities. It should not

be used as a comparison with other jurisdictions and should be considered only in the context of Jersey for this report.

11. Given the type of activity undertaken by an IFC, Jersey is more likely to be exposed to the layering stage of money laundering which typologies indicate regularly involve Banks, TCSPs or Funds - rather than the placement stage.
12. Considering the Threats and Vulnerabilities together, along with the context of Jersey, ten residual risks have been developed which describe the initial areas of greatest focus for ML when considering the totality of the NRA process to date.
13. The below table also looks to categorise these risks with consideration of two additional factors:

1. Sectoral Focus
2. Foreign/Domestic factors

14. In respect of sectoral focus, the table looks to highlight whether the risk relevant across all sectors or has a sector specific focus. For example, a risk relevant generally to an authority (LEA Co-operation with other jurisdictions) will be relevant for all sectors, however, a risk that has a sector specific focus (understanding of ML risk in key market areas) may be directed towards only specific sectors (TCSP, Banking etc.).
15. Given the nature of Jersey as an IFC, the risks are also heavily influenced by risks emanating from other jurisdictions. Therefore, the risk has been categorised as to whether it is a foreign risk, domestic risk or both where the risk is foreign or both there will be the need to engage with authorities outside Jersey to mitigate such risks.

Table 5.2

LEA Co-operation with jurisdictions where common All Foreign

predicate offences occur still requires development to

pursue effective ML investigations and prosecutions in  Specifically, but not limited to, the Jersey. following countries:

India, Kenya, Russia, Switzerland, UAE

For both authorities and industry, the understanding of TCSP Foreign specific topics relevant to ML is still developing and is

uneven in key industry sectors most exposed to those Banking

risks this is exacerbated by the limited understanding Funds & FSB

of ML risk in common foreign markets with which Jersey

interacts.  Lawyers

Specific topics of note are:

PEPs

Complex Structures

Specific Funds ML risk

The Quality of Intelligence available to the FIU, combined All Both

with processing challenges and resource constraints

means that Jersey has yet to fully resource financial  (Foreign more significant) crime investigation. It therefore remains challenging

to identify, investigate and prosecute ML in areas that

present the greatest threat to Jersey such as cross-

border ML threat. This is exacerbated by foreign co-

operation risks outlined in Risk 5.

The effectiveness of tax enforcement and co-operation TCSP may indicate challenges in identifying and investigating

tax evasion as a common predicate offence presenting a Banking

risk to Jersey significant sectors

The supervisory approach is not fully tailored to higher TCSP Both risk sectors and themes in order to effectively mitigate

ML risk Banking

Funds&FSB

Typologies of ML and guidance for specific important TCSP Both sectors, combined with outreach is required to ensure Banking

the industry fully understand the ML risk in those sectors Funds & FSB

Lawyers

SECTION 6

Recommended Actions

AML Policy &  1.  Policies and procedures around civil/criminal enforcement Strategy should be amended to ensure parallel ML investigations

occur whenever international predicate offences are identified and there is a link to a domestic individual or regulated entity.

2. Determine whether there are specific reasons for the lack of data available in evidencing ML investigations and introduce policies to address these reasons if appropriate.
3. Review the current legal framework for imposition of sanctions for breaches of AML/CFT obligations; and make changes where necessary to facilitate the imposition of effective, proportionate and dissuasive sanctions where appropriate.
4. Improve the MLO to allow for criminal and civil sanctions to be effectively taken.
5. Ensure Policy development is sufficiently resourced and agile enough to fully develop and co-ordinate a policy response to emerging threats faced by Jersey as an IFC
6. In order to better understand the ML Threat posed by

the main jurisdictions with which Jersey does business,

a detailed analysis of those jurisdictions should be undertaken and the risk profile for each of the jurisdictions should be set out in one document which is maintained on an ongoing basis and accessible to all agencies.

7. Develop an Island strategy to prioritise and drive forward key areas of ML/TF risk and policy for Jersey.

SECTION 7

National Money- Laundering Threat

Introduction & Methodology

1. The money laundering (ML) threat faced by Jersey was reviewed against data from various sources within the jurisdiction[1]. The data recorded from Law Enforcement Agencies (LEAs) and their partners was limited to a time period of 2013 2017. In module 1B of the World Bank (WB) model all reported and recordable offences that generated proceeds in excess of GBP 10,000[2] were documented.
2. The data used in the threat analysis was also not consistently recorded in the same format across the relevant departments, and this limitation should be recognised. Where there are gaps in data, other sources of information such as Moneyval mutual evaluation reports (MERs), international co-operation surveys[3] and suspicious activity reports (SAR) intelligence has been relied upon in order to formulate overall assessment of threat.
3. As an IFC, the majority of Jersey s customer base is non-resident (by number and value). Accordingly, activities that result in funds being held in Jersey will take place largely outside the jurisdiction and it follows that a large majority of predicate offending will have been committed outside of the island, with the proceeds potentially being placed and laundered through local institutions[4].
4. The threat assessment, therefore, focusses mainly on the international ML threat, although the domestic threat has also been considered.
5. The assessment of Jersey s ML threat includes an assessment of:

Foreign Predicate Criminality

The assessment of foreign predicate offences relied upon other sources of data and publications such as information held by authorities, other countries national risk assessments (NRA s) and MER s as the data obtained as part of this assessment highlighted that there were predominately more case studies available on domestic threat, than that of international threat.

Cross-border Threat

The working group used the WB module form on cross border activity as a starting template and then applied further criteria deemed relevant to Jersey. The product of

this assessment was a list of countries that may be considered to present a threat to Jersey (or vice versa). To the extent that any of these countries were financial centres, it was important to consider also whether there were strong links between such centres and any jurisdictions which may be considered to present a higher risk for ML purposes.

Domestic ML Threat

A number of predicate offences were recorded during this period. Local crime data provided by SOJP and the LOD was analysed and compared to the FATF designated categories of offences list[1] and all relevant local offences that were proceeds of crime generating over GBP 10,000 were collated and used in the assessment. All reported ML investigations were based upon domestic predicate offending[2].

Foreign Predicate Offences

Overview

6. As explained above, financial intelligence rather than criminal investigations has been used predominantly to identify the types of foreign predicate offences

that are laundered in Jersey. This is because there are only a very small number of investigations and prosecutions for ML where predicates have taken place outside Jersey.

7. Between 2013 and 2018, 8,091 spontaneous dissemination reports relating

to financial intelligence were shared via the Egmont Secure Web (ESW). The spontaneous disseminations are based upon intelligence received from SAR reporting to the FIU, this is analysed and disseminated to the most relevant jurisdiction(s) that would benefit from receipt of this information. The aim is to assist any predicate crime investigation in their jurisdiction and to open dialogue with that jurisdiction in order to explore the possibility of positive action that can be taken in Jersey where the proceeds of crime may be located. This also looks to identify where domestic criminality may have occurred so that further investigation can occur.

8. During 2013 2017, 1290 Requests For Assistance (RFA s) were received from international jurisdictions via the ESW. These requests can be in the form of a response to a spontaneous dissemination or where the jurisdiction has received intelligence from their financial industry linking their jurisdiction to Jersey.
9. Often requests can include but are not isolated to information sought in relation to the beneficial owners of Jersey registered companies and details of the activity of those companies.

10. Jersey also has an agreement with the United Kingdom via an Exchange of Notes to exchange beneficial ownership information in a short time period, or urgently in certain circumstances. Between June 2017 and the end of 2018, 26 requests from the UK were responded to[3].

Information on foreign predicates based on FIU intelligence

11. This FIU intelligence indicates that the top criminality suspected relates to tax evasion, fraud and corruption. To better understand these predicate activities, the JFCU-FIU s intelligence database has been reviewed and relevant cases extracted. These cases suggest that the greatest threat to Jersey comes from non-residents seeking to hide the proceeds of corruption and white-collar crime27 in Jersey.
12. In the examples below, a cross section of jurisdictions and suspected offences has been selected to identify what type of intelligence was typically received during this assessment period. There are examples where despite the suspicion of domestic criminality and effective sharing of intelligence with international jurisdictions, none of the examples resulted in any prosecution of individuals or regulated entities in Jersey.
13. In the examples below, a cross section of jurisdictions and suspected offences has been selected to identify what type of intelligence was typically received during this assessment period. There are examples where despite the suspicion of domestic criminality and effective sharing of intelligence with international jurisdictions, none of the examples resulted in any prosecution of individuals or regulated entities in Jersey.
14. The reasons for lack of investigation or prosecution in these specific cases included: lack of support or corroboration of intelligence by international jurisdictions and insufficient evidence to progress an investigation to a criminal or civil standard.
15. The following cases are examples compiled between 2013-2017 that featured suspected overseas predicate crimes:

Corruption case 2013

A PEP was linked through open source information to the alleged receiving of bribes in relation to contracts relating to military equipment. Assets held locally were linked to activity in the 1980s (prior to the allegation). Assets were placed into investments managed by a large global asset management company.

Fraud case 2014 Jersey and UK Police investigation and prosecution

Intelligence led to an investigation involving a Jersey-based global holiday scam involving members of an organised crime syndicate which made victims believe they were booking holiday apartments in, no services were provided, and money was fraudulently transferred to different accounts under assumed names. Convictions were handed down for fraud and money laundering under

the proceeds of crime law and one person sentenced in Jersey to 2 years and a second person also received a 10.5-month prison sentence. A legitimate holiday site was hacked by the fraudsters and the proceeds of crime were placed into bank accounts held locally set up with fraudulent identification. Proceeds were then diverted to UK bank accounts and through a local MSB.

Insider dealing Case 2014

The subject of intelligence was a senior employee of a company which was subject to a takeover bid by a rival company. The subject purchased a significant quantity of shares in the company prior to the public announcement of the

bid and then sold some of them following the announcement (the price had appreciated by 33%). The remainder were acquired by the new company at

the agreed price. In total, the subject made gross profits of GBP 770,223. The alleged proceeds of the insider dealing benefit were traded through a local bank. There was insufficient evidence found to proceed with prosecution and the case was discontinued.

Bribery and corruption case study - Kenya Police investigation and prosecution

Windward Trading Limited (February 2016): Windward Trading pleaded guilty to four counts of money laundering offences between 1999 and 2001 involving a total of GBP 2,599,050 and USD 2,971,743 respectively. The company received and held the proceeds of criminal conduct perpetrated by its controlling mind

and beneficial owner, Samuel Gichuru of Kenya. The company knowingly enabled Samuel Gichuru to obtain substantial bribes paid to him while he held

the post of Chief Executive of Kenya Power and Lighting Company, the Kenyan government s electricity utility company. Attempts to extradite Samuel Gichuru and Chrysanthus Okemo continue. No action was taken against the TCSP managing the company. The Royal Court Judgement indicates this was due

to the control of the company having changed hands more than once and the TCSP in charge at the time of sentencing was not culpable. The company itself was stripped of all of its assets in confiscation and therefore no further penalty was sought.

Confiscation: GBP 3,281,897.40 and USD 540,330.69. Corruption Case 2015

Intelligence was received that the subject had made payments to numerous PEPs in Africa to solicit sensitive information from government officials, other prominent individuals and a journalist. The subject s company specialised in political and corporate intelligence for sub-Saharan Africa, advising private and corporate investors. Data obtained was then being provided to those private investors in order to obtain a financial advantage and reward as a result of the information provided. No local investigation was commenced as no cooperation received from oversees jurisdiction to support intelligence. Intelligence was share with relevant overseas authorities.. A local banking entity was used to facilitate the payments to and from PEP S.

Corruption Case 2015 Russia and UK

A Russian PEP linked to a state oil company held bank accounts in company names in the UK and Jersey. Transfers were made from UK company accounts to a Jersey company and then a further transfer was made to another Jersey

46

company account owned by a foreign law discretionary trust. A transfer was then made to the subject s account in a Russian bank. No local investigation commenced. The assets could not be linked to the alleged criminality. Proceeds of the alleged criminality were placed into bank accounts held locally before distribution to Russia.

Bribery and Corruption 2016 Middle East and UK

The subjects were connected to a company from which their source of wealth emanated. This company was connected, according to adverse media, to bribery and corruption payments linked to an oil company in the Middle

East. Investments were made in Jersey administered companies with assets believed to be from the proceeds of that corruption. No local investigation was commenced as no links from the assets could be made to the criminality.

Fraud Case 2016 USA and Middle East

The subject s company formed an undisclosed joint venture partnership with another middle Eastern company and a US company, and they were awarded contracts they would not have been entitled to, had the joint venture partnership been declared. The joint venture partners are also alleged to have submitted false claims, payment demands, records and statements. A local TCSP provided company administration services to the trust structures for which the funds were received.

[1]Tax

16. Tax-related SAR reporting is in the top-three reported crimes suspected by local regulated entities, most relating to suspicion of tax evasion. SARs often report clients taking advantage of tax amnesties.
17. In practice, it is difficult to develop typologies for tax evasion, since foreign Investigations tend to be of an administrative rather than criminal nature. Whereas the JFCU FIU will share the relevant tax intelligence with a partner FIU, many requests for assistance are made through Revenue Jersey under tax information exchange agreements, where OECD confidentiality arrangements preclude notification of the FIU by Revenue Jersey. Nevertheless, a significant number of requests were made to provide tax information in the period from 2014 to 2018 which suggests that Jersey is likely to be used to evade foreign taxes. The FIU share tax related intelligence internationally. Challenges exist with identifying oversees tax predicates where the placement and layering of funds is occurring in Jersey and this impacts on identifying potential cases to investigate to a criminal standard hence the lack of investigations and prosecutions across the jurisdiction in this area.
18. The Tax Justice Network regularly comment on how extensively jurisdictions contribute to helping the world s multinational enterprises escape paying tax. Jersey has received negative publicity for its use in tax avoidance particularly concerning schemes involving Her Majesty s Revenue and Customs in the UK and the use of complex structures. However, this criticism often fails to note the approach to addressing this risk that Jersey has applied for many years, namely regulating the financial services community, transparency and information exchange.

Mutual Legal Assistance requests

19. The Criminal Division of the Law Officers Department deals with Mutual Legal Assistance on behalf of the AG. The work involved in this area includes gathering written and oral evidence for use in overseas criminal or civil asset recovery investigations and proceedings, as well as freezing and confiscating the proceeds of crime and drug trafficking. Data recorded in the Attorneys General s annual reports[2] from 2014 2017 provides the following data, 368 MLA s were received from interactions with foreign jurisdictions29. Jurisdictions making those were requests were: UK,USA, Australia and from the regions of Asia, Africa, South America and other European countries. The MLA s handled by type of offence indicate that fraud, corruption and money laundering were main types of criminality identified.
20. The majority of requests to other jurisdictions are made for the purpose

of obtaining evidence from overseas authorities for use in local criminal investigations and criminal prosecutions. However, the AG might also request asset restraint and registration of Jersey Confiscation Orders. In the period 2014 2017, 38 requests were sent29.

Threat rating of Foreign Predicate Offences

21. The foreign predicate criminality threat of ML is Medium/High. This is based on the following:

As evidenced with Windward Trading the routing of the proceeds of fraud committed overseas through a Jersey structure poses a money laundering threat, particularly using complex structures or where the beneficiary of the Jersey structure is linked to the award of high value contracts in other jurisdictions where corruption is endemic.

Jersey s financial sectors have been used to conceal the proceeds of foreign criminality. This is evidenced by the use of complex structures, incorporated or administered from in the island, in the cases analysed during this risk assessment. A number of complex structures were found to manage and/or hold assets locally, internationally and sometimes both simultaneously.

The TCSP and banking sectors are most exposed to this threat, particularly by holding funds that may be the proceeds of crime or administering legal persons and legal arrangements appointed to facilitate international cross jurisdictional ventures.

In addition to this management of Private Wealth is an important part of Jersey s offering with major institutions headquartering their Private Wealth businesses in the Island. Given the scale of the business, the risks associated with providing services to Private Wealth clients who are PEPs from an international perspective is considered to be significant.

The threat from international criminality is evident from information held by the authorities. This combined with general analysis and professional judgement indicates that the threat from overseas criminality is significant.

Cross Border Threat Assessment

Overview of methodology

22. The international ML threat included an assessment of cross-border threat. The Working Group used two methodologies to determine which countries may be considered to present a threat to Jersey (or vice versa).

Methodology 1: WB Methodology

23. The working group assessed jurisdictions using the WB methodology. Thereafter, it applied its own additional methodology and analysis

to best reflect its professional judgement. The methodology for determining jurisdictions to be included in the cross-border threat analysis was enhanced to reflect Jersey s position as an international financial centre.

24. There were 3 parts to the methodology:

Part A: Identify jurisdictions which feature when certain criteria is applied

Identify the jurisdictions which feature in various objective data reports (for example, jurisdictions with financial flows of more than GBP 2m into Jersey); and

Identify the jurisdictions which feature when additional indicators are applied (for example, jurisdictions that request supervisory cooperation from Jersey).

Part B: Determine which jurisdictions to include in the cross-border threat analysis

Rate each jurisdiction based on the number of times it features in Part A1 and Part A2 (jurisdictions which only feature once in Part A1 or Part A2 are disregarded).

Part C: Determine the threat for the jurisdictions included in the threat analysis

Multiply the rating given to each jurisdiction in Part B by the number of times the jurisdiction is identified by credible external sources as presenting a higher risk as set out in Appendix D2 of the AML/CFT Handbook.

Diagram 7.1

All All All Top 16 Top 16 Top 15 Top 18

PART A1 Jurisdictions identified from available data (Objective Criteria) PART A1

PART B Identification of jurisdictions to be  PART C Identification of threat for jurisdictions  Top 5 included in cross-border threat analysis included in cross-border threat analysis jurisdictions

identified

All jurisdictions which scored 2 or more in  The product of: the number of times that the  using this PART A1 and/or 2 or more in PART A2* Score given to a  jurisdiction is identified by credible  methodology:

jurisdiction based on  X external sources as presenting a  *Russia

number of times it  higher risk – as set out in Appendix  *Kenya *UK (*one point given for each time the jurisdiction featured) featured under PART B* D2 of the AML/CFT Handbook *India *USA

PART A2 Jurisdictions identified from additional indicators PART A2

Top 15 Top 15 Top 15 Top 15 Top 15 Top 15 Top 15 Top 15

[1]For example:

For Example A B C D E

Country Number of times  Number of times  Total in part A  Number of times  Total Score

featured in Part  featured in Part  (A+B) identified in  (C x D)

A1 (if 2) A2 (if 2) Appendix D2

X 5 7 6 42

25. Any jurisdiction scoring 4 or more was rated. There were 27 jurisdictions considered for wider research and inclusion in this section.
26. The jurisdictions with the top 5 scores were identified as posing a threat to Jersey (or vice versa). See Table 7.1 below.

Methodology 2: Financial Centres[2]

27. The Working Group identified additional jurisdictions for further analysis, based upon the fact that they are financial centres. Those centres may act as entrepots , where funds received or sent, have come from or will subsequently be transferred to other jurisdictions, including Jersey.
28. These jurisdictions were reviewed by their most recent NRAs (if available) and MERs. The methodology was to identify within those reports any information indicating high risk jurisdictions connected with those countries and also high- risk products and services within that country that poses a risk for Jersey. It was also considered whether there are strong links between such centres and any jurisdictions which may be considered to present a higher risk for ML purposes.
29. 6 jurisdictions were identified as posing a threat to Jersey (or vice versa). See Table 7.1 below.

Outcome of Assessment

30. The countries which were identified as posing a threat to Jersey (or vice versa) using Methodology 1 and Methodology 2 are set out below:

Table 7.1

Jersey s Links with Financial Centres identified using Methodology 2

Ireland

33. Ireland s close economic ties with the United Kingdom and its shared border mean that it could be at risk of certain cross-border money-laundering activities. Given the potential impact of the UK leaving the EU, Ireland will most certainly require enhanced agreements with the UK and the EU, particularly with regard to the border. Ireland is the 4th largest exporter of Financial Services in the EU. The financial sector brings significant numbers of international financial services companies to Ireland, creating substantial levels of employment and generating significant tax revenue for the State.
34. While Ireland is considered a relatively low crime country, proceeds-generating criminal conduct, common to all developed economies, is present. Predicate offences are perpetrated by offenders of various levels of sophistication, from small scale criminals, through criminalised professionals to organised crime gangs (OCGs). It is estimated that there are approximately 40 OCGs in Ireland, of which at least 9 have international links with OCGs in regions such as the Netherlands, Spain, West Africa and the United Kingdom. The financial services sector as a whole is vulnerable to ML/TF threats arising from a range of predicate offences including drug trafficking, financial crime, fuel smuggling, prostitution, tax evasion, bribery and corruption.
35. The risk of being targeted by criminals to launder the proceeds of crime is significant due to a range of factors, including: the wide range of products and services offered in the sector; the nature of the products and services offered; the broad demographic of the customer base; the wide geographic reach of the financial sector; the scale and materiality of the financial sector in Ireland; the use of complex corporate vehicles.
36. The business links between Jersey and Ireland are predominantly in respect of corporate fund structures (such as LLCs, hedge funds and retail funds), where fund administration services are outsourced from Jersey to Ireland and vice versa.

HKC

37. HKC is a major financial centre and a major jurisdiction for company incorporation. While HKC has a low domestic crime rate the recent FATF MER of HKC identified it faces a significant risk of attracting those who seek to launder the proceeds of crimes such as corruption and tax evasion.
38. The MER found that given HKC s position as an international financial centre, and the risks it faces from crimes committed abroad, it is not making sufficient outgoing requests for cooperation. Authorities could focus more on prosecuting the laundering of proceeds from foreign offences. The issue of co-operation is significant for Jersey as complex structures involving HKC entities can be linked to Jersey.
39. Complex structures which are linked between HKC and Jersey are relevant to the ML risk in Jersey. There are also a number of international banks, TCSPs and law firms who have presence in both HKC and Jersey.

Switzerland

40. Main threats for the Swiss financial sector in terms of predicate offences are fraud, including online fraud, bribery committed abroad, and support for and participation in a criminal organisation. Financial intermediaries most exposed to money laundering risks are banks (especially universal banks and private banks), independent asset managers, fiduciaries, lawyers and notaries, and money transmitters. Switzerland determined that there are ML risks associated with the use of offshore structures in the context of creating companies for use in the layering process.
41. Swiss wealth management is 26% of global offshore wealth management and has the largest amount of assets under management. The banking sector is high risk in terms of opening accounts and managing assets on behalf of legal structures such as foundations, domiciliary companies and trusts domiciled in offshore centres. Not all fiduciaries operating through branches or through partnerships with foreign intermediaries, when setting up offshore entities have a proper appreciation of their responsibility linked to the creation of corporate structures.
42. Trust and subsequent banking arrangements are common links between Switzerland and Jersey. Switzerland looks to use the common law structure of the Jersey law trust to provide a greater variety of wealth management facilities being run out of Switzerland. The presence of a number of Swiss regulated entities in Jersey.

UAE

43. The UAE is a country with a significant wire transfer flow both to and from Jersey. It is assessed as medium risk with an increasing trend. UAE is a varied area consisting of an estimated 30 commercial free trade zones and the Dubai IFC (DIFC), with numerous divergent approaches to AML/CFT enforcement across sectors and emirates which creates an uneven regime which can be abused for ML.
44. The recent FATF MER of the UAE indicates that the DIFC and the ADGM (the two Financial Free Zones in the UAE) have higher standards of financial regulation, compared to the other domestic and free trade areas. Relevant reports indicate that there is cause for concern and room for improvement in several areas. There

is a growing number of trade free zones where creation of offshore companies

is possible but in Dubai these structures are not permitted. The risk of front companies existing in the UAE and being used by nationals on behalf of foreign interests is significant. Trusts are only permitted in DIFC and these are regulated, therefore legal arrangements generally present a lower risk. ML vulnerabilities

exist particularly due to heavy use of cash in economy which MVTS providers

are particularly exposed to, however significant risks also exist within DNFBP s, CDD obligations, securities and insurance within the free commercial areas.

45. Trust and subsequent banking arrangements are the common structures used between Jersey and the UAE. This has been a particular growth area over the past 10 years with significant links being built with the UAE.

53

UK

46. The UK faces significant ML risks from overseas, in particular, from other financial centres (including some of its Overseas Territories and Crown Dependencies),

due to its position as a major global financial centre and the world s largest

centre for cross-border banking. In particular, the UK is vulnerable and at risk

of being used as a destination or transit location for criminal proceeds. Criminal activity in the UK also generates a significant amount of proceeds although domestic crime levels have continued to decrease over the past 20 years.

47. The main ML risks identified in the UKNRA include high-end ML, cash-based ML, and the laundering of proceeds from fraud and tax offences, drug offending and human trafficking, and organised crime. The UK also faces particular and significant risks from laundering the proceeds of foreign predicate crimes, including transnational organised crime and overseas corruption. The NRA identifies the highest risks as those from cash-based ML and high-end ML (meaning the laundering of large amounts of criminal funds through the UK by, for example, transferring those funds through complex corporate vehicles and offshore jurisdictions).
48. Jersey has strong financial links with London and tends to focus on markets that are being developed within the City of London. Financial flows both incoming and outgoing are indicative of that relationship with the UK which are top of the listing in both areas. This is an indicator that foreign investment may not

be coming to Jersey directly from the source countries but being placed in UK financial institutions and the asset flow is then to Jersey.

USA

49. According to the MER of the USA, inadequate access to beneficial ownership information is a fundamental gap in the US regime. The MER notes that the NMLRA identifies examples of legal persons being abused for ML, in particular, through the use of complex structures to hide ownership. While authorities provided examples of successful investigations in such cases, the general lack of access to beneficial ownership information was a concern. Among the discussion in the NMLRA on legal persons and legal arrangements there are a few references to legal persons (including shell companies) in an offshore context. Criminal actors are noted as having established complex networks of front and/ or shell companies in jurisdictions spread throughout the world, often in places with active offshore financial centres or areas with lax corporate registration controls. Such front/shell companies in turn establish bank accounts which give them access to the global banking system through normal correspondent banking ties, this being the primary entry method into the US financial system.
50. Jersey is not specifically mentioned in the NRAs, however, Jersey is noted in the MER as having shared forfeited assets with the US and supports the effective international partnership that Jersey has with theUSA.
51. In the TCSP sector there is involvement in the administration of structures with nexus to the USA. This is considered to be a potential growth prospect in the area of Funds.

International Co-Operation Surveys

52. As referred to in the introduction, international co-operation surveys were sent out to jurisdictions that Jersey had liaised with, through either the FIU, LOD of JFSC to obtain feedback. The jurisdictions were chosen based on the fact they were common jurisdictions of liaison for the Jersey authorities. The feedback document was based upon a template more commonly used by the FATF and FATF-Style Regional Bodies ahead of mutual evaluations. This had two aims:

Assess the extent to which Jersey actively and effectively renders and requests international cooperation in relation to ML/TF, associated predicate offences, related financial crime investigations and prosecutions and asset forfeiture.

Take account of information provided on general or specific ML/TF risks present in Jersey - observed from outside the jurisdiction.

53. The FIU sent out surveys to other foreign authorities who they have regular interaction with. . The feedback was positive in terms of the quality of information shared and how this was then converted to domestic referrals in their jurisdictions. The threats observed from their jurisdictions were related to tax crimes, with Jersey facilitating structures and a competitive banking system attractive to investors, in order to avoid tax liabilities in their jurisdictions. Also, the use of Trust structures, again to disguise the beneficial owners through the use of companies and disguising of assets which could include the proceeds of crime.
54. The LOD sent out surveys to other foreign authorities who they have regular interaction with, all indicating positive experiences with the handling of MLA s. MLA s.
55. During 2019, the JFSC collaborated with 29 jurisdictions (with the vast majority of interactions being with the UK); received over 600 regulatory requests for assistance and made nearly 300 requests from other jurisdictions[3].

Country links to Jersey through customer relationships

56. The Government of Jersey initially published a strategy for developing relationships with global markets in 2017. The strategy was updated in 2019,

and now includes a broader matrix of indices used to evaluate countries with which to pursue engagement in order to position Jersey as a more influential partner internationally, with maturing commercial and political relationships. These indices include data from the JSFC on higher risk countries and the Basel Anti-Money Laundering Index. The updated strategy was not considered in NRA analysis due to timing of publication being after the main analysis period.

The 2017 strategy focussed on countries in Asia, the Middle East, sub-Saharan Africa and North America. A number of those jurisdictions were considered to present a higher risk for ML & TF by the JFSC. Appendix D2 of the Handbook lists a number of countries and territories that are identified by reliable and independent external sources as presenting a higher risk. In assessing country risk for AML/CFT purposes, in addition to considering the particular features of a customer, it will be relevant to take account of the number of occasions that a particular country or territory is listed for different reasons. Where a country or territory is identified as presenting a higher risk for different reasons by three

or more, or four or more, separate external sources, it is more prominently highlighted in the appendix.

57. Understanding the destination of funds transfers and the jurisdictions from which funds are received (funds flow data) is a recognised key indicator of the risk of money laundering and terrorist financing being present in a jurisdiction. Where a jurisdiction has a Central Bank, funds flow data is captured and monitored as a matter of course, but Jersey has no Central Bank.
58. In late 2017/early 2018 the Government worked with a small number of Jersey deposit-takers to investigate how funds flow data could be captured and considered. This work highlighted that it was possible for deposit-takers to provide aggregated data regarding the destination and origination of funds. Whilst the deposit-takers use a number of systems to move funds SWIFT is the most common and the system of most interest as it is multicurrency/multi- jurisdictional.
59. The 2016 and 2017 data was voluntarily supplied by 75% of the UK clearing banks and a number of the largest deposit-takers operating on the Island therefore it is anticipated that the voluntary data may cover a large percentage of the number and value of funds flows.

Physical Movement of Cash

60. Although it is not possible to identify how much currency is incoming and outgoing, there is some data available from JCIS for cash seized and forfeited under court orders from people leaving the Island. There is also information available identifying the cash being declared by individuals leaving the Island. Table 7.2 indicates that in total GBP 1,090,022.00 outgoing flow was declared but not seized. Table 7.3 indicates that in total USD 20,519.00 outgoing flow was declared but not seized and Table 7.4 indicates that in total EUR 123,410.00 outgoing flow was declared but not seized.

Table 7.2

Top ten jurisdictions cash declared not seized in GBP

Spain  273,500.00 United Kingdom  235,477.00 Island of Madeira36, Portugal  148,200.00 Poland  142,960.00 Romania  59,500.00 USA  59,093.00 Thailand  27,270.00 Czech Republic  21,700.00 Switzerland  20,500.00 China  15,000.00

Table 7.3

Top six countries cash declared not seized in USD

Argentina 11,000.00 Zimbabwe 3,600.00 Canada  3,200.00 Russian Federation  2,000.00 United Kingdom 619.00 Nicaragua  100.00

Table 7.4

Top ten countries cash declared not seized in EUR

France  41,120.00 Spain  37,050.00 Island of Madeira, Portugal  28,995.00 Germany  9,000.00 Italy  5,000.00 Greece  3,855.00 United Kingdom  3,840.00 Netherlands  1,800.00 Poland  1,500.00 Mainland Portugal  250.00

61. None of the cash in Tables 8.2-8.4 was considered by JCIS officers to be tainted and therefore was not seized, this assessment was made following discussions with the passengers at the port of departure. The funds being taken to Madeira and Poland were identified as being the earnings of transient workers. This is

in line with the population of migrant workers that take up employment in the Island on short term contracts, such as in the farming industry and then returning to their national homes after the working season has concluded. JCIS have had success in preventing the export of the proceeds of crime leaving Jersey to the UK; for example, in 2016 there were two cases convicted: AG v Turney where GBP 42,000 was seized and AG v Brennan where GBP 11,660 was seized. In a further case in 2017 (AG v Dixie and Pereira) JCIS seized GBP 36,420. All the above cash was discovered concealed within vehicles returning to the UK by the way of commercial sea travel

62. It is likely that a proportion of the proceeds of crime seized inland by SoJP

and JCIS are destined to be exported. These are largely dealt with by the way

of Confiscation by the higher Court at conviction and are included within the Confiscation figures not the cross border cash seizure statistics, for example:

AG v Whelan GBP 40,020, AG v Spinola, Rae & Palmer GBP 65,155, GBP 8,000 and GBP 54,020 in 2016, Ag v Hole GBP 115,000 in 2017. Further data collected via the Treasury indicates that Jersey currency in the region of GBP 20m was repatriated to the Island between 2013 and 2018. Jersey bank notes cannot

be used in the UK as they are not legal tender. These notes are collected and returned to the Treasury. There is no reliable information available to ascertain where in the UK the notes are exchanged, or any supporting information that could indicate the quantities that are being exchanged at any one place. It can

57

be assumed that some transactions occur at bureaux de changes in the airports and in major cities visited by tourists.

Threat Rating of Cross-Border Threat

63. Cross-Border threat of ML has been assessed as Medium. This is based on the following:

Physical cross border movement of cash poses a threat of ML. Declarations at the Ports of Jersey are on an if asked to declare basis. The result of this

is that passengers can transport the proceeds of crime through the borders without having made statutory declarations, unless stopped by border enforcement staff. Evidence of multi million pounds of Jersey currency being repatriated back to the island, over a 5-year period is indicative that this activity is occurring without law enforcement detection.

Predicate offending is evidenced occurring in international jurisdictions as highlighted in the previous chapter. The flow of tainted assets is being placed and layered in local institutions often corporate structures which aid to assist the disguise of their origins. This is evident particularly in the bribery and corruption cases highlighted.

Drugs trafficking is a common crime associated with cross border threat, not only is the flow of the commodity between jurisdictions a threat to the health of the population, but the financial transactional activity of the traffickers. Financial sectors commonly associated with tainted cash flow are the banking and MSB sectors.

As highlighted in the list of identified countries that pose a cross border threat, examples of high end UK property owned by local corporate structures demonstrates the threat of tainted assets being placed in this jurisdiction to disguise their origin and then invested in luxury property under company structures.

The absence of transactional reporting of a pre-determined set threshold, allows the flow of assets across borders, relying only on the suspicious element of this transaction to be identified often after the transaction has occurred. This is a threat in terms of the receipt of assets being placed in the jurisdiction and also the transmission of those assets to other jurisdictions as identified in other countries NRA s such as Guernsey s.

Domestic Predicate offences

Overview

64. Predicate offences recorded during this period, using the FATF designated categories of offences list32 as a reference and including other relevant domestic offences, are:

- drugs trafficking

- larceny (theft)

- breaking and entry/illegal entry

- receiving stolen property

- fraud & false pretence

- kidnap and extortion

- [1]robbery

- bribery and corruption

- offences under: Article 7(1) Financial Services (Jersey) Law 1998 Article 28(2) - Financial Services (Jersey) Law Article 53(1)(a) Terrorism (Jersey) Law

- Tax offences.

65. The crime rate in Jersey is currently low, it has been steadily decreasing since 2008 when the number of recorded crimes for that year was 4,806[2], apart from 2017 where there is a slight increase in reported crimes figures:
66. Crimes recorded between 2013 2017

Table 7.5

No.  4,806  4,539  4,564  3,985  3,833  3,201  3,141  3,087  2,902  3,033

67. The number of cases of money laundering investigated has been low throughout this period. The reasons for this are considered in the chapter on national ML vulnerability.
68. The outcome of the data analysis of the most prevalent domestic offences indicates that drugs trafficking cases had most prosecutions and convictions for ML, followed by fraud offences and larceny.
69. No prosecutions have been undertaken against institutions regulated by the JFSC during this period although significant regulatory sanctions have been imposed against institutions and individuals for failing to comply with the AML requirements.
70. Virtual offices are not permitted in Jersey and any person providing registered offices by way of business are required to submit to the full regulatory regime.

A recent trawl of the company registry data identified a significant number of private addresses linked to the administration of companies potentially in breach of the regulatory regime. The JFSC commenced a review of such activity in 2019 and visited premises where suspected regulated activity was being undertaken.

Drugs Trafficking

71. JCIS and SOJP both produce public annual reports containing annual figures comparing drugs trafficking seizures year on year and any trends that have been identified34. In the chart below JCIS have provided statistics showing the overall value of drugs seized during 2012 2017.

Diagram 7.2 - JCIS annual report 2017

4.0 £3.8

3.5 Millions £3.2

£3.0

3.0

2.5 £2.4 £2.3

2.0

1.5

1.0 £950,300

0.5

0.0

2012 2013 2014 2015 2016 2017

72. The profile of drugs trafficking has changed since 2013. The more traditional drugs such as Class A MDMA, cocaine and heroin and Class B drugs such as herbal cannabis and cannabis resin remain the focus of many drugs trafficking cases. However, in 2014 increased seizures of New Psychoactive Substances (NPS), or legal highs as they became better known, was observed. In 2014, SOJP and JCIS seized almost 3 kilograms of NPS in a two-week period which resulted in several prosecutions and convictions.35 At the time 3 kilograms was a significant haul (applying 2019 estimated street values, NPS is valued at GBP 40 GBP 80 per gram). JCIS data shows that drugs are predominantly imported to Jersey through its sea borders. Importation of drugs through the postal system as a drugs trafficking method is not uncommon in Jersey, although less material. Importation through Jersey s air borders is much less significant.
73. 2014 also saw a sharp increase in the levels of drug-related crime, through higher detection rates as a result of intelligence led operations and the considerable work that was done to raise the awareness and understanding of the dangers of so called legal highs . 2015 saw a 14% reduction in the detection of drug-related crime. The longer-term trend also suggests that the Island saw a 20% reduction

in drugs related offences over the past five years. The level of drugs seizures

can be a reflection of Police and JCIS activities, rather than an indication of the overall level of illegal drugs activity in the Island. In 2016 specifically drugs crimes increased and an additional 88 crimes were recorded compared to 2015. The number of seizures of NPS reduced significantly in 2016.This reduction can be attributed to the multi-agency approach regarding the dangers of taking these substances involving not only law enforcement, but also Health and Social Services, Education and the Prison? Me? No Way! programme, together with

the introduction of the Psychoactive Substances Act in the UK in May 2016.

74. The proceeds that are generated from the supply of drugs in Jersey is

considered substantial: figures obtained from the LOD indicate that during 2013 2017 approximately GBP 5.3m, USD 350,000 and EUR 110,000 was confiscated from criminals. Undetected proceeds generated from this type of offence are deemed to be higher than those detected. There are of course challenges of policing borders and not every person and every vehicle fromevery vessel or

34  https://www.gov.je/government/departments/justicehomeaffairs/departments/customsimmigration/Pages/index.aspx 60 35  https://jersey.police.uk/news-appeals/2014/april/nps%E2%80%99-seized/

plane can be searched. So, there is a risk that drugs are being missed and being sold in Jersey. This is evident when suspects are arrested for crimes and they are under the influence of drugs. The threat assessment attributed to this offence is therefore Medium/High.

Fraud offences

75. All recorded fraud offences during the data collection period relate to

common law[1] fraud, fraudulent conversion and cases involving false pretence. Investigations extended across multiple jurisdictions, making them both complex and time consuming; equally some investigations were also led by the AG due

to their seriousness and the requirement to use specific powers of the AG during the investigation process.

7.76 Fraud offences within the jurisdiction assessed during this period indicate that criminals are committing crimes against individuals - some who are vulnerable

- by using their positions of trust in order to make false representations for personal gain. The group s assessment of undetected proceeds generated from this type of offence is deemed to be higher than is being detected.

7.77 Fraudsters can and often work alone to avoid detection and build up significant trust with their victims. However, there are historic local examples of fraudulent inducement to invest and lend money by 4 individuals conspiring together, one of the defendants was a sitting Magistrate at the time.

7.78 The threat of fraud is ever increasing especially with cyber-enabled fraud. Local reports of online fraud to the States of Jersey Police have recently increased significantly from 127 in 2017 to 212 in 2018. Not all resulted in loss of money to the complainant with many people contacting the Police describing the potential for loss in order to alert others. However, the total number of Islanders reporting that they have lost money and the amounts stolen has risen sharply from 21 in 2017 to 31 in 2018 with corresponding total losses of GBP 300,697 and GBP 999,888 respectively. Social engineering continues to be the main driver behind such fraud with criminals tricking Islanders into parting with their personal and/or financial details by pretending to be from a trusted organisation such as a bank, the police or a utility company.

Larceny (Theft)

79. Larceny offence cases recorded during this assessment period that were detected or investigated is 2,664 with 405 persons being convicted of the predicate offence only. There is one recorded ML offence relating to the laundering of the proceeds of larceny.
80. Larceny is a common law offence and there are several permutations of this offence such as larceny servant (theft from your employer)
81. Larceny is one of the higher reported crimes for this assessment period - most reported crimes relate to simple larceny. The threat of larceny on a local level is often opportunistic and related to simple crime, there are very few cases of planned and complex larcenies and where this does occur it is often part of a bigger crime such as a complex fraud. There is no evidence of sophisticated conspiracy to steal offences recorded.

82. Only one offence of ML connected to the predicate of larceny has been recorded; however, there are often cross overs of common law offences, in that cases can involve offences of fraud and larceny as part of the criminality. Whilst a high volume of larceny crimes is recorded, there is no data that indicates that the proceeds of these crimes are being laundered in any sophisticated manner. There will be self-laundering that is occurring in these simpler crimes, but this is not being detected on a regular basis and there are no statistics to support this. This could be because it is not being investigated and therefore not being detected. The undetected proceeds generated from this type of offence are deemed to be higher than is being detected, as a result of lack of data and/

or investigations. The assessment of threat in relation to larceny offences is deemed to be Low.

Other predicate offences with no ML investigation

Breaking and entry/ This predicate offence is also a common law offence; 620 cases Medium/low. Illegal entry  were detected or investigated within this time frame and 93

(Burglary) persons were convicted for the predicate only offence. There is

one recorded ML investigation that took place in 2016.

Receiving stolen  There were 35 cases of detected or investigated crime in this area Low property during the assessment period; in total 19 people were convicted.

This predicate offence is a common law offence. However, there are no recorded ML cases that were prosecuted or convicted during this period.

Kidnap and extortionThis predicate offence is a very rare occurrence in the jurisdiction Low

and during the assessment period there are only two cases that were detected or investigated of extortion. Of those cases one person was convicted, but there have been no recorded ML convictions during this period.

Robbery Robbery is a common law offence and acts of violence on  Low

innocent members of the public are rare. During the assessment period there were 24 cases of robbery which were detected

or investigated, and 7 persons were convicted. There are no recorded ML cases in relation to robbery.

Bribery and  There have been 7 recorded cases of domestic bribery and  Low corruption corruption that were detected or investigated as a predicate

offence.

Terrorism During the assessment period there has been one case detected Low

or investigated under Article 53(1)(a) of the Terrorism (Jersey) Law 2002. This case was also prosecuted, and one person was convicted in 2015.

Criminality involving This has been a focus of SOJP in recent years. Whilst offences Not rated. Included vulnerable people,  towards this section of the community is not generally linked to to reflect other such as children and  financial gain, the risk of threat and harm is significant. Offences crimes that are vulnerable adults against children such as possession of indecent images of children not necessarily ML

covered by legislation such as the Children s Law (Jersey) 2002, linked, but could saw 27 convictions during the assessment period.  be if committed

cross border in this example.

Human trafficking  This has not been detected within the jurisdiction and there have Not Rated. Included and modern-day  been no convictions.  here to reflect slavery emerging crimes in

There is no evidence of human trafficking and exploitation of low other jurisdictions paid workers for financial reward. This is different to the profile and the current seen in the UK where most Police forces now have modern slavery Jersey profile.

units, set up to tackle the increased detection of this type of crime.

In the UK, multi occupancy premises, once identified, have been

found to be inhumane to live in and residents have little or no

money, as their bank accounts are controlled by the Organised

Crime Groups exploiting them.

Prostitution There are no recorded convictions for prostitution in the  Not Rated. Included jurisdiction, there is no red-light district and soliciting at the  here to reflect

roadside is not common practice. emerging crimes in other jurisdictions

and the current Jersey profile.

Revenue Jersey The investigation of tax offences has in recent years been  Medium/Low

dealt with mainly by civil settlement and levying of penalties.

Tax evasion has been investigated by the Police only as part of investigations of wider criminality, e.g. Goodwin & Jones. There

have been only limited opportunities to prosecute ML offences

linked to domestic predicate tax crimes.

Revenue Jersey prosecuted 10 cases for fraudulent completion of income tax returns between 1992 and 2010.

Organised Crime Groups (OCGs)

83. Organised criminality poses a serious threat to the health, wellbeing and national security of Jersey whilst simultaneously eroding the unique economic environment. Criminals are becoming more capable and resilient, persistently targeting Jersey because of its unique financial infrastructure and very profitable drug commodity market. The response to this threat needs to be measured and consistent, allowing an ability to identify, index, and assess organised criminality and the threat individual members of groups may pose.
84. Organised criminality within the financial sector poses a risk to the Island, any group pursuing financial criminality that meets the definition can be mapped and researched further. A key distinction here is that the group must be operating, at least mostly, in Jersey and the operations of the group pose risk to Jersey. This distinction is important because the JFCU may deal with organised criminality stemming from around the world but where Jersey is being used as a conduit to move funds etc. This type of group is not necessarily mapped under this type of local OCG mapping and will likely be captured under international investigations.
85. The types of organised criminality identified by the JFCU would broadly fall into one of two areas:

1. Organised financial criminality secondary to a primary crime type (e.g. money laundering by an OCG involved in drug supply)
2. Organised financial criminality being the primary crime (e.g. professional money laundering, possibly servicing multiple OCGs or individuals- professional facilitators)

86. Drugs trafficking offences have the strongest connection to OCGs and importation of drugs occurs by sea and air from mainland UK and Europe. This includes links to cross border criminality with couriers often being recruited by OCGs to participate in the importation. The couriers are mostly indebted in some way to the OCG financially or as a vulnerable user of drugs receiving gifts of the product as payment, although OCG members have personally couriered in recent times.
87. In June 2019, Operation Lion saw the arrest of OCG members in both the UK and Jersey as part of a long-term operation with the UK National Crime Agency, UK Border Force and the Australian Authorities. An array of Class A and B drugs

destined for Jersey were seized valued at GBP 919,000. That specific case is now in the judicial system with the first seven members of the OCG being sentenced in September 2020. The threat assessment in relation to OCG activity locally is medium/high with links to cross border activity covered in a further section of this report - this is predominantly linked to the predicate offence of drugs trafficking.

Threat rating of Domestic Criminality

88. Domestic threat of ML has been assessed as Medium/Low. This is based on the following:

The conclusions reached in relation to domestic criminality is that reported crime is low and in general the public perception of crimes committed in Jersey is that the jurisdiction is a low crime area and a safe place to live. Drugs offences, Larceny, Fraud and Corruption are the only offences that have any ML investigations linked to the predicate. The low recorded ML investigations attached to predicate crime

is a strong indicator that ML offences have not been fully exploited historically and opportunities have been missed in this area.

A hypothesis is that this is down to a lack of understanding of ML related offences and a lack of experience in investigating ML across LEA. Having a two-trial judiciary process for predicate and ML indictments, has inevitably also led prosecutors to

the preferred one trial approach of the predicate offence only, historically. Domestic crime in general is largely reactive in response to reported crime to LEA s. Drugs trafficking is the most proactively investigated crime which is often intelligence led and can involve multiagency partnership across LEA s. The threat of ML remains whilst acquisitive crime continues to be committed, there needs to be better training and understanding of ML across LEA s even at low level crime and it should always be a consideration in every serious local asset generating offence.

The manner in which local residents have decided to secure investment advice and the type of investments they are seeking to invest in has increased the threat of fraud against local residents. Usually the offender is very well known to the victim and in a position of trust. Low bank interest rate has

The Jersey Fraud Prevention Forum undertook a risk assessment in relation to local residents and the risks of fraud. The move towards online shopping and payment online by credit card presents serious challenges for law enforcement and significant opportunities for the more technically advanced criminals. Given the increase in postal packages being handled coming into the Island the threat posed by online fraud is considered significant. The individual transaction amounts are generally modest and may explain why many incidents of online fraud go unreported. The increase in online fraud globally poses an AML threat with the proceeds needing to be pooled and laundered via companies posing as legitimate businesses.

Whilst acquisitive crime continues within this jurisdiction there remains a risk of the laundering of the illicit gains in order to disguise their origin. Acknowledging that there is a lack of data supporting ML investigations, it is concluded that ML is likely but at a low level. In relation to drugs trafficking offences there is an obvious threat of laundering which is cross border and involves OCG s on a national and international scale. Where the origin is unknown of the predicate offences because of the

international nature of drug trafficking this is deemed Medium/Low.

Overall ML threat assessment and conclusion

ML Threat: Foreign Predicate Offences Cross-Border Domestic Overall Rating Medium-High Medium Medium-Low Medium-High

89. When determining the overall rating, it was deemed appropriate to apply a heavier weighting to the foreign predicate offences threat rating. The foreign predicate offences posed a much higher threat to Jersey as they were considerably more significant in respect of the type, value and level of the criminality.
90. The following factors were also considered when assessing the Overall ML Threat:

the comparison of data collated via various stated sources

evidence and intelligence of crimes committed within the jurisdiction, outside of the jurisdiction and where the origin is unknown, it compares domestic threat to international threat

the absence/gaps in data which is ultimately a vulnerability

professional judgement that was determined via various sources cited in this report and other available material as well as through working group discussions.

SECTION 8

National Money- Laundering Vulnerabilities

Module 1: Quality of AML policy and strategy

Assessment: 0.4 Medium Low

1. Jersey s Government is strongly committed to fighting money laundering and the financing of terrorism. The Policy Framework for the Jersey Financial Services Industry (2014) includes complying with international standards and initiatives of global application, as a key objective (although there is no specific reference

to financial crime). More recently, the Proposed Common Strategic Policy (2018 -2022) explains the importance of protecting Jersey s reputation. This requires

the Island to demonstrate that it meets international standards (although, again, there is no reference to financial crime). The Government Plan 2020-2023[1] for Jersey forms an important part of the strategic framework for the Island and brings to life the priorities set out in the Common Strategic Policy. That document specifically notes the importance of underpinning capability in international tax policy, financial crime policy, financial services supervision and enforcement.

2. Historically, AML/CFT policy has been developed around: (i) FATF Recommendations; (ii) EU implementation of those Recommendations; and (iii) standards set by the (GIFCS with respect to TCSPs. Use of control of borrowing legislation also means that Jersey is in a strong position regarding transparency of legal persons. Jersey s active participation in bodies that promote good practice relating to international standards (as examples: MONEYVAL; Egmont Group; and CARIN) also assists in policy development.
3. Jersey s track record has been proactive in identifying and addressing vulnerabilities. For example, TCSPs have been subject to requirements set out in the MLJO since 1999, and a mechanism to oversee compliance with those obligations has been in place since 2002. Both of these initiatives were ahead of most other jurisdictions.
4. More recently, responsibility for financial crime policy has been assigned to the Minister for External Relations. Government runs its co-ordination of financial crime policy through the JFCSG. The JFCSG deals with evolving policy and provides advice to the Minister.
5. The JFCSG has been established for approximately five years and similar coordinating arrangements have been in place for longer (through the former AML/CFT Strategy Group). Advice and recommendations are to be provided to Ministers as necessary and reporting on progress is undertaken either directly to the Council of Ministers or to the Financial Services and External Relations Advisory Group (FERAG), a ministerial group.

6. The JFCSG has published a statement of priorities for 2017 - 2019. However, it

is currently considered that there is (i) insufficient AML/CFT resource within the Chief Executive s Office; and (ii) insufficient direction, oversight and coordination

of AML/CFT policy and strategy by the Chief Executive s Office, to ensure

that the JFCSG delivers its statement of priorities. In particular, programmes

have not been in place to: (i) periodically monitor progress in implementing recommendations made in MONEYVAL s 2016 mutual evaluation report (MER)

on Jersey; and (ii) consider findings and recommendations included in other MONEYVAL MERs, such as that of the Isle of Man, MONEYVAL s first assessment of an international financial centre.

7. The JFCSG has also not developed an overarching policy or strategy on tackling financial crime which sets out what is expected of all the relevant departments and agencies. In particular: (i) there is no clear expression of policies to be followed investigating and prosecuting financial crime (LOD) or supervision of compliance with AML/CFT requirements (JFSC); and (ii) there has been only limited communication with the Global Markets Strategy Group which is charged with developing Jersey s links with other jurisdictions.
8. In practice, the JFCSG has not played a proactive role in discussing how AML/ CFT resources are to be applied. A recent review of JFCU and LOD resources was triggered by discussion outside the JFCSG and the effectiveness of overall financial crime enforcement monitored by a standing government-led working group (Financial Crime Enforcement - Government Oversight Group) (FCE-GOG) in line with a MoU on financial crime.
9. Policy and strategy set by the JFCSG tends to focus on compliance with the FATF Recommendations (including addressing recommendations made in reviews of compliance with those Recommendations). The JFCSG does not currently benefit from access to data which would enable it to develop policy

and strategy more generally. In particular, there is no mechanism for collecting and analysing comprehensive statistics from members on matters relevant to the effectiveness and efficiency of AML/CFT systems. For reasons such as these the JFCSG is considered reactive in its approach with changes to AML/CFT strategy being instigated by other fora.

Module 2: Effectiveness of ML Crime definition

Assessment: 0.9 Close to Excellent

10. In Jersey s fourth round mutual evaluation, Moneyval assessed Jersey as being Largely Compliant with Recommendation 1 of the 2003 FATF Recommendations (now superseded by Recommendation 3 of the FATF 2012 Recommendations).
11. A minor technical shortcoming was identified regarding the definition of criminal property and concerns were raised, regarding effectiveness, over the number of money laundering prosecutions and the difficulties in trying a statutory offence of money laundering together with a customary law offence (examples of the latter being fraud and perverting course of justice).
12. Measures have been taken to amend the definition of criminal property, which now includes property that:

1. constitutes/represents the proceeds of criminal conduct whether in whole/ part and whether indirectly/directly; and
2. is known or suspected by the alleged offender to constitute/represent such proceeds.

13. In terms of the effectiveness concerns expressed by the MONEYVAL assessment team, the Jersey authorities, in practice, have not encountered any difficulties with the current definition of the ML offence.
14. The average penalty was 22 months imprisonment, the highest custodial sentences imposed against persons were six years, four years and three-and- a-half years. Very few fines were imposed in these cases since for natural persons imprisonment is considered a more dissuasive penalty. However significant confiscation orders were otherwise imposed. Windward Trading Ltd is an example, where a legal person was prosecuted for money laundering

and confiscation orders were made in that case for GBP 3,281,897.40 and USD 540,330.69. It is considered that sanctions which have been applied

are effective, proportionate and dissuasive. In some cases the ML has been standalone and the added value of ML protected because the penalty has not been merely concurrent to the sentence for the predicate.

15. There are not strict sentencing guidelines in Jersey which one might see in larger jurisdictions to avoid discrepancies across judges. The Crown and the Court do follow precedents (Jersey and elsewhere) when judging the appropriate starting point for a sentence (before then considering mitigation/ aggravation).
16. Statutory and customary offences previously could not be tried together because of the differing modes of trial. The procedure regarding mixed indictments has been revised. Since July 2019, in those circumstances where a person is being tried at the same time with both customary and statutory offences the mode of trial shall be determined by the Court which shall have regard to the nature and gravity of the offences and submissions from defence and prosecution counsel.

Statistics

17. Between 2013 and 2020, there were 47 persons (legal or natural) convicted of money laundering in Jersey. There are examples of natural persons having been convicted of ML following guilty pleas without the underlying predicate offence being proven. Jersey is yet to see an ML conviction after trial on the basis of irresistible inferences. The majority of these convictions were for self-laundering or were third party money laundering convictions. Most cases concerned the importation of, or dealing in, drugs.

Module 3: Comprehensiveness of Asset Forfeiture Laws

Assessment 0.7 High

18. Jersey has a comprehensive range of statutory provisions which provide for the seizure and confiscation of the proceeds of crime, instrumentalities and property of a corresponding value.

68

19. Comprehensive investigation powers are provided for to identify and trace proceeds of crime, including: production orders, search powers and financial information orders and account monitoring orders. There is also a sound framework for civil forfeiture investigations.
20. There are various tools available to law enforcement authorities to provisionally seize/freeze assets with a view to confiscation. The Saisie Judiciare, which

can be made ex parte, allows law enforcement to provisionally seize/freeze all realisable property of the defendant when criminal proceedings have been instituted or are to be instituted. In addition, an authorized officer may seize cash for up to 96 hours if he has reasonable grounds for suspecting that it is tainted cash, and the AG may apply to the Bailiff for an order authorizing the detention for a longer period. Furthermore, where the AG has reasonable grounds to believe that property held in any bank account is tainted property, he may apply for a property restraint order prohibiting the withdrawal, transfer or payment out of the bank account of the property, or part thereof. In cases where the FIU is considering a disclosure regarding a request to proceed with a transaction/ relationship and issues a No Consent, this acts as an informal freeze as financial institutions will not wish to expose themselves to prosecution.

21. The confiscation framework is very wide and provides for confiscation where a person has benefited from any relevant criminal conduct , which means the offences for which the defendant appears to be sentenced, together with other offences which the Court may take into consideration when passing sentence. The amount a defendant is required by a confiscation order to pay shall be the amount assessed by the Court to be the value of the defendant s benefit from the relevant criminal conduct and therefore property corresponding to the property laundered or the proceeds of crime may be confiscated
22. In terms of non-conviction-based confiscation, the law applies to property held in bank accounts and contains a summary procedure for the expedited forfeiture of monies subject to an informal freeze (No Consent) for 12 months or more[1]. Tainted cash/monies in bank accounts may be forfeited unless the defendant proves to the Court that the property is not tainted. Property is tainted if it is used in, or intended to be used in, unlawful conduct or obtained in the course of, from the proceeds of, or in connection with, unlawful conduct. Instrumentalities may be confiscated: the law provides the Court with the power to deprive an offender of property used or intended for use for the purpose of crime.
23. The law also provides for the enforcement of foreign non-conviction-based orders, with associated powers to make a property restraint order, which may be applied for an ex parte basis.
24. In Jersey s 4th round mutual evaluation by Moneyval, concerns were raised by the evaluation team regarding Jersey s ability to confiscate monies which were given to third parties as gifts, particularly those that were placed into trust where the settlor retains a beneficial interest.
25. Amendments to the POCL have been consulted upon which will enable LEA toattack property which was gifted away by a defendant within a prescribed period of five years prior to the offending. Following consultation, it has been agreed that this claw-back should be limited to gifts into trust where: the settlor retains a benefit; there is a power to add the settlor as a beneficiary; or where the letter of wishes anticipates the settlor benefiting from trust assets.

26. FATF Recommendation 4(d) requires measures to enable the confiscation

of property of a corresponding value to the property described in 4(a)-(c) including instrumentalities. This is a gap in Jersey s legislation and is currently being reviewed as part of a wider consultation on gaps against the 2012 FATF Recommendations.

27. The Evaluation Team noted that previous conduct provisions of the now repealed Drug Trafficking (Jersey) Law 1988 had not made their way into the POCL. An amendment to the POCL was adopted in 2018 which now means that a single qualifying offence (i.e. liable to one or more years imprisonment) may trigger the assumptions which the Court can make regarding criminal benefit

and the quantum of that benefit.

Statistics

28. Between 2013 and 2017, the amounts confiscated (without money laundering charges) for drug trafficking was GBP 304,195.50 and for fraud GBP 908,380.17 and USD 462,972.72.
29. In those cases where money laundering was the predicate offence and money laundering was charged amounts of GBP 5,302,326.54, USD 350,857.51 and EUR 109,216.09 were confiscated.
30. In cases where corruption was the predicate offence, and money laundering was charged, amounts of GBP 3,281,897.40 and USD 540,330.69 were confiscated.

Module 4: Quality of FIU Intelligence Gathering and Processing

Assessment: 0.4 Medium /Low

31. Jersey has a standalone financial intelligence unit (FIU)[2]. The FIU sits within the JFCU. The core functions of the FIU are distinct from other policing functions and the unit s autonomy within the police structure is supported at a strategic level

by the Senior Management Team (SMT) (which includes the Acting Deputy Chief Officer). The FIU is a member of the Egmont Group of Financial Intelligence Units in its own right. The primary function of the FIU is to receive, analyse, enhance and disseminate intelligence efficiently and effectively. The FIU faces challenges at each stage of its functions.

32. In relation to the receipt function, the SAR form used by the FIU does not collect all of the intelligence that is needed to evaluate and prioritise SARs. The current SAR system does not automatically reject incomplete returns nor does it permit automated analysis and interrogation. This affects the FIU s ability to produce meaningful statistics and strategic analysis for both Government and the private sector in a timely fashion. At the grading stage, SARs are: (i) graded; or (ii) closed. Currently there are two levels for grading SARs received: (i) code 1 (priority);

and (ii) code 2. A third code is to be introduced to allow analytical resources to

be better prioritised. It is not clear that restraint of assets is actively considered

at the grading stage and there should be a gating process that leads to immediate action being taken where there is a risk of dissipation of assets. The FIU does not receive or analyse threshold transaction reports (TTRs). Such transaction reports, e.g. reports about certain countries or about use of particular products or services, could potentially hold vital intelligence that may provide a link to criminality where there was not previously any suspicion.

33. The quality of SAR reporting has been identified as an issue of concern since there are often large differences in the standard of SAR reporting across entities.
34. A number of templates are used to respond to SARs: (i) consent; (ii) no consent;

3. consent to exit only; (iv) exit to be reviewed; and (v) acknowledgement. These letters are to be reviewed, since it is not clear that their content is entirely consistent with statutory provisions. In particular, the exit to be reviewed response deals with requests from industry to exit a business relationship, and can be an important tool in combating ML, as withholding consent can give the FIU and partner agencies time and opportunity to instigate a criminal enquiry and confiscate criminal assets that may otherwise leave Jersey.

35. Generally, during the relevant time period of the report, the FIU has not had access to all of the resources necessary for it to effectively perform its functions. In particular: (a) Prosecutorial input is needed earlier in the SAR analysis process in order to identify strong cases and discount weak ones (which waste resources); (b) There is a need for tax expertise and to develop its understanding of complex structures, including legal persons and legal arrangements. Updated triage procedures (see below) should address this; (c) Processes are largely manual due to limitations in ICT systems.
36. The extent to which intelligence disseminated by the FIU is used by law enforcement in Jersey is not entirely clear. The FIU reports that around one- third of investigations by JFCU Ops had been identified from FIU intelligence, whereas JFCU Ops reports that two-thirds of its current workload were attributed to SAR intelligence origin. This perhaps reflects the absence of an agreed way of measuring the extent to which intelligence disseminated by the FIU is used in practice.
37. Intelligence is regularly disseminated overseas. Where there is a situation of intelligence relating to a country who is not a member of the Egmont Group, then intelligence may not have been shared domestically or overseas.
38. In terms of strategic analysis, the last report produced on trends and typologies was in 2015 by the GoJ. This is an area that requires attention by the FIU and other authorities. Changes to recording processes has already commenced, to improve early identification of useful data for sharing with industry and partner agencies.
39. As a matter of law, the AG must consent to what intelligence can be disseminated. However, in practice, the FIU disseminates intelligence on

a spontaneous basis with administrative and law enforcement authorities

under the authority of the AG s Guidelines which give broad consent to share intelligence particularly to other FIUs belonging to the Egmont Group. Where the JFCU is in any doubt, or where, even in circumstances where JFCU is authorised to make a disclosure it would prefer to obtain AG s specific agreement, then it may approach the AG on individual case basis.

40. The FIU has faced difficulties in the past to obtain sufficient funding for training purposes. This has led to the absence of appropriate and relevant up-skilling of staff and a process that will not have kept pace with developments in ML and TF.

71

Module 5: Capacity of Resources for Financial Crime Investigation (Including Asset Forfeiture)

Assessment: 0.5 (medium)

41. This module focuses, on the JFCU and the ECCU, notwithstanding that it appears other parts of the SOJP also undertake ML investigations.
42. The JFCU is comprised of: (i) the FIU; (ii) JFCU-Ops; and (iii) Jersey Customs and Immigration Service (JCIS) (asset tracing and confiscation related to drug importation and other offences). Both the FIU and JFCU-Ops are headed by police inspectors who report to a separate Chief Inspector (Chief Inspector of Intelligence/Chief Inspector of Crime respectively).
43. Within the JFCU, JFCU-Ops investigates more complex predicates and ML that may affect the integrity of the island s finance sector, this includes any foreign predicate activity. Investigations focus on legal persons and legal arrangements (and associated individuals) engaged in complex transactional and multi- jurisdictional structures and relationships.
44. FCU-Ops is also responsible for asset tracing with the assistance of the LOD. However, the JCIS team, which consists of 3 officers positioned within the JFCU, is responsible for asset tracing and confiscation investigations that run parallel to SOJP drug trafficking investigations.
45. JFCU-Ops comprises a team of 9 criminal investigators, which represents an increase of 4 since the last MONEYVAL evaluation and reflects a commitment to resourcing that had been made at the time of the last evaluation. Detective constables within JFCU-Ops are ring-fenced and protected from other policing duties - except in exceptional circumstances. The recent successful bid for 2 extra investigators is expected to be sufficient to manage any upturn in workload as a result of an increased focus on ML investigations associated with foreign predicate offences (an objective shared with the FIU).

45. Officers in JFCU-Ops are experienced serving, or previously serving, police officers with an investigative mind-set. Investigators in JFCU-Ops are required to complete the ICA Diploma in AML/CFT, the NTFIU CFT training programme, and all have done so or will do so by the end of 2020. They have also been trained by the City of London Police in financial crime investigation.
46. Criminal investigations are instigated via a number of sources, including without limitation: (i) FIU intelligence packages (originating from SAR disclosures); (ii) the Tripartite Group; (iii) criminal complaints; and (iv) covert police investigations.
47. Notwithstanding Jersey s position as an IFC, the number of ML investigations of standalone/autonomous ML (with foreign predicates) and third-partyML is low. Most investigations have focussed on the predicate offence and not, also, any associated ML. This can be attributed to a combination of the following factors: (i) absence of an overarching national ML/TF strategy; (ii) investigators have been reluctant to pursue ML without evidence of a predicate offence (notwithstanding that it is their responsibility to convert intelligence into evidence); (iii) the JFSC has taken on some cases in the past as opposed to instigating a criminal investigation; and (iv) prosecutors have preferred to prosecute customary law offences (when faced with a choice between trial systems) and there was some impact by the deficiencies in Jersey s definition of ML which was addressed

in 2014). The low number of investigations also results from defendants and evidence generally being outside Jersey leading to insufficient availability of evidence particularly where overseas LEAs are unwilling to cooperate (which is not uncommon) or the absence of any evidence at all.

48. No parallel financial investigation policy is in place, consequently parallel investigations are not conducted for all predicates investigated.
49. For the above reasons, it appears that a low priority has been attached to ML investigations in recent years (with one notable exception). ML investigations have tended to focus on domestic predicates (predominantly drugs). It is not currently clear whether the number of investigations (predicates and ML) that lead to prosecutions is reasonable.
50. The ECCU was formed in 2017 and became operational in 2018 to address the specific deficiency in the lack of more complex ML investigations. It is positioned within the LOD and investigates and prosecutes complex fraud, ML and TF cases. The ECCU s constitution and operating protocol are discussed in module 7 of this report.
51. The ECCU has the same powers as those available to JFCU-Ops. August 2018 saw the enactment of the Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018, (the Forfeiture Law) which allows the ECCU to make an application to the Royal Court for the seizure of funds suspected to represent the proceeds of crime, where a prosecution has not taken place, and reverses the burden of proof so that the subject is required to provide evidence of the probity of the funds.
52. The ECCU have the capability to develop its own cases for investigation from alternative sources alongside intelligence that is disseminated by the FIU.
53. The ECCU is the sole agency within the LOD that also investigates and applies for civil asset forfeiture orders under the Forfeiture Law. Within days of the

law coming into force, a forfeiture order was made by the Court for circa GBP 97,000. Subsequent applications have all been successful: Liu (USD 21,694). Freemantle (GBP 4,823) and Truk (USD 16.8m). The Truk settlement was agreed through settlement and the forfeited sums were distributed between the Criminal Offences Confiscation Fund ( COCF ) and the three charitable institutions (one local charity and two international charities), who were the beneficiaries of the trust. It is believed to be the largest single asset forfeiture order in a Crown Dependency or Overseas Territory.

54. Qualifications and training for officers of ECCU is largely the same as that summarised above for JFCU Ops.

Module 6: Integrity and independence of Financial Crime Investigators (Including Asset Forfeiture)

Assessment: 0.9 Close to excellent

55. All investigators (SOJP and ECCU[1]) are employees of the SOJP and must adhere to high professional standards, policies and procedures, codes of conduct and legislation. These provide a framework to ensure that the conduct and integrity of staff is clearly set out and enforced so that the community

has confidence that police and civilian officers act with fairness, integrity and impartiality in all actions.

56. As staff positions within the JFCU are increasingly held by civilian officers, GoJ policies and procedures become more prevalent.
57. The SOJP is a rank-orientated organisation. The respective heads of JFCU Ops and the FIU are, as noted previously, Inspectors who have reached their position showing the qualities, integrity and professional standards expected of the rank.
58. All SOJP staff are vetted at security clearance level 3 (valid for 10 years) and through Jersey and UK national criminal database checks (PNC/PND). However, financial checks are not undertaken on staff and there is a higher level of security clearance (4 levels in DBS structure). Pre-employment criminal record vetting checks are conducted on all staff, and officers are additionally subject to (UK) national Security Clearance vetting.
59. From the launch of an investigation, investigators work freely and independently from other authorities. Financial investigations are not vetted or scrutinised by outside third parties and are conducted without political or social influence and/ or pressure. Indeed, such investigations may be of a covert nature.
60. Investigations proceed on the merits of the evidence available.
61. The convictions of an ex-magistrate in 2012 and a former Parish Constable in 2013 both separately convicted and jailed for fraud, and a former States Deputy arrested for breaches of data protection legislation are considered proof that no person is beyond the scope of criminal investigation in Jersey. There was also the recent prosecution and conviction of an Assistant Chief Minister for a driving offence leading to his resignation from the Government.
62. When conduct of police officers falls below the expected standard or matters of integrity or criminal allegations are raised, procedures are in place both internally via the Professional Standards Department (PSD) and externally via the independent Jersey Police Complaints Authority (JPCA) to deal with these matters.
63. Breaches of expected professional conduct by, and criminal allegations about, police officers are managed by the PSD (which can resolve the matter with a range of sanctions).
64. The JPCA is an independent body of lay people that oversee the conduct of investigations of police officers (including honorary police officers). There have been no investigations of staff related to corruption or criminal conduct for financial gain. Convictions of SOJP staff in recent years have related to road traffic offences and use of police data for personal benefit.
65. The SOJP has enjoyed high satisfaction ratings from the public for several years. 2017 and 2018 reports from the Jersey Police Authority cite high levels of public satisfaction.
66. JCIS officers (who form part of the JFCU) are civil servants who are, therefore, subject to the provisions of the Official Secrets (Jersey) Law 1952, the GoJ Code of Practice on Employee Conduct and other relevant disciplinary policies and rules.

67. The Viscount is the courts executive officer in Jersey and is, therefore, principally required to execute orders of the courts. The Viscount has the authority to seize, maintain, manage and confiscate assets. The Viscount manages seized assets in accordance with court orders and directions and is not influenced by either defence or prosecution in the way in which those assets are managed or confiscated.
68. When the Viscount is ordered to carry out a saisie judiciaire, all the realisable property held by the defendant in Jersey vests in the Viscount. The Viscount has the duty to take possession of and, in accordance with the Court s directions, to manage or otherwise deal with any such realisable property. The Viscount is not under any obligation to improve or increase the value of any assets held. A case recently cited in a press release by the AG s office relates to the seizure of funds linked to General Abacha of Nigeria where over USD 259m has been placed in a recovery fund (see link below). The Jersey Court of Appeal (2017) has confirmed that, once a confiscation order has been made, the primary duty of the Viscount is to ensure that the assets are realised in such a manner as enables that confiscation order to be paid and that it is not the Viscount s duty to conduct the realisation in such a way as maximises the value of the assets realised.

Corruption

69. As a small jurisdiction, Jersey is not covered in Transparency International s CPI. The UK is ranked 11 out of 180 jurisdictions in the 2018 survey[2] and this is considered to provide a good indication as to where Jersey might be ranked. In a press report[3] in 2018, it was reported that there had been no more than 5 allegations of corruption passed to the AG, since allegations of misconduct in public office are difficult to prove.
70. Jersey has recently been evaluated by the United Nations Office on Drugs and Crime, in relation to the implementation of United Nations Convention Against Corruption. The Implementation Review Mechanism (IRM) is a peer review process that assists States parties to effectively implement the Convention. The most recent report is included in the report of the United Kingdom (who extends conventions to the Crown Dependencies and acts on their behalf in international law) and covers compliance with Chapter II (Preventative Measures) and Chapter V (asset recovery). The Executive Summary is now published[4] with the full report pending publication.

Module 7: Capacity and Resources for Financial Crime Prosecutions (including Asset Forfeiture)

Assessment: 0.7 High

71. Jersey has dedicated considerable resources for the prosecution of financial crime and money laundering and asset forfeiture in economic crime cases.

This is exemplified by the recently established ECCU. Jersey s effectiveness

is demonstrated by the significant number of convictions and confiscations. However, it is recognised that the overall number of money laundering prosecutions and convictions (other than for drug trafficking offences and self- laundering or cash mules ) is not currently at a level to support a higher rating for this variable.

Law Officers Department (LOD)

72. The AG is the prosecuting authority in Jersey and all prosecutions are brought in his name. He and the Solicitor General head up the LOD. There are four full time Crown Advocates employed by the LOD. One of these Crown Advocates is the head of the Mutual Legal Assistance (MLA) team and the other the head of the ECCU team (see below). The other Crown Advocates are responsible for prosecuting most cases which come before the Royal Court which range from drugs cases to grave and criminal assaults and sexual cases, but also may include Money Laundering, particularly with predicate drug offences.

However, complex economic crime cases will either be dealt with by the ECCU, or, in some cases, an external advocate will be appointed as a Crown Advocate to prosecute a case.

73. The work of the LOD in prosecuting these cases is not hampered by restraints arising from either the number or expertise of lawyers. The AG is able to secure resources additional to those available internally and appoint advocates in

private practice with capacity and expertise to prosecute complex financial crime. This occurred in significant Money Laundering cases such as AG v Bhojwani and AG v Windward. The instruction of external advocates has reduced sharply in recent years owing to recruitment of specialist lawyers and bespoke training.

74. The AG has an annual budget available to fund court and case costs. This includes the ability to instruct external counsel which may include specialist counsel in the United Kingdom. Further, the AG is also able to access a proportion of the funds held in the Criminal Offences Confiscation Fund, which is, in part, ring-fenced for the purpose of combatting financial crime in the event large cases exhaust court and case funds.

MLA

75. The MLA team processes all incoming and outgoing MLA requests. The MLA team is headed by a Crown Advocate and consists of two Jersey solicitors, two Assistant Legal Advisers and an experienced retired police Detective Constable who is now a civilian investigator.
76. The work of the MLA team is considered in more detail under Module 15 (international co-operation). However, at this point, it is worth recording that the MLA team now frequently examines documents, which it is asked to provide

to requesting jurisdictions, in order to determine whether a local investigation/ prosecution should be opened.

ECCU

77. The ECCU was established in 2017 and is headed by a Crown Advocate (with substantial experience in prosecuting Jersey ML cases) who is attached to

the JFCU. The ECCU is also staffed by two legal advisers and two assistant legal advisers. Two senior police officers (with financial crime experience) and a forensic accountant are also based in the LOD. ECCU is dedicated to the prosecution of complex fraud, money laundering and terrorist financing.

78. The existence of the ECCU contributes to the efforts made by Jersey to proactively identify and investigate money laundering, large scale complex fraud and terrorist financing offences. It does not focus on standard domestic ML associated with conventional drug dealing offences, which are successfully prosecuted by the general crime team of the Criminal Division. When considering the adoption of cases, regard is had to the prospect for significant confiscation under the Jersey civil forfeiture regime; prospects for conviction based confiscation; the quantum of alleged fraud and of money laundering; the complexity and seriousness of the alleged offending; the risk of significant damage to the reputation and integrity of the Island and the likelihood of significant compensation to members of the public in the Island or elsewhere. It is specifically provided that care must be taken to ensure the benefits of confiscation do not unduly influence decision making in the face of other public and victim interest.
79. The introduction of the Forfeiture of Assets (Civil Proceedings) (Jersey) Law 2018, on 20 August 2018, represents a significant milestone in the development of

Jersey s non-conviction based forfeiture regime

Module 8: Integrity and Independence of Financial Crime Prosecutors

Assessment 0.9 Close to Excellent

80. Jersey has a stringent framework which safeguards the independence and integrity of prosecutors.
81. All prosecutions are brought in the name of the AG. The AG s deputy is the Solicitor General (SG) and he or she may discharge any function appertaining to the office of the Attorney. Together, the AG and the SG are the Law Officers.
82. The process for recommending the appointment of a Law Officer starts with

a prospective applicant (a Jersey qualified lawyer) making an application to

the Lieutenant Governor. Applicants are interviewed by a recommending

panel consisting of the Bailiff , a senior Jurat and the Chairman of the Jersey Appointments Commission. The recommending panel then makes a recommendation to the Lieutenant Governor who transmits it to the Crown. The Law Officers are appointed by Her Majesty the Queen under Letters Patent and hold office subject to good behaviour until 70 unless they retire earlier. Only Her Majesty can dismiss a Law Officer, i.e. the Law Officers cannot be dismissed by any politician, civil servant or judge. Complaints about a Law Officer are made to the Lieutenant Governor and the full procedure for considering such complaints is published on the Law Officers Department website.

83. Crown Advocates are advocates who are permanently employed within the LOD although, from time to time, advocates working in private practice are appointed as Crown Advocates for specific cases. Only the AG can appoint a Crown Advocate.
84. Employees of the LOD are subject to the following safeguards:

they cannot be suspended or dismissed except with the consent of the AG and cannot be directed or supervised in the discharge of their duties as such an officer, by the Chief Executive Officer of the States, the States

Employment Board, a Minister or a person acting on behalf of such a person; they are subject to the States of Jersey Code of Conduct;

they are subject to the LOD s Code of Conduct which is specifically tailored to lawyers working in that department;

complaints against lawyers working in the Law Officers Department are made to the AG (as opposed to an external body comprised of private practice lawyers) and are dealt with internally under a comprehensive procedure brought into force in 2013; and

Advocates and solicitors are ultimately subject to the disciplinary jurisdiction of the Royal Court and may be referred to that Court by the AG if the

above procedure is engaged and the lawyer has committed professional misconduct, with the ultimate sanction being a striking off.

85. Within the LOD, there is a clear separation between the Civil Division and the Criminal Division, and technology provides for ethical walls, where necessary, even within divisions. Conflicts, if they ever arise, are identified by lawyers and/or their supervisor and ethical walls used to mitigate against this.
86. The AG and SG are also constitutionally independent of one another (for example, the AG cannot dismiss the SG), which mitigates against conflicts

which might naturally arise in a small jurisdiction where the Law Officers also provide advice to the legislature and government. In 2016, at the meeting of

Law Ministers and Attorneys General of small commonwealth jurisdictions the meeting noted the following: Law Ministers and Attorneys General noted that

in a number of jurisdictions the constitutional independence of the AG meant

that the establishment of a separate office of Director of Public Prosecutions was unnecessary.

87. In recent years, Attorneys General have prosecuted a sitting Magistrate for

fraud and a local lawyer for attempting to pervert the course of justice, ancillary to his father s money laundering conviction. This demonstrates a willingness to prosecute where necessary and not close ranks. The prosecution of high-profile individuals such as Bhojwani/Windward Trading and Curtis Warr en for financial crime/drug trafficking further emphasise this.

88. As mentioned above under 9.6 Jersey has not, as a jurisdiction, published an anti-corruption strategy/policy which means that the variable cannot be graded as Excellent.

Module 9: Capacity and Resources for Judicial Processes (including Asset Forfeiture)

Assessment: 0.7 High

89. Jersey has a system which enables complex financial crime cases to be heard before a Court consisting of a legally qualified judge and, in the case of statutory offences (money laundering, breaches of the MLO) and asset forfeiture, the judge is joined by two full time lay judges (Jurats) who are the fact finders. In the case of customary offences (fraud, perverting the course of justice) the fact finders are a jury of 12 citizens. In 2013, the States of Jersey re-affirmed that there is

an obligation upon Ministers to ensure the judiciary has sufficient resources to discharge its duties.44

90. The Royal Court has two full time judges namely, the Bailiff and the Deputy Bailiff , the Chief Justice and Deputy Chief Justice, respectively, who are locally qualified lawyers and who will have usually also served as AG, and possibly Solicitor General, before taking office. Consequently, both the Bailiff and Deputy Bailiff will have had significant experience of money laundering and asset forfeiture in their previous roles as a Law Officer.
91. The judiciary is also comprised of three Jersey-based Royal Court Commissioners (two who are former Bailiff s) who the Bailiff may appoint to preside over any particular case. Such persons will often be appointed owing to their particular expertise and experience. Therefore, Commissioners who have acted in, or sat on, money laundering trials in the UK can deploy their invaluable experience in presiding over similar trials in Jersey.
92. As mentioned above, Jersey s court system has the benefit of lay judges known as Jurats, of which there are 12. In criminal cases, the Jurats act as the finders of fact in trials where the offender is being tried for a statutory offence such as money laundering. The Jurats also determine sentences for crimes where the offender is being sentenced before the Royal Court (less serious offences are tried and sentenced before the Magistrate s Court) and also form part of the Court when confiscation orders are being determined. Jurats are not usually legally qualified but come from a varied background of Island life which often includes having worked in the finance industry
93. The Royal Court is serviced by a full time Court service consisting of the Judicial Greffier and his department namely, the Judicial Greffe, who, in criminal matters, acts as the Court clerical service. The Viscount acts as the chief executive officer of the Royal Court. The Viscount and her department enforce court orders including saisie judiciaire and confiscation orders, acting as, inter alia, the asset management agency.
94. Specific training for the judiciary relevant to money laundering cases has not yet occurred, although the authorities are considering this, particularly through their regular contact with senior members of the judiciary in the United Kingdom. Training on money laundering in order to ensure that the Court is cognisant of its ability to draw irresistible inferences based on circumstantial evidence (without needing to identify or have proven the predicate offending) is also desirable. However, it must also be borne in mind that Jurats are fact finding judges and any training provided must be appropriate. It is the role of the presiding judge, who is legally qualified, to direct the Jurats in his summing up on the principles which apply (as he would do with a jury in a trial of a customary offence).
95. The Courts are equipped with technology allowing, for example, witnesses to appear by way of video link. The Court also has recognised translators which can be used in cases where witnesses do not have a strong grasp of English.
96. The absence of a second Jury Court does impede the speed with which jury trials are concluded. However, there are plans underway to resolve this issue. The Court has, in the past, made necessary arrangements for large trials including financial crime matters to be heard elsewhere. The pre-trial process (dealing with matters such as disclosure) will usually take several months, and prosecutors experience, during the last two years, has not been that courtroom availability has been a significant impediment to bringing financial crime matters swiftly before the Court. It is not considered that the time taken to bring matters to conclude trials is a problem, particularly given the size of the jurisdiction. The

Court now actively manages cases pre-trial including the issue of disclosure. There are no prescription periods for criminal offences, something which can cause difficulties in other jurisdictions.

97. Parallel to issues with physical Court space, the demands on the diaries of the Bailiff and Deputy Bailiff can affect their availability. Whilst Commissioners can be appointed to hear any case or matter, this still has to be done in a way which is financially manageable. Such practical difficulties are, however, commonplace amongst small jurisdictions.
98. Consideration was given by the NRA Vulnerability Group regarding the establishment of a separate Court for financial crime cases, with examples having been seen in Switzerland and Andorra. This might allow such cases to be heard more expeditiously and by specialist judges. However, on analysis it is considered that the five principal judges and the relevant Commissioners, selected specifically for their expertise, do have substantial experience in such cases and that ultimately cases would not be heard any more quickly.
99. One new statutory provision which will assist with effective case management

is the requirement under Article 83 of the Criminal Procedure (Jersey) Law 2018, which came into force in October 2019. Article 83 requires the defendant to give a case statement to the Court and prosecution, setting out: the nature of the defence (indicating the matter(s) of fact on which the defendant takes issue with the prosecution and why); the particulars of fact on which the defendant wishes to rely; and any point of law the defendant wishes to take. This is seen as a major development which will enhance the case management of prosecutions and require the defendant to set out his or her defence at an early stage.

Module 10: Integrity and Independence of Judges (including Asset Forfeiture)

Assessment: 0.9 Close to Excellent

100. The judiciary in Jersey is independent and has high levels of integrity. It is able to conduct proceedings without interference, political or social pressure, corruption, intimidation or abuse of office. The pace or outcome of such proceedings are also not subject to interference, political or social pressure, corruption, intimidation or abuse of office. There is a robust code of conduct for the judiciary and complaints procedure for the judiciary, meaning that Jersey has a comprehensive framework against judicial corruption. However, Jersey does not, as a jurisdiction, have an anti-corruption strategy/policy, and this therefore permeates several areas of potential national vulnerability, including the matters discussed under this module.
101. The Bailiff is the Chief Justice of the Bailiwick of Jersey and is appointed by Her Majesty the Queen under Letters Patent and holds office until he reaches the

age of 70 or is removed by Her Majesty for bad behaviour. The Deputy Bailiff

is also appointed by Her Majesty and holds office on the same terms as the

Bailiff and may discharge any function appertaining to the office of Bailiff . The role of Deputy Bailiff is advertised and a stringent recruitment process before a candidate is recommended to Her Majesty. The role of Bailiff is not advertised as it is customary for the Deputy Bailiff to succeed to this role when the Bailiff retires

80 44 (P.92/2013) available at /assemblypropositions/2013/p.092-2013.pdf

102. The Bailiff is also the civic head of the Island and the President of the States of Jersey Assembly. On being sworn in, the Bailiff and Deputy Bailiff swear an oath of office which includes: You swear and promise before God that you will uphold and maintain the laws and usages and the privileges and freedoms of this Island and that you will vigorously oppose whomsoever may seek to destroy them; that you will administer justice to all manner of persons without favour or partiality
103. Commissioners may be appointed for the hearing of a particular cause or matter or a specified term. Where an appointment is made for a particular matter the appointment shall continue for the duration of the hearing of that matter. Where the appointment is for a term (normally a three-year term), the term shall be specified in the instrument of appointment although this term may, with the agreement of the Commissioner, be extended for such period as the Bailiff thinks appropriate. The Bailiff may, if the Bailiff thinks fit, terminate the appointment of a Commissioner on the ground of incapacity or misbehaviour. Commissioners swear an oath of office which is in similar wording to the Bailiff / Deputy Bailiff oath.
104. Jurats are the sole judges of fact in all civil and criminal trials, except where

the latter is decided by a jury. Juries are the arbiters of facts for customary

law offences (such as fraud) whereas Jurats sit in cases where the offence

is statutory (examples include money laundering, terrorist financing, drug trafficking). The Bailiff / Deputy /Commissioner is the sole judge of law and has a casting vote on decisions of fact where the Jurats are split.

105. In 2002, the European Court of Human Rights stated that the Jurats are usually individuals with a known history of sound judgment and integrity, which has been consistently demonstrated throughout a lengthy professional, business or civic life. 45 The Jurats oath of office require them to swear to administer justice fairly to all: You will administer sound and swift justice to rich and poor alike, without favour, according to the Laws, Customs and Usages enshrined in our Privileges, upholding the same together with our liberties and freedoms, opposing whomsoever would seek to infringe them.
106. The Jersey Court of Appeal is comprised of judges appointed by Her Majesty. Those appointed by Her Majesty generally consist of experienced QCs from the United Kingdom, retired High Court judges or members of judiciary of the other Crown Dependencies, with at least 10 years experience. To ensure independence and impartiality no ordinary judge of the Court of Appeal shall, during the judge s continuance in office, practise at the Bar in Jersey or be concerned directly or indirectly, whether within or without Jersey, as counsel, solicitor, arbitrator or referee in any matter arising within Jersey. The judges are appointed under Letters Patent and hold office during good behaviour. They can only be removed from office by Her Majesty. Their oaths of office include the language in French, translated to English You will administer good and timely justice to one and all, without exception
107. The Court of Appeal is considered to provide a vital appellate oversight of the local judiciary, by an independent panel which will usually consist of a majority of judges from outside Jersey.
108. The Judicial Committee of the Privy Council, which is the highest appellate Court of Jersey, is constituted by Justices of the Supreme Court of the United Kingdom.

109. The Bailiff s Judicial Secretary will avoid allocating a case to a particular judge where there is an obvious conflict of interests. Other obvious conflicts may be noticed by the judge at an early stage, otherwise they may be raised by counsel and dealt with at a hearing. It is a matter for the judge to decide if he should recuse himself (AG v Barra Hotels). The test for recusal is well known and based on leading English jurisprudence such as Porter v McGill: whether a fair-minded observer, informed of all of the relevant facts and circumstances, would conclude that there was a real possibility that the judge was biased. The test is objective.
110. All members of the judiciary in Jersey are subject to the Judicial Code of Conduct. Complaints about the Bailiff / Deputy Bailiff are made to the Lieutenant Governor and the full procedure for considering such complaints is published on the Bailiff s Chambers website.
111. Complaints against other members of the judiciary, including Jurats, Judges of the Court of Appeal and Commissioners are made in accordance with a policy which is also published on the Bailiff s Chambers website.
112. A former Magistrate was prosecuted and convicted in 2012 of fraudulent inducement to invest. This demonstrates that there is no bar to trials taking place against powerful members of society, even members of the judiciary.
113. Jersey has not, as a jurisdiction, published an anti-corruption strategy/policy which means that the variable cannot be graded as Excellent.

Module 11: Quality of Border Controls

Assessment 0.8 Very High

114. As an Island of 45 square miles, the vast majority of passenger, vehicular, and freight traffic passes through the seaport of St Helier and Jersey Airport which are both staffed, seven days a week, by Customs and Immigration Officers. In addition, Officers are on duty at the Post Office every day when mail arrives into the depot.
115. The border controls at the harbour/airport are considered robust which is reflected, statistically, in the number of searches that take place, and the quantity of drugs, cigarettes and cash seized.
116. For many years Customs and Immigration Officers have successfully developed intelligence led operations resulting in the seizure of commercial quantities of drugs, the proceeds of crime and the dismantling of drug smuggling syndicates. Officers are not, due to resources, normally deployed to non-commercial small ports unless specific intelligence exists. As a result, it is possible to arrive in, and depart from, the Island without being subject to a customs control.

Module 12: Comprehensiveness of Customs Regime on Cash and Similar Instruments

Assessment 0.7 High

117. Jersey has a comprehensive legal and regulatory framework which adheres to FATF international best practice to detect and deter unauthorised physical

82

cross-border transportation of cash and bearer negotiable instruments.

118. Prominent signage at the ports (both inbound and outbound) informs travellers of their AML obligations to disclose cash and of the need to make appropriate declarations to Customs of goods in excess of allowances. However, it is recommended that public information and signage is reviewed on an ongoing basis in response to any legislative or regulatory changes that come into effect.
119. The term disclosure system refers to a system whereby persons are required to make a truthful disclosure to the designated competent authorities upon request. The term declaration system refers to a system whereby persons are required to pro-actively submit a truthful declaration to the designated competent authorities.
120. Whilst a disclosure regime of the kind currently operated in Jersey is acceptable under FATF recommendations, the European Parliament is proposing to tighten the EU declaration regime.

Module 13: Effectiveness of Customs Controls on Cash and Similar Instruments

Assessment 0.6 Medium High

121. Jersey enforces customs laws and regulations proactively and effectively. A risk-based and intelligence-led approach results in the detection of unauthorised transportation of cash and negotiable instruments, albeit as noted in module 12, some improvements can be made by the introduction of a cash declaration regime.
122. Customs and Immigration officers are empowered to carry out searches on persons, their baggage and their means of transport and are tasked with controlling the movement of prohibited and restricted goods, including cash. Law enforcement staff are assigned specifically to border protection duties and are supported by intelligence, investigation and freight specialists. While this is considered sufficient resource further resources to conduct more screening and searches would further enhance effectiveness.
123. Procedures are also in place with security search providers at both the harbour and airport whereby officers are notified when cash is found either on a passenger or in their baggage on export.
124. A risk-based and intelligence-led approach is adopted for the examination of departing passenger and vehicular traffic. While postal and freight traffic is examined on a daily basis, the overall proportion of items examined is low.
125. A specially trained dog is retained to detect large amounts of cash carried personally by passengers, within baggage, by freight and through postal traffic.
126. A minimum of two cross-border cash risk assessments are conducted each year. These exercises are led by officers with assistance of drug and cash-detector dogs. Results from these exercises informs the assessment of ongoing risks and resource allocation.

126. There have been a number of successful prosecutions of individuals who have

45 Snooks and Dowse v UK (Applications nos. 44305/98 and 49150/99) 83

attempted to export cash (generally suspected of deriving from the proceeds of drug trafficking). Examples include:

AG vs Turney 30 September 2016 - GBP 42,000 2 years imprisonment, suspended

AG vs Brennan 16 December 2016 - GBP 11,660 - 12 months imprisonment

AG vs Dixey and Pereira 20 May 2017 - GBP 36,420 Dixey 18 months imprisonment

127. Revenue Jersey s expanded information sharing powers, introduced from 1 January 2020 have created a legal gateway for the first time for the sharing of this information.
128. Rarely, due to other operational requirements, is it not possible to deploy an officer to respond to suspicious movements of persons or goods.
129. Customs will be reviewing existing data sharing gateways and will be exploring opportunities to better establish whether or not transportation of cash from Jersey derives from tax evasion. It is recommended that work is undertaken to understand why cash, comprised of Jersey bank notes, is banked outside the Island and to establish the role of UK clearers in this process.

Module 14: Effectiveness of Domestic Cooperation

Assessment: 0.6 Medium High

130. A number of changes have been made recently to improve domestic cooperation
131. This is perhaps best illustrated by the tripartite forum. Members comprise seniorrepresentatives from the JFSC, JFCU, LOD and, more recently, ECCU. This forum has provoked a great deal of cooperation and has brought all agencies together. Tripartite meetings are scheduled bi-monthly and are supplemented by case specific meetings. Meetings develop cooperation, assess and develop agreed acceptance criteria for new cases, and review ongoing investigations where there is a shared investigative nexus. However, investigation case acceptance criteria are not considered by all parties to be clear and, where FIU cases have not been taken on in past, reasons and remedial work required have not been recorded. This does not facilitate inter-agency working. Further, there is no formal process for conducting lessons learned reviews. They are, however, undertaken on an ad hoc basis.
132. There are various agreements in place between different stakeholders on operational cooperation. The AG has a Joint Working Framework Agreement with the JFCU-FIU and has given guidelines on the onward transmission of suspicious activity reports. An Operating Protocol46 is in place between the ECCU and the JFCU to provide clarity on essential issues such as adoption criteria for ECCU cases, access to financial intelligence, and mutual support.

An MoU is in place on the investigation and prosecution of financial crime47 between the Chief Minister, SoJP, AG and JFSC. The JFSC has entered into MoU with, inter alias, the Channel Islands Financial Ombudsman, Jersey Gambling Commission (JGC), SoJP and the Law Society of Jersey (LSJ). One area of operational cooperation which requires improvement relates to the sharing of

46 https://www.gov.je/Freedom%20of%20Information%20library/ID%20FOI%20Economic%20Crime%20and%20

Confiscation%20Unit%20-%20Operating%20Protocol%2020180213.pdf

47 Signed by the Chief Minister, States of Jersey Police, Attorney General and JFSC and effective since July 2018. The 84 terms of the agreement provide for it to be made publicly available.

tax information although this has begun to be addressed through the improved powers in the Revenue Administration Law ( RAL ) from 2020.

133. A standing government-led working group namely, the Financial CrimeEnforcement - Government Oversight Group (FCE-GOG) comprising senior representatives from Government, SoJP, LOD and JFSC is responsible, amongst other things, for reviewing resource allocation and training programmes for financial crime investigation and prosecution. Members are also requested to report regularly on the development of long-term resourcing and training in the area of financial crime investigation and prosecution, though this has not been done. Reports are expected to consider education, training, career-progression and external support to develop expertise. The group is expected to meet on a quarterly basis but has not met for some time now.
134. The JFSC, Government of Jersey, the Law Draftsman s Office and the LOD meet monthly to discuss progress on various law drafting projects, including those relating to AML/CFT legislation.
135. The JFCSG has been referred to in Module 1. It is responsible for co-ordinating the actions of the Island to mitigate the risk of financial crime. Whilst meetings

of the JFCSG are held regularly there is: (i) insufficient AML/CFT resource within Government; and (ii) insufficient direction, oversight and coordination of AML/ CFT policy and strategy by the Government, to ensure that the JFCSG delivers

its priorities. This is considered under Module 1.

136. Reporting entities are involved in the development of policy on an ad hoc basis. For important areas of policy development, formal consultation with industry (both directly and indirectly through Jersey Finance Limited the representative body of the finance industry in Jersey) and others affected is undertaken by the JFCSG.
137. The JFSC and Government regularly attend meetings of the Jersey Bankers Association (JBA), the Jersey Funds Association (JFA), the Law Society of Jersey Commercial Sub-Committee (the Law Society) and the Jersey Association of Trust Companies (JATCO) at which AML/CFT law, regulations and guidelines are discussed from time to time. Ad hoc meetings are also held with other trade bodies.
138. There is extensive public/private sector cooperation within the NRA project, and each of the sectoral ML vulnerability teams chaired by the JFSC include representatives of reporting entities. However, there are currently no formalised arrangements in place to secure strategic engagement from industry in Jersey s AML/CFT planning.
139. The Law Society of Jersey is able to refer matters touching upon potential criminal allegations. It did so in the Manning case.
140. Locate Jersey and the Population Office play an important role in regulating

who can reside or set up businesses in Jersey. However, it does not appear that the role of the two departments in tackling ML is appropriately recognised, and information sharing gateways in place between these departments on the one hand and the LOD and SoJP on the other, do not appear to be sufficient (though workarounds are in place). Further, the JFSC does not share adverse regulatory data with Locate Jersey/Population Office, notwithstanding that Jersey is actively encouraging finance professionals to relocate to Jersey.

Module 15: Effectiveness of International Cooperation

Assessment: 0.5 Medium Introduction

141. Jersey has a broad legal basis for providing international cooperation in relation to money laundering. However, less evidence is available to demonstrate that cooperation provided by LEAs, the FIU and the JFSC is: (i) provided rapidly, constructively and effectively; or (ii) provided on an urgent basis.
142. The MLA Team has available to it excellent technology and the support of the Law Officers Department budget which is substantial. They are thus well resourced both in terms of technology and finances.
143. The AG has published guidelines for countries seeking MLA from Jersey. Requests are prioritised where a Requesting Authority advises of a need for urgency. In such cases the Request is reviewed upon receipt and provided all legal requirements are met and the time frame is practically possible, it can be expected that the Request will be executed within the required timeframe. This is not always possibe for reasons beyond the MLA team s control, for example, a Request to serve process on a witness/defendant to appear in a foreign court on a specified date and that date has already passed (in one case this was due to the length of time taken for the Request to be processed via the central authority of the Requesting jurisdiction). In terms of incoming requests, between 2013 and 2017, 269 incoming requests were made to the AG. 55 of these requests were related to money laundering. The majority of MLA requests come from the United Kingdom (UK) although requests are received from across the world.
144. Between 2013 and 2017, 16 outgoing MLA requests were made which were money laundering related, with 47 outgoing MLA requests in total.
145. Recently, Jersey benefitted from an asset share with the US for its co-operation in a long-running investigation into funds gifted away by a notorious drug baron.
146. Law enforcement does not retain statistics on requests for, or access to, beneficial ownership and control Information (other than under the Exchange of Notes process see below). However, all authorities confirmed that no issues are experienced in practice, with relevant trustees being identified through liaison with the JFSC. MLA Requests for evidence of beneficial ownership are always executed in a timely manner where the Request itself fulfils the legal requirements. Often, they do not. It is to be expected Requests (in relation to Jersey registered companies) would be more straightforward than Requests

for other forms of evidence. The reason for this is that it is known exactly what records are held by the Companies registry, a standard form of notice is used and the records are invariably produced within the required time period (notably where the Notice period is fore-shortened due to time critical factors). Evidence from partner agencies in other jurisdictions is not available to corroborate this confirmation.

147. The AG consistently provides BO records (whether the company is held in a trust or not) to competent authorities in criminal cases (and, most significantly, has been doing so since 1991 in relation to cases of serious fraud and since 2001 in other criminal cases). Also, the AG is able to obtain BO records in relation to non- Jersey companies administered in Jersey by issuing notices upon the relevant

86

Financial Service Provider in possession of the foreign company records.

148. The FIU can also request intelligence from overseas FIUs (via Egmont) and law enforcement agencies. Information has not been provided on the number of requests made by the JFCU-FIU to assist with its analysis of cases designed to support domestic ML investigations in respect of foreign predicate offences. Nor is it clear why there are so few outgoing requests for supervisory information, particularly given the number of TCSPs headquartered in Jersey with overseas operations. However, feedback provided from foreign FIU s on information provided has been very positive.
149. The CAR Law provides for the enforcement, in Jersey, of non-conviction-based confiscation orders made in another jurisdiction. Substantial funds held in Jersey have been returned to authorities in other countries notwithstanding that there has been no criminal prosecution in those other countries. This has included

GBP 1bn to Italy (Riva) and USD21m to the US (Bengis). Jersey will return seized funds linked to General Abacha to Nigeria through an asset sharing agreement

to be negotiated between Nigeria, the US and Jersey.

150. The JFSC has wide statutory powers to exchange information with foreign counterparts. It has published a Handbook on International Cooperation and Information Exchange on its website and has a procedure for prioritising incoming requests for assistance including urgent requests.
151. In 2016, Jersey along with Guernsey, the Isle of Man and six British Overseas Territories, signed a bilateral agreement with the UK which committed Jersey to providing UK law enforcement agencies with information about the beneficial owners of companies incorporated in the Island. This arrangement, which is known as the Exchange of Notes (EoN), came into force on 1 July 2017.
152. A periodic statutory review to assess the effectiveness of the EoN has now been completed and presented to the UK Parliament. The report found that overall

the EoN is functioning well and has been extremely useful in accessing the information needed to support ongoing investigations . During the first 18 months of operation, 26 requests for information from Jersey were made responses

were provided for all requests made, almost all within the agreed timeframe.

153. Jersey is a signatory to the OECD s Multilateral Convention on Administrative Assistance in Tax Matters (MAAC), under which it has the ability to exchange information with all other jurisdictions (other than the UK and its associated

and dependent territories who are considered the same jurisdiction for the purposes of the MAAC) which have also signed and brought the convention

into force (currently more than 110. In addition to these relationships Jersey has agreements for exchange of tax information with the UK, Guernsey, the Isle

of Man and the US, all of which have been assessed by the OECD s Global Forum on Tax Transparency and Exchange of Information and found to be in line with the global standard. It is Jersey s policy not to decline a valid request for exchange of tax information. Requests have been received and responded to from 35 jurisdictions to date.

154. Strategically, FIUs and LEAs from the three CDs and Gibraltar (Quad Island group) meet regularly to discuss relevant issues. There is also an annual CD meeting during which trends and typologies are discussed. There are bi-annual partnership meetings with the UK National Crime Agency and the CDs.

155. In the Q4 2018, the GoJ requested input from competent authorities in peer countries on their cooperation experience with Jersey over the past 4 years. Feedback was received from six FIUs. Responses were broadly positive.
156. LEA feedback was received from four jurisdictions. Responses were positive.
157. United Nations officials have recognised Jersey s good practice in returning stolen assets to their rightful country. At an international meeting in Addis Ababa, the Officer-in-Charge of the Corruption and Economic Crime Branch of the United Nations Office on Drugs and Crime (UNODC) said: UNODC recognises the innovative work that the Governments of Kenya, Jersey, Switzerland and

the UK have undertaken in developing the Framework for Return of Assets from Crime and Corruption in Kenya (FRACCK). The FRACCK is a novel approach to facilitating asset return and has generated interest internationally. The international expert meeting on the return of stolen assets provided a valuable opportunity for officials from Jersey and Kenya to jointly present on lessons learned from the FRACCK; this dialogue is important for strengthening good practices on asset return to foster sustainable development.

Module 16: Availability of internal audit

Assessment: 0.7 High

158. Jersey is served by a substantial professional audit community. The accountancy sector (which includes auditors) employs 1,16048 people, servicing approximately 19,00049 clients and generating a fee income through 2016 and 2017 of GBP 110,000,00050 pa. Jersey s broad range of auditors provide independent audit services to all types of legal persons and arrangements established under Jersey law (including companies, trusts, partnerships, foundations, non-profit organizations and charities) and, in addition, provide audit services to many non- Jersey entities which are administered from within the Island. An accountancy sector of 44 audit firms when considered against Jersey s population of circa 105,500 demonstrates considerable strength of infrastructure.
159. Despite this, the scope of Jersey s statutory audit requirements is quite narrowly drawn. Statutory audit obligations in respect of legal persons and legal arrangements established under Jersey law are prescribed only for: (i) public companies (and private companies that are treated as public companies); (ii) market traded companies MTCs ; and (iii) entities regulated by the JFSC under financial services legislation.
160. There is no statutory audit requirement for other types of legal persons or

legal arrangements, including private companies, limited liability companies, foundations and limited partnerships. However, many legal persons and

legal arrangements that are not subject to statutory audit requirements are administered by trust and company service providers (TCSPs) who are regulated by the JFSC and are required to maintain proper records for those persons and arrangements. As a result, a form of independent audit is applied to structures under administration which would not otherwise be subject to any form of audit

in a sector which is particularly vulnerable to money laundering. This involves oversight by the compliance officer, MLCO and MLRO of regulated TCSPs, which are themselves subject to supervisory examination by the JFSC. Regulatory

48 See page 9 of https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20Jersey%20

Labour%20Market%20Dec%2017%2020180410%20SU.pdf

49 Phase 2 Data Collection responses to BA1 and BB1 (at 31 December 2017)

50 see page 5 of https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20 88 Finance%20and%20Legal%20Sector%20GVA%202017%2020180704%20SU.pdf).

examinations usually include sample testing of underlying client files and look at whether transactions are properly understood and scrutinised.

161. Moreover, many legal persons and arrangements choose to have

anindependent audit for varying reasons, including investor requirements (e.g. mergers or acquisitions), bank or other lender commitments, good corporate governance (e.g. group structures) and other stakeholder demands. It is considered that non-statutory audits will form a sizeable part of the audit market in Jersey, though statistics are not available to support this.

Module 17: Level of Financial Integrity

Assessment: 0.8 Very High

162. Jersey has a significant professional services community which is longstanding in its existence. This is particularly the case in the situation of training and education of Directors and professional services professionals. It is notable that the Institute of Directors in Jersey was founded in 1966 and has over 600 members from all sectors of the business community. It plays a significant role in promoting business in Jersey, by promoting free enterprise and setting high standards of corporate governance and financial integrity through professional training programmes.
163. The number of cases encompassing integrity failures are not sufficiently significant to suggest the systemic involvement (ranging from unwitting facilitation to acting as witting accomplice) in money laundering by professional intermediaries (third party money laundering). Underlying this assessment is:

A broad framework to support (including training of) directors.

Limited evidence of behaviour lacking integrity amongst members of professional bodies, in regulated sectors and amongst bankrupts.

The relatively low number of financial crime cases.

No referrals, of any director, by the Viscount to the AG since 2004 (either as

a result of an offence under the Bankruptcy (DØsastre) (Jersey) Law 1990, nor seeking a disqualification order).

A general culture of tax compliance.

Evidence of information sharing from Revenue Jersey to SoJP (via use of Production Orders).

Evidence of information sharing with overseas law enforcement agencies as envisaged within the OECD s Model Tax Convention.

Many legal persons and legal arrangements that are not subject to statutory audit requirements are administered by TCSPs who are required to maintain proper records which are subject to compliance monitoring arrangements and oversight by the JFSC.

Investigators experience is that when production orders are complied with, the information produced does allow them to see the picture and to follow the money .

However:

The very low number of directors banned by the Court indicates a failure to take action where there are failures of corporate governance, including tax

compliance. However, the JFSC has issued a number of public statements banning principal persons who held director roles.

The Taxes Office s ability to undertake risk analysis and target compliance activities to areas at the greatest risk of tax evasion is underdeveloped.

Revenue Jersey has been severely restricted regarding to whom, and under what circumstances, it may share information, although this has begun to be addressed with the intorduction of the RAL from 2020.

In recent years, Revenue Jersey has dealt with the majority of cases of non- compliance via civil settlements and not through the criminal Courts.

There have been no prosecutions of legal persons and legal arrangements for failing to keep proper books of account.

As noted elsewhere in this report, there is not currently a formal strategy in place for combatting corruption.

Jersey s tax framework is within a period of transformation of systems and processes.

Module 18: Effectiveness of Tax Enforcement

Assessment: 0.5 Medium

164. Revenue Jersey is a non-ministerial department of the States Treasury and Exchequer, broadly reflecting the administrative governance of the UK (HMRC) and the Westminster/Commonwealth model (meaning that the Comptroller and Revenue Jersey staff are independent officers enforcing tax laws independently of all others including Ministers and other civil servants).
165. All employees of Revenue Jersey are required to swear an Oath of Office in the Royal Court, obliging them to maintain taxpayer confidentiality and act impartially. All staff are vetted to appropriate levels for their civil-service grade; and are required to make an annual declaration of conflicts of interest. Revenue Jersey is subject to both internal (Government) and external audit on an annual basis.
166. A scheme of internal management assurance dictates that regular checks are carried out by senior officers on assessing repayments and write-offs. These checks are, in turn, subject to the annual audit process. The Comptroller and senior managers exercise governance over large and unusual tax assessments including the abandonment of tax investigations.
167. Basic training is provided in-house, including coaching, mentoring and checking; with advanced training provided through the funding of external professional tax qualifications. Revenue Jersey routinely seconds people from other tax administrations (mainly UK/HMRC) and secures coaching and training from larger administrations. Strong links exist with HMRC both bilaterally and under the aegis of the British Isles Tax Administrations forum. HMRC routinely provides access to relevant training materials.
168. The administration of the ITL, GST and LTT Laws is entrusted by law to the Comptroller of Revenue. The Comptroller s oath of office requires him/her to administer the laws without hatred, favour or partiality and demands complete confidentiality in the performance of his/her duties except for the purposes or in the course of a prosecution of an offence or where specifically permitted by the

law. All employees are required to swear a similar oath. It is an offence for any member of staff to share any information derived in the course of their duties.

169. Revenue Jersey is currently undergoing a period of transformation which is reflected in the current assessment. Whilst there are a number of positives including: powers to obtain information; compliance activity; autonomy; and the professionalism of staff, there are also areas requiring improvement. These include: the risk based approach to compliance is not yet sophisticated and targeted (this will become the case post transition); there have been no significant prosecutions since 2010; and the current Law relies too heavily on criminal sanctions, which are generally not being used in favour of a less structured civil penalty approach to encouraging compliance.
170. The RAL came into force on 1 January 2020. New legal gateways have been opened with other Government departments and public bodies, enabling information to be shared more easily. For the first time, civil penalties for providing inaccurate information to Revenue Jersey may be levied on individuals and companies (in respect of declarations made on or after 1 January 2020). Draft legislation is currently being prepared to introduce civil information production powers.
171. This will open new legal gateways and remove barriers enabling Revenue Jersey to share information more easily. It will also introduce new structured civil penalties on individuals and companies that make incorrect declarations. In addition, amendments to the Income Tax Law (effective from 1 January 2020) introduce new penalties for long overdue returns and statements.
172. Revenue Jersey considers there is a general culture of tax compliance. As in all jurisdictions, there is a level of non-compliance arising from error and misunderstanding of tax law, as well as from deliberate avoidance and/or evasion. Revenue Jersey s ability to analyse the risk of tax avoidance and evasion is underdeveloped, which has hindered its targeting of compliance resources to areas of greatest need. This is being addressed as part of the wider transformation exercise currently being undertaken.
173. In recent years, the majority of cases of non-compliance have been addressed by civil settlements (including the levying of penalties) and not generally through the criminal Courts.
174. In addition, over the same period technical interventions have led to adjustments to the profits on business accounts.
175. In 2019, in the case of Jones, the a defendant was sentenced to time served (just over 13 months) and fined GBP 75,000 for evading tax, laundering of undeclared income and being in possession of cannabis. The revenue evaded amounted to GBP 275,558 and the unpaid tax, surcharge and long-term care contribution amounted to GBP 65,826. The court ordered payment of this sum out of previously seized cash. In the 2016 case of Goodwin, the defendant

was sentenced to 6 years imprisonment and fined GBP 2,000 for delivering fraudulent tax returns, money laundering and attempting to pervert the course of justice. Prior to this, Revenue Jersey prosecuted 10 cases for fraudulent completion of income tax returns between 1992 and 2010 Prior to this Revenue Jersey prosecuted 10 cases for fraudulent completion of income tax returns

between 1992 & 2010.

176. In 2017 a non-disclosure opportunity was held resulting in approximately GBP 8m of income being reported and settlements raised of GBP 1.6m
177. Revenue Jersey does not currently publicise details of tax recovered by intervention.

Module 19: Level of formalisation of the economy

Assessment: 0.9 Close to Excellent

178. Jersey is an island of 45 square miles with a population density approximately double that of England. On one view, this makes it difficult for inhabitants to carry out hidden economic activity without someone else knowing about it (in particular, the regulatory authorities). Alternatively, it may be viewed that the close communities arising from such a population density facilitate a hidden or informal economy.
179. The term informal economy refers to paid informal work, that is the paid production and sale of goods and services that are unregistered by, or hidden from, the state for tax, benefit and/or labour law purposes but which are legal in all other respects51 (i.e. excluding criminal activities, e.g. drug trafficking).
180. Jersey s geography permits effective control over its borders and, therefore, scrutiny of people entering and leaving Jersey (and ultimately working within it). Controls over living and working in Jersey, together with its developed financial services industry, support a view of a high degree of formalisation of the Jersey economy.
181. In order to live and work in Jersey, various legislative controls exist. The Population Office regulates migration in terms of who is entitled to live and work in Jersey and JCIS controls movements of people to and from the Island including the issuance of visas and entry clearances where required, and the conduct of physical border controls.
182. A licence is required before any business may operate in Jersey and,

before taking on any employee, a business must ensure the individual has a Government of Jersey registration card (evidencing the person s residential and employment status52). Businesses cannot employ anyone without a registration card and, whilst they can employ as many Entitled or Entitled for Work people as necessary (subject to business licence conditions), permission from the Population Office is also required to employ anyone of Licensed or Registered status. To date, there has been one prosecution for operating without a licence and none for failing to request a registration card at the time of employment. However, where cases have been identified of employers failing to request a registration card, these have been regularised by the employer and sanctions

not applied.

183. In 2018 the evidence was given to a States Scrutiny Panel suggesting that

a black market is developing in Jersey s hospitality sector with businesses starting to pay staff off the books in an attempt to bypass controls and address chronic staff and skills shortages . Notwithstanding this, the level of regulation in Jersey is considered to have a positive effect, reducing the size of Jersey s

informal economy.

184. Data is not available on the extent to which cash is used in Jersey to pay for goods and services, relative to other payment instruments such as debit and credit cards.
185. The use of cash is more prevalent in certain industries including construction, agriculture, hospitality and other lower income services such as cleaning and childcare. However, these industries form a proportionately lower contribution to Jersey s Gross Value Added ( GVA ) Nevertheless, Jersey has significant migrant communities, many of whom work in these lower income sectors.
186. Unlike in the EU, Jersey lacks a legal framework to ensure that everyone can open a bank account.
187. One local clearing bank sees around two cases per month of social exclusion from banking services (due to crimes or language barriers). A report commissioned by the Government of Jersey in 2016, explored the provision

of basic accounts, and Community Savings[1] may have an expanded role in future: Whilst Community Savings does not maintain statistical information on those excluded from mainstream banking, they continue to regularly receive applications from individuals who are unable to open an account with a high street bank.

188. Jersey has a relatively simple tax regime and lower rates of tax than in many other jurisdictions. On the other hand, the cost of living is high. Around 25% of households/individuals are on low income - GBP 410 per week/GBP 21,320 pa. Accordingly, there is some incentive to moonlight . Currently, Revenue Jersey[2] does not publicise information on interventions and there has been a lack of regular criminal prosecutions for tax fraud.
189. Revenue Jersey does not currently estimate the level of tax evasion. In June 2018, HMRC published a tax gap estimates report which estimates tax lost through a range of behaviours (including errors, evasion, criminality and the hidden economy). The size of the overall tax gap is estimated to be GBP 33bn (5.7% of tax liabilities) of which the hidden economy accounts for GBP 3.2bn (less than 1% of GVA[3]).
190. Based on UK data, moonlighting activities are not considered to be significant.
191. Whilst, as noted in Module 12, the current cash disclosure regime is considered

to be largely adequate, it does not require mandatory declaration or disclosure

of cash or similar instruments at the border. Only limited information is held about cross-border transfers (that might help to identify the extent of tax evasion).

191. There are, therefore, some gaps in Jersey s information infrastructure which may not fully support transparency of the economy.
192. Statistics Jersey, established by the Statistics and Census (Jersey) Law 2018[4],confirmed no studies or reports are available on the extent or size of Jersey s informal economy. However, when asked if it had a sense of what the share might be and, in an informal oral response, has speculated that the share could be around 5% of the economy. Whilst no studies or reports are available on the extent of Jersey s informal economy, the UK may be considered a useful

benchmark.

193. In October 2017, HMRC published a survey on the hidden economy in Great Britain. The survey estimated that 4.9% of the British population was involved in the hidden economy (of which an estimated 2.6% had a presumed taxable income) with highest prevalence amongst low income households, 16-24 age range and households with three or more adults. The report further identified that moonlighters were the most common behaviour type (accounting for 57% of the hidden economy). Income earned from the hidden economy was generally low with 83% earning less than GBP 5,000 and 65% earning less than GBP 500.
194. In June 2017, a study by the Association of Chartered Certified Accountants estimated that the underground economy in the UK represented 11.5% of GDP in 2016. This is expected to fall slightly in coming years to 10.8% by 2025 but remains a sizeable portion of the UK economy. The global average is expected to fall from 22.5% to 21.39% of GDP over the same period.
195. Given the size of the financial services industry in Jersey (40% GVA[1]), higher salaries (compared to the UK), and factors considered above, the size of

Jersey s informal economy is likely to be smaller than in the UK. On balance, it is estimated that circa 5% - 10% of Jersey s GDP could be attributed to the informal economy.

Module 20: Availability of Reliable Identification Infrastructure

Assessment: 0.8 Very High

196. For the purpose of this assessment, identity is taken to encompass who someone is and where they live.
197. The Government of Jersey and parochial authorities issue a range of documents suitable for use in the verification of identity. Some of these are photographic (passports, driving licences and firearms certificates). Others are non- photographic (registration cards and tax assessments). There are currently no known problems with falsified government-issued documents in Jersey. JCIS further confirmed that less than 5 forged or counterfeit overseas passports are encountered at Jersey s borders each year, and, in such cases, the holder is typically refused entry.
198. In respect of driving licences, there are a small number of circumstances of fraudulent behaviour which are reported to the States of Jersey Police and include: (i) an applicant for a licence making a false declaration that they are resident in Jersey when they are not; and (ii) fraudulent exchanges - where a foreign licence is presented in exchange for a Jersey licence, and, during the validation process, it is identified that the foreign licence is a forgery.
199. National identity cards are used in most EU member states and around 100 countries have enacted laws making identity cards compulsory. Some allow Authorised Persons (which include banks) to access the national database in order to assist in the application of CDD measures.
200. In August 2017, GoJ adopted the use of Yoti - a digital identification system. Yoti is, however, limited in its application: it relies upon documentary evidence of identity provided by users and does not itself establish identity. A number of identity verification applications ( Apps ) are available and are slowly developing

prevalence in the local market.

201. Notwithstanding the initiatives referred to above, there continues to be much reliance on customers to provide supporting documents to verify an individual s address (utility bills and bank statements - certified where required). Utility bills are the default requirement for almost every Financial Institution/DNFBP when seeking to evidence proof of address.[2]
202. Jersey utility companies, certain of which are government-owned, issue bills

for utilities provided to a particular address. Given the size of the economy, the number of utility providers is limited and there is strong awareness of the bills format. It is very easy to forge these documents, and so it is perhaps surprising that their use is so prevalent. Increasingly, utility companies distribute bills electronically which means that there is an increased risk of forgery/falsification.

203. As outlined above, significant reliance continues to be placed on documents that are provided by individuals who are customers. Minimal use is made of public information sources, such as CRAs, to verify identity. There are a number of CRAs which could be used to verify identity including Equifax, Experian, Callcredit and Crediva. Whilst CRAs do hold information on Jersey residents, the extent of access to underlying data varies. It is perhaps because of this, that use by Financial Institutions and DNFBPs is limited[3].
204. Evidence collected to verify the identity of non-residents (which account for significantly more customer relationships than local individuals) includes the usual identity and address verification documentation (such as passports and utility bills), assessment of public source information and electronic verification screening methods. When utilising traditional verification documentation (utility bills and bank statements) for non-residents, it is unusual to receive original documents. Instead, certified copies of the documents are obtained. For a certified copy to be acceptable, the certifier must meet the requirements of a suitable certifier and provide sufficient contact information in the event of enquiry.
205. Guidance provided for in the Handbook suggests that checks should be undertaken on the certifier if he/or she is based in a higher risk jurisdiction. This is typically undertaken through independent internet searches. Call-backs

are also undertaken on the certifier when deemed appropriate. However, the

 suitable certifier need have no experience in spotting forged documentation

and Financial Institutions /DNFBP have little, or no, opportunity to spot a forgery when receiving a copy of the documents. Similar issues may be faced where reliance is placed on obliged persons (including group companies).

206. Jersey s Companies Registry collects information on companies and

partnerships that are created under Jersey Law. Some core information,

available on payment of a nominal fee, includes incorporation documents and annual returns (which includes key corporate identifying information and details of registered shareholders at the 1st of January of the relevant year). Information on directors of companies (except public companies), beneficial owners and controllers are not currently publicly available. Only publicly listed companies are required to submit financial statements to the Companies Registry, though such statements may be obtained from the client directly.

legal person or arrangement. Examples include registration under: the Data Protection (Jersey) Law 2018; the Goods and Services Tax (Jersey) Law 2007 and the Goods and Services Tax (ISE) (Jersey) Regulations 2008.

208. Registers of companies and partnerships can be used to verify the identity of foreign legal persons and (less common) arrangements. Typically, European registries/financial service regulators disclose most data. For jurisdictions outside Europe data available varies considerably, with certain jurisdictions not disclosing any information at all.
209. An international database is also available online for companies involved in international transactions and can be used to verify identity and/or corroborate information60. Care must be taken however, as entities with the same name and a different country of incorporation may appear in the lookup list.

Module 21: Availability of Independent Information Sources

Assessment: 0.6 Medium High

210. There is limited public information available to assist in determining Jersey- resident customer profiles/ expected transactional activity. However, Jersey has

a significant and expanding community working in the provision of risk-screening tools which can be used to develop a customer transaction profile for resident

and non-resident customers alike.

211. Many Financial Institutions and DNFBPs in Jersey use a range of risk-screening tools ( RSTs ), some of which are locally established and managed. According to the GoJ private sector survey, the most commonly used screening tools are: World-check, Riskscreen, C6, Accuity, RDC and LexisNexis.
212. Data held by CRAs may also be used to assess customers financial status and therefore to determine transaction patterns. Most of the data held by CRAs relates to how an individual has maintained their credit and service/utility accounts. CRAs also access data from other sources including electoral rolls, Court judgments, and bankruptcy and insolvency data. Whilst UKCRAs do hold information on Jersey residents, the extent of access to underlying data may vary and so use is limited.
213. Understanding the activity an applicant for business or a customer has undertaken to generate source of funds or wealth is important in developing customer profiles. Limited independent information is available publicly to determine source of funds and source of wealth, and so reliance is placed on the customer. Industry practice to corroborate this information typically includes undertaking open source internet searches, use of screening tools, and obtaining financial statements or other financial data such as bank statements and tax returns.
214. As noted in module 20, Jersey s Companies Registry collects and holds information on companies and partnerships that are created under Jersey

Law. Data on beneficial ownership and control of legal persons is not currently publicly available, and it might be argued that this data could assist in building a transaction profile.

215. While the JFSC does publish a list of investment advisors, this in contrast to the position in the UK where the FCA also publishes details of approved persons, authorised representatives and controllers. A list of disqualified directors is not published in Jersey, although the JFSC issues public statements on its website in respect of individuals deemed to be not fit and proper to work in the finance industry.
216. Whilst the above reveals there is currently limited data available to the public from the Companies Registry or JFSC, this does not appear to cause an issue to industry.
217. Given the majority of business in Jersey is with non-resident customers, Financial Institutions and DNFBPs have developed significant expertise in accessing

data sources outside Jersey. However, independent and reliable sources of information to determine transaction patterns may not be available in countries and territories with a less-developed legal and regulatory framework and/or financial service sector.

Module 22: Availability and Access to Beneficial Ownership Information

Assessment: 0.7 High

218. Jersey has an established system to ensure that comprehensive information on the structure, management, control, and beneficial ownership ( BOC Information ) of corporations, trusts, and similar vehicles is available and can be accessed in a timely manner by competent authorities.
219. Jersey also has an established system for ensuring that such BOC Information is available to Financial Institutions and DNFBPs to facilitate their CDD requirements.
220. This is primarily achieved by a central register of BOC Information (accessible to competent authorities), combined with a regulated and supervised TCSP sector (the effective supervision of which is rated as medium ).
221. Jersey laws allow for the incorporation and/or registration of the following types of legal persons: private companies, public companies, foundations, limited liability partnerships, limited liability companies, separate limited partnerships, incorporated limited partnerships and incorporated associations.
222. Trusts, customary law partnerships, as well as limited partnerships are legal arrangements available under Jersey legislation. Jersey trusts law comprises both the Trusts (Jersey) Law 1984, (the Trusts Law ) and the Jersey customary law of trusts.
223. A regulated and supervised TCSP is required to form or register most legal persons or legal arrangements. Where legal entities are owned by non- residents, they are required to be incorporated and provided with administration services by a regulated TCSP.
224. It should be noted that there is a limited carve out for companies with locally resident shareholders who must present evidence of identity to Jersey s Companies Registry ( the Registry ). This is designed to allow small, local,

trading companies to avoid the expense of involving a professional TCSP.

225. All companies were required to update their BOC data by 1 July 2017 as part

of the new central register of BOC and are obliged to notify the register of any change within 21 days.

226. Each legal person must maintain (at least) a registered office in Jersey and all providers of registered office by way of business (TCSPs) must be licensed and supervised by the JFSC in line with the international standard set by the GIFCS. This includes a fit and proper assessment and supervisory programme.
227. Under the MLO, all TCSPs (and private trustees) must apply CDD measures, including reviews of records to ensure that documents, data, or information are up to date, relevant and keep records. This includes full information and evidence in relation to BOC Information.
228. Article 19(4) of the MLO requires a relevant person to keep records in such a manner that those records can be made available on a timely basis to the JFCU, the FIU a police officer or customs officer (to assist with the analysis of a SAR or for the purposes of an investigation) for the purposes of complying with a requirement under any enactment.
229. According to the AML Handbook for Regulated Financial Services Business, and unless otherwise specified, records relating to evidence of identity, other CDD measures, and transactions must be accessible and retrievable within 5 working days (whether kept in Jersey or outside Jersey), or such longer period as agreed with the JFSC. Other records must be accessible and retrievable within 10 working days (whether kept in Jersey or outside Jersey), or such longer period as agreed with the JFSC.
230. In addition to the above, since 2017 Basic61 as well as BOC Information of all legal persons (excluding foundations) has been collected by the Registry and held on a Central Register ( the Register ). Legal persons are obliged to keep such information up to date, with the Registry monitoring data flows and volumes/ activity, as well as obtaining information direct from entities, to ensure that such obligations are being adhered to.
231. TCSPs (who undertake this as part of their services) are supervised by the JFSC for compliance with the BOC Information requirements.
232. All beneficial ownership information held on the Register is available to domestic and international law enforcement and tax authorities.
233. Basic and BOC Information of legal arrangements (not held on the Register)

is readily available to domestic and international law enforcement and tax authorities, via the TCSP, Trustee, General Partner or equivalent.

234. This equally applies to Basic and BOC Information in relation to foreign legal persons or foreign legal arrangements that are administered by a Jersey TCB. In relation to foreign companies trading in (but not administered in) Jersey, little risk is posed as most such trading companies have UK/EU parents.
235. One potential vulnerability in this area is a trustee of a Jersey law trust who is not resident in Jersey. In this case, BOC information is not readily available. However, given such trusts and trustees have no nexus to Jersey, there is no practical way

98 61 Information entity name, registered address, proof of incorporation, etc

to assess either the extent of this practise or the potential vulnerability posed by it.

236. The JFSC has general powers to access any information and documentation held by TCSPs and those suspected of carrying on unauthorised business.

The JFSC may require production of information, the provision of answers and have access to the premises of the supervised person. The tax office may

serve notice and Law enforcement may apply for a court order to access any information and documentation held by TCSPs and any non-professional trustee.

237. LEAs do not retain statistics on requests for, or access to, BOC Information. However, all confirmed that no issues are experienced in practice, with relevant provision of information.
238. BOC Information on legal persons and arrangements held on the Register and/ or by TCSPs is not publicly available (unless the beneficial owner is also the registered owner of shares).
239. Financial Institutions and DNFBPs have access to all publicly available information held by the Registrar, and to the information on the directors,

the registers of members or partners, as the case may be, maintained at the registered offices of the different legal persons referred to above. However,

the information contained therein is only Basic Information and not necessarily information on the beneficial owners and controllers of the relevant legal persons

240. Therefore, Financial Institutions and DNFBPs do not access BOC Information from a public source to verify CDD information. No specific measures are in place to facilitate access to BOC Information, so as to enable Financial Institutions and DNFBPs to more easily verify customer identification data.
241. However, despite the lack of publicly available BOC Information, there are effective alternative methods used to obtain such information. In practice, BOC information is obtained directly from the person/arrangement or from the TCSP administering the person/arrangement.

GoJ Survey Results

242. A GoJ survey of the private sector in 2018 revealed:

42% felt that adequate, accurate and up-to-date BOC Information of legal persons or legal arrangements was always available.

44% said that adequate, accurate and up-to-date BOC Information of legal persons or legal arrangements was very often available.

3 respondents said that BOC Information was rarely available 1 respondent said BOC Information was never available.

243. The Banking Sector Working Group has also confirmed that, despite there being no publicly available BOC Information (such as a public register), no practical issues are experienced by banks when obtaining or accessing BOC Information in relation to their customers.
244. It is acknowledged that the accuracy of BOC Information obtained and held

by TCSPs and other Financial Institutions and DNFBPs is maintained primarily via the AML/CFT obligations imposed upon them. All Financial Institutions and DNFBPs are supervised for compliance with these obligations by the JFSC.

245. The TCSP Sector Working Group has considered the effectiveness of supervision of TCBs (including statistics regarding on-site and off-site inspections, findings, sanctions, etc) and has assigned this a rating of 0.7 - High.
246. Further, the JFSC s regulation and supervision of TCSPs was evaluated by GIFCS against its Standard in late 2017, resulting in compliant ratings for all areas.
247. These two ratings (high from the working group and compliant from GIFCS) have both been considered, along with the generally positive feedback from industry, in coming to the overall assessment of this variable.

100

Part B Sectoral risk

[1]SECTION 9

TCSP Sector

Key Findings: The most material activity within the TCSP sector is management services where the trust company business (or an officer thereof) is the director, partner, council member of a foundation or trustee in respect of a client structure.

The overall assessment of the vulnerability of the TCSP sector, having taken into account the characteristics of the sector including the different services provided and the composition of the customer-base, and having assessed the input variables for this sector is: 0.61. This rates the sector as Medium High.

Overview of the TCSP sector

1. Jersey has a large and significant TCSP sector, in keeping with its existence as an IFC. In more recent years, there has been a shift in ownership and size (by number of employees) within the TCSP sector. However, it remains an important sector for the Island, employing over five thousand employees directly (as set out in Table 9.1 below) and accounting for estimated assets under management in excess of GBP 713bn as at the end December 2018.
2. As at the end of 2017 there were 114[2] TCSPs. There was a decrease in owner managed TCSPs from 98 in 2007 to 58 in 2017 and a sell-off and consolidation of TCSPs owned by law firms primarily to private equity firms or other group owned TCSPs. This trend for consolidation continues creating further large and super large TCSPs.
3. Of the total number of TCSPs, 35 were super large (>50 employees), 13 were

large (31-50 employees), 24 were medium (11-30 employees) and 42 were small (<10 employees). A shift in the number of mid-sized TCSPs (11-30 employees) was also seen, decreasing from 61 TCSPs in 2007 to 24 TCSPs as at 31 December

2017. Conversely, a shift in profile by size can be seen in the increase in the

super large TCSPs, increasing from just 14 in 2007 to 35 as at 31 December 2017. A considerable proportion of customer assets, some 74%, are administered by

35 super-large TCSPs.

4. Data from the TCSP sector with regards to the types of customer entities administered by TCSPs in Jersey as at the 31 December 2018.

Table 9.1

Type of Customers administered Trusts Jersey  Non-Jersey  Total

Vehicles Vehicles

5. Jersey has had a central register of beneficial owners for over 20 years. In June 2017, there were changes made to the regime, in line with emerging international standards and best practice to ensure that the Companies Registry maintained an up to date register of beneficial owners and controllers which may be accessible by relevant agencies. In addition, annual returns and filing fees must be submitted by 28 February each year and any change of beneficial owners and controllers submitted to Companies Registry within 21 days.[1]
6. Upon incorporation of a Jersey company, Companies Registry will undertake screening of beneficial owners and controllers following a risk based approach, and liaise with the JFSC Supervisor of the TCSP where it has concerns as to the veracity of information submitted to it upon incorporation or those beneficial owners/controllers linked to the customer structure. The companies Registry has published its Registry Processing Statement in this regard.[2]
7. TCSPs are regulated under the FS(J) Law for prudential and conduct of business matters and are required to be registered. TCSPS are supervised by the JFSC for compliance with the Jersey AML/CFT regime. A person who is registered as a TCSP under the FS(J) Law may include a natural person, a limited liability company or a limited or unlimited partnership. The vast majority of those holding TCSP licences in Jersey are entities known as Participating Members, who are part of a wider TCSP affiliation.
8. There are two specific limited exemptions from registration which are examined in more detail later in this report and those are:

Private trust company business (or PTC) and private trust company business in respect of foundations; and

A limited exemption from registration for a natural person, when acting as or fulfilling the function of a director of a company. Such exemption is only available if the individual holds no more than six appointments in or from within Jersey.

Threats in the TCSP sector

TCSPs ML threat to sector = High

9. The TCSP sector has been assessed as high in relation to the ML threat to the sector. From the data collected there were no ML investigations involving the sector and just 1 case where there was an investigation of a predicate offence only. The JFSC recorded 5 cases that were investigated in this sector. There is

1 recorded ML prosecution featuring the sector, and no convictions listed, the JFSC also have recorded 2 cases where sanctions have been taken by them. Data collected by the FIU using a selection of SAR intelligence where there was a typology of potential money laundering, identified 10 cases where there was intelligence suggesting that there was evidence of a predicate offence. LOD statistics indicate that there was 1 prosecution of complex financial crime case. The estimation of ML activities that occur in the sector but are not or cannot be detected, is deemed to be medium/high and the size of the sector and/or its share in the economy is deemed to be high.

Vulnerabilities in the TCSP sector

Inherent vulnerabilities

10. Each of the slices assessed, Trust and company services, PTC Services, Limited Services and other services were risk rated in 9 different areas[1] using the

WB risk rating tool. Each of the 9 factors were rated in accordance with the rating criteria available in the tool. The tool itself generated the vulnerability ratings. Where risks identified by the TCSP team did not feature in the WB tool, e.g. ownership of TCSPs and Use of reserved power trusts, these risks were commented on by the TCSP team so that their importance was not lost just because they did not feature explicitly in the risk rating tool.

Ownership of TCSPs

11. In terms of risks to the TCSP sector arising from ownership changes and/or mergers of regulated businesses, it is recognised that inherent ML vulnerabilities may increase. Where two existing TCSPs merge, the quality of internal governance and controls may decrease during the transition and integration phases, resulting in an increased risk of ML going undetected. This risk can be increased further should the acquirer fail to conduct adequate due diligence prior to the acquisition or fail to conduct a full review of the client book being acquired post-acquisition.
12. Ownership structures involving private equity investment can be complex, with multiple layers of ownership and control structured through the use of private funds. There can be multiple investors holding less than the current 10% threshold definition of a principal person as defined under the FS(J) Law. Furthermore, since Private Equity investment time horizons tend to be short, at between 3 to 5 year, there is some concern that the inevitable focus of private equity firms on maximising the returns on their TCSP investments during the investment period may have an adverse impact/influence on a TCSP s ML/FT risk appetite.

Customer base profile

13. As at the 31 December 2018, TCSPs operating in Jersey provided services to some 65,110 customer entities from 179 countries globally, with over 72,000 individual clients and beneficial owners/controllers behind those structures. The top ten jurisdictions and total number of customers and beneficial owners or controllers who have these countries as their principal place of residence are UK, Jersey, USA, Sweden, South Africa, Switzerland, UAE, HKC, Saudi Arabia and Kuwait.
14. Some 10% of the customers have been identified as having a relevant connection to a country or territory which has been assessed by reliable and independent third party sources as presenting a higher risk of involvement in Money Laundering or Terrorist Financing (referred to as D2 countries within the AML/CFT Handbook).

Use of Reserved Powers Trusts

15. The reserved power provision may open up the risk of the individual holding the reserved power exploiting this control over the trust assets, and the consequent reduced oversight of the trustee in reviewing the exercise of power arising, in order to facilitate ML/FT. The data collected by the JFSC showed that there were just 5% of trusts serviced in Jersey, where investment powers had been reserved. It is a generally known fact that the vast majority of trust structures established for high net worth Asian families contain reserved power provisions. The absence of reserved powers in other trusts (95%), i.e. fully discretionary sits at the heart of the trust business in Jersey and therefore minimises the overall risk.

Jersey companies versus Non-Jersey companies

16. Data shows that 15% of the TCSPs customers are Non-Jersey Companies. There is currently no specific data showing where these Non-Jersey companies are located, or why services are provided to them. It is however the understanding of the Working Group that these are registered in jurisdictions, such as the

BVI, IOM, Guernsey, Delaware, Bahamas, Bermuda, Anguilla and Belize. Since 2016, the Working Group believe there to be a reduction in the use of new incorporations of non-Jersey companies. Given the proximity to the UK, and the prevalence of clients and Beneficial Owners and Controllers residing there which account for 34% of total customers in Jersey, there are also a number of UK incorporated companies which are serviced by Jersey-based service providers.

Complex Client Structures

17. It is not uncommon to come across structures with a Jersey company serviced

by the Jersey TCSP holding investments in overseas trading companies, sometimes with a number of layers of ownership in between. It is recognised that this creates a vulnerability since there may be distance between the Jersey holding company and the overseas investment, and it may therefore be difficult for the TCSP to obtain relevant information. The vulnerability is considered by the working group to be lower where such structures are seen in PTC arrangements given the TCSP s close connection to the family involved and the associated increased accessibility to relevant information.

Bearer Shares

18. Where bearer shares are issued, the company is obliged to obtain and maintain shareholder information on those shares, including the name and address of the shareholder. Through the shareholder register it is therefore ensured that legal ownership information is available with respect to any bearer shares. Accordingly, a company would not be allowed to be incorporated if its owner was a foreign company that has issued bearer shares.
19. Data collected with regards Non-jersey Companies did indicate that there is a very small number of these which are serviced by Jersey TCSPs where shares have been issued to the bearer. The most recent NRA data, for the period ended 31 December 2018 indicate that only 1 non-Jersey company, out of a total of 9,510 serviced in the Island, has issued bearer shares or warrants.

Cash transactions

20. A very small number of TCSPs reported cash transactions having taken place, with 4 TCSPs reporting 36 cash transactions for the period ending the 31 December 2018.

ML/FT risk profile of TCSP customer-base

21. Data collected from industry participants with regards to the composition of their customer-bases shows that of the total customers serviced by TCSPs in Jersey, 31% are rated by their TCSPs as presenting a higher risk of Money Laundering, 33% are rated as standard risk, whilst the majority, 35%, are rated as presenting a lower risk of Money Laundering. Neither the MLO, nor the AML/CFT Handbook, require TCSPs to conduct a separate risk rating of the Ultimate Beneficial Owner (UBO)/Controllers of their customer entities. It is understood however that some do. Given that the risk rating of UBO/Controllers is not consistently applied across the TCSP sector, the data collected in this regard is not analysed in any detail within this report.
22. It should be noted that there is currently no prescribed manner in which entities should risk rate their customers from an AML/CFT perspective. Given the application of a risk-based approach as defined by the AML/CFT Handbook, there is a possibility that the application of such may be inconsistent between TCSP s. From discussions with members of the working group however, it is not anticipated that there are material differences in the manner in which TCSPs risk rate their customers (and where separately undertaken, UBO/Controllers) for AML/CFT purposes.

Politically Exposed Persons (PEPs)

23. Data collected showed that as at the 31 December 2018, 12% of the TCSP customers were either PEPs themselves, or connected with a PEP. The top ten jurisdictions for PEP exposure, and which accounted for almost half of the total PEP population, were: Bahrain, HKC, Jordan, Kuwait, Qatar, Russian Federation, Saudi Arabia, UAE, UK and US.

Customers conducting activities described in the Sound Business Practice Policy (SBPP)69

24. As at 31 December 2018, 1.5% of TCSP customers were reported carrying

on activities that potentially pose a risk to Jersey as an International Finance Centre, these activities are listed in the JFSC s SBPP. The greatest number (0.5%) of customers were reported as undertaking activity 7, which relates to

the involvement, directly or indirectly, in mining, drilling or quarrying for natural resources across the world.

25. The exploitation of natural resources is synonymous with Bribery and Corruption and therefore there is an increased risk of those companies undertaking activity in this area, particularly in countries perceived as having higher levels of public sector corruption, being involved in such criminal activity. Such risk is also increased where the TCSP is not engaged in the direct management of the

assets of its underlying client structure.

106

Sovereign Wealth Funds, the risk of corruption and higher risk jurisdictions

26. The supervisory activity of the JFSC has highlighted scenarios where TCSPs have provided services to state-owned investment structures. These have ranged from pension investments for North American states, private equity investments in respect of London real estate ventures for Middle Eastern sovereignties, to managing the assets on behalf of some of the poorest African nations provided with supranational funding. The difficulty in the various scenarios is the application of the risk-based approach and the three-tier test

in order to identify the controllers in the context of the governing body of the beneficial owner i.e. the state. Often, these organisations can be quite unique in their constitution and officers may change or it may be difficult for the TCSP to keep up to date with changes where an intermediary is used.

TCSPs providing services to Aggressive Tax Schemes

27. Jersey has stated publicly that it has no wish, or need, to engage with those

who seek to involve the Island in abusive tax planning schemes to avoid tax,

with a particular focus on those originating in the UK. Anecdotal evidence from a number of TCSPs suggests that the appetite for exposure to such schemes, and indeed their prevalence, has diminished significantly over recent years.

Use of trust and company structures to avoid tax

28. There is a risk that TCSPs may not have had sight of tax advice in respect of client structures at the point of taking the business on. There is also the risk that the tax position at the stage that the TCSP engaged with its client may have changed. There is no regulatory requirement for Jersey TCSPs to seek copies of tax advice for their clientele, however the JFSC s expectations in this regard is that best practice, in order to ensure that TCSPs can demonstrate adequate knowledge and understanding of the rationale for tax driven structures, is for TCSPs to seek copies of their clients tax advice.

Other potential vulnerabilities

29. TCSPs are expected to fully understand the rationale for the establishment

of client structures. Failure to fully understand and document said rationale exposes the TCSP to the risk that it does not adequately monitor the activities of its client and may therefore fail to identify activity which may ordinarily give rise to a suspicion of criminal activity.

30. There is also a risk that due to pressures associated with income generation, certain TCSPs may become over dependent on particularly significant fee generating clients and may, as a result, acquiesce in the directions and wishes of such clients rather than upset them and put their fee income at risk. In discussion with the working group it was felt that such risk should be mitigated by TCSPs having robust risk management frameworks and oversight of concentration risk.

TCSP Sector Slices

31. ML vulnerabilities were assessed in terms of the provision of services in four principal areas:

1. Trust and Company services or Management Services - where the trust company business (or an officer thereof) is the director, partner, council member of a foundation or trustee in respect of a client structure.
2. Services provided to Private Trust Companies - The Working Group felt that there was merit in discussing Private Trust Companies, which are exempt from registration, and the services provided to them by regulated TCSPs, in further detail within this report. The TCSP work did include analysis of the PTC space, included later in this chapter.
3. Limited Services - including registered office and accommodation, correspondence or administrative address.
4. Other services provided An assessment of other ancillary services in respect of which data has been collected.

32. The inherent vulnerability of these services, and final vulnerability scores arising once the various control variables were derived using the WB Risk Model tool. The risk rating exercise was undertaken by each TCSP working group team members, which were then averaged to produce scores/ratings which were used in the model. The team completed the exercise twice, August 2019, and then following the World Bank workshop, which took place in November 2019. The scores/ratings used are those produced following the workshop, and the output from the risk tool (which did not differ materially from the previous rating exercise in August) produced the following results:

Table 9.2

Service Type Vulnerability Rating Score Trust & Company Services Inherent vulnerability Medium High 0.75

Final Vulnerability Medium High 0.61 Private Trust Company ServicesInherent vulnerability Medium High 0.63 Final Vulnerability Medium 0.54

Limited Services Inherent vulnerability Medium High 0.63 Final Vulnerability Medium 0.54

Other Services Inherent vulnerability Medium 0.55 Final Vulnerability Medium 0.49

33. The overall assessment of ML vulnerability for the TCSP sector is: 0.61 which is Medium High.
34. A breakdown was sought across all TCSP Sector slices as to the types of activities provided by TCSPs to their customers. Data collected for the period ended the 31 December 2018 shows the split of services as being:

108 67  https://www.jerseyfsc.org/media/2111/20180802-ps-sound-business-practice-policy.pdf

Table 9.3

Activities of the TCSP Trusts Jersey  Non-Jersey  Other -  Other -  Total

Companies Companies Jersey non-Jersey Number where management services 27,695 14,893 8,778 1,009 194 52,569

are provided

Limited Services only 6,394 526 160 78 7,158 Registered Office only 1,485 237 1,722 Director Service only 601 503 1,104 Trustee service only 7,158 7,158 Partner service only 5 7 12 Council member service only 12 4 16 Nominee service only  181 44 19 244 Accommodation, correspondence or  26 18 17 35 14 110

administrative services only

 hold mail service  2 13 6 0 0 21 TOTAL 35,062 23,448 9,849 1,458 297 70,114

35. The above data shows that whilst a number of different combinations of

services are provided by TCSPs to their clients, by far the majority of the activity undertaken is in respect of Management Services.

36. It is noted that there are differences in the number of customers to whom activities / services are provided with the data collected showing a total of 70,114, compared to the total number of customers declared as 65,110. The assumption

is that there may be an element of double counting by TCSPs, as well as the potential for there to be more than one TCSP providing services to a particular customer structure. One such example could be the provision of trustee services to a trust by one TCSP and director services to an underlying company or companies of the trust provided by one or more other TCSPs.

Trust and Company Services where management services are provided ( Management Services )

37. The assessment of the inherent vulnerability variables for the provision of management services is set out in the below table:

Table 9.4

Product Specific Input Variable Rating

Total Size/Volume High

Client Base Profile High Professional Secrecy/Client Privilege Light

Use of Agents Medium Low Anonymous Use of Product Not Available Difficulty in tracing the transaction records of the product Easy to Trace Existence of ML typologies on the abuse of the product Exist

Use of product in fraud or tax evasion schemes Exist

Non face to face use of the product Available

38. The TCSP sector in itself is sizeable, with some 65,110 underlying customers for which TCSPs have reported asset values of an estimated GBP 713bn. This client base is predominantly made up of customers who are not resident in Jersey, and as such by its very nature is considered high risk.
39. As discussed previously, the majority of customers receiving services from Jersey TCSPs, some 80%, receive management services incorporating trust services, company services, or a combination of both.
40. Whilst TCSPs do provide nominee services to their clients, and the register

of beneficial owners and controllers is not currently publicly available, the anonymous use of this product has been rated as not available as TCSPs have to adhere to the KYC requirements of the AML/CFT Framework, and the JFSC as Supervisor for AML purposes and Registrar of companies, has full access

to details of ownership and control of Jersey registered companies both at the point of incorporation and on an ongoing basis thereafter

41. At this stage there is no register of company directors, however at the time of publication the States Assembly had approved primary law introducing a register of Directors, and this information will be publicly available in the future.
42. Given its status as an IFC, the use of agents for the purposes of introducing new business to Jersey TCSPs is common-place, with the majority of introducers being located in the United Kingdom. It is the understanding of the Working Group however that in the main, TCSPs will manage their client relationships locally and will tend to meet with their clients on a face to face basis, and this

is seen as a value added part of the service for their clients. There may be occasions where, due to cultural reasons, it may not be possible to deal directly with the ultimate customer. The working group stated that this was common when dealing with clients from the Middle East and some UHNW customers that often utilise either gatekeepers or a family office to deal with matters relating

to their wealth. In these circumstances TCSPs will tend to have regular contact, including face to face, with the customers trusted advisors and will look to undertake CDD checks on these individuals as well as the ultimate customer so as to mitigate both AML/CFT and commercial risks.

43. Some businesses who form part of larger regulated groups, such as Bank- owned TCSPs, may depend upon the services of staff from group companies to interact directly with clients. Client on-boarding may be centralised in a group company based in another jurisdiction which may be unfamiliar with the Jersey CDD requirements and operate to a lower standard, however the working group concluded that this vulnerability will be reduced via the application of the JFSC s Outsourcing Policy by TCSPs which mitigates the risks in a number of ways.
44. The vulnerability associated with non-face to face relationships will be greatest where a TCSP: (i) has relied on a third party to apply CDD; (ii) deals with its customers through an intermediary; and (iii) that intermediary is unfamiliar with the TCSP s policies and procedures and the AML/CFT requirements applicable in Jersey.
45. The provisions of the AML/CFT framework allow certain reliance to be placed on third parties in respect of the identification of beneficial owners and controllers