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– R.58/2020
Contents
Chair s statement 06 09 02 Reflecting on 2019:
Director General's statement 10 13 03 2019 at a glance 14 15 04 2019 in detail 16 37
- Taking action to protect the public 20 23
- Building our understanding of risk 24 29
- Helping to build regulatory and 30 33
05 Developing our people 38 45 06 Finance and resources 46 49 07 Governance 50 61
08 Independent auditor s report to the
Chief Minister of the Government of Jersey 62 69
09 Financial statements 70 87 10 Appendices 88 93 11 Notes 94 95
Jersey Financial
Services Commission
Annual Report
2019
p.06 p.07
0 1.
Vision from the top:
p.08 p.09 Annual Report 2019
01 . Vision from the top:
Chair s statement E a pbveerycassiauonsoee at thn fthoer thye JFSC hkenior ww othrk ea s financial crisis arwprmoras fraote fraectionist, then the rules that goying. As the trade in goods becomes morgmented. It is in Jerseound global regulaty s intverory coherern it become ests for this ence e
not to be repeated in financial services. Global regulatory coherence serves us well. Clearly, Brexit unsettles the international framework in which
difference they make wwill be the long-twe operate do need te. Wo re do noemain close term consequences ot know at this point what o both the UK and f Brexit, but EU and continue to promote a strong consensus
around international standards. During 2019, we
supervised closely Industry plans for a disruptive At the time of writing my first statement as Chair of the Jersey Financial This is a challenging mandate to deliver. Made Brexit scenario, which did not emerge. We will
Services Commission (JFSC), local and international financial services centres more challenging by the environment in which continue to support the Government of Jersey in
we operate. its international discussions on the implications and communities across the world are experiencing unprecedented pressures of Brexit.
as every one of us contends with the outbreak of the coronavirus, Covid-19. There is continued focus on the role of
International Financial Centres such as Jersey. It was against this challenging backdrop in 2019 For Jersey and our regulated community, the pandemic has posed its own unique challenges as many As an Island, we understand the importance of that we set ourselves three strategic goals: to organisations, including our own, have been forced to move to home working for an indefinite period. adhering to the highest international standards build even more effective supervision; to embed While this has presented considerable operational issues for all, I have been immensely impressed by to safeguard our reputation. Those standards risk-focused choices throughout our work; and
the way in which the JFSC has responded to the threat, ensuring that business as usual continues, though are dynamic, not static. We, therefore, to strengthen our organisational resilience.
albeit remotely. need to evolve as a regulator in order to meet
those new higher standards. Whilst our three strategic goals look to the future, The far-reaching consequences of this pandemic for the Island and Industry are yet to be fully as our report on our activities in 2019 show, they determined, but I am confident that the organisation will weather this storm, as it has many others. In As a consequence, we are working closely are being embedded in the JFSC. Our activities are fact, one of our strategic goals for 2020 and beyond is to strengthen our medium-term organisational with the Government of Jersey and the financial grouped in five themes; looking at supervision, resilience. Nothing better illustrates our resilience than the positive way in which we have reacted and services industry to prepare for the next protecting the public, understanding risk, building adapted to this global crisis. MONEYVAL assessment scheduled for 2022. regulatory and registry standards and better
However, we know that the bar for achieving processes.
the gold standard is much higher than the last
assessment in 2015. Underpinning this are our people.
The businesses we regulate are changing too.
They are becoming more complex, driven by Making a difference
technology, globalisation and innovation. Their
A tough act to follow response to Covid-19 is evidence of this. A decade The JFSC has a demanding workload and rightly
ago, the Island s financial services businesses so. Together with the Government and businesses, It would be remiss of me to start my tenure In supervision, we seek to reduce conduct and would not have had the technology to relocate we play a key role in maintaining and enhancing
as Chair without thanking my predecessor, prudential risk as we authorise and supervise their operations from offices to remote working. the prosperity and reputation of the Island. As I Lord Eatwell. John has been a distinguished firms Globalisation means not just international have got to know the team at the JFSC over the
Commissioner and Chair. He has helped guide businesses, but also hand in hand with past year, I have been impressed by their
the JFSC through difficult times and led its In Registry, we seek to protect the Island s technology, more complex supply chains dedication and their commitment. Throughout response to the changing regulatory environment reputation when we check the beneficial and outsourcing. the organisation, everyone has a passion for their in which Jersey, its businesses and its regulator ownership and business purpose of firms work because they know the difference they operate. His thoughtful and engaging approach seeking to set up in Jersey Prior to the current crisis, as a regulator we make to the Island.
strengthened the JFSC s relationship with were placing more emphasis on our own and
the businesses we regulate, as well as the As an organisation, we seek to support the sector s operational resilience. Through our I started by thanking my predecessor for his Government and its agencies. He is a tough innovation in financial services to keep pace registry and regulatory functions, we see also contribution to shaping the JFSC and I want to end act to follow. with changes in technology, whilst at the same the opportunities and challenges that come from by thanking our people. They, too, have made the
time protecting the public innovation. It is undoubtedly the case that Jersey JFSC the strong and effective regulator it is today. will only thrive through innovation but, as we note But we are not complacent. We have an ambitious
A clear but difficult mandate Where firms let down their customers through elsewhere in our annual report, that cannot come agenda for 2020.
incompetence or malpractice, we will take at the expense of consumer protection. At the
When I joined the JFSC, I was struck by the very enforcement action where appropriate JFSC, we need to focus our resources to enable
clear mandate given to us by the guiding us to continue to deliver our mandate against
principles in the Commission Law. These Through our effective supervision we are able this backdrop. Mark Hoban
principles drive the JFSC. They motivate our to protect the Island s reputation and promote Chair
people to work on your behalf. the best economic interests of Jersey
A changing international landscape Whether through supervision, registry or
enforcement activities we aim to play our part When I spoke at the launch of our 2020 Business in countering financial crime. Plan earlier this year, I put our strategy in the
context of a changing international landscape.
I made the point that the consensus after the
p.10 p.11
02.
Reflecting on 2019:
Director General s statement
p.12 p.13 Annual Report 2019
02.
Reflecting on 2019: 2019 wAlongside all our oas a year when the JFSC also tther work, we undertook stook that ock. Lhas enjoooking back on 2019, the majority oyed a sustained period of pr f Industry osperity since Director General s much-needed prand planning that will ensurIsland rthe coming yemains true tears.ocess oo our guiding principles of challenge, prioritisation e our service to the ver the 200our funds has held rthan 300 Jerseemplogrown. Pryee numbers ha7-8 financial crisis. The Neofessional services firms hay Privecorate Fve been stable or had leunds and, holisticallyvels, thert Assee arve continued t Ve moralue ove , e f
statement 2019 was a year tstable or incrsimilar stabilityo win business, Jerseeasing deposits and ther, or growth, within the oy banks have experienced ther sece has been tors
for taking stock that we regulate.
Opportunities exist to invest in the right
and reflection infrastructure and to be smart during times that
are not so prosperous. We have already made progress with our change programme from
2015 to 2019, which saw marked improvements Developing our strategy for the period to 2023
While this annual report focuses on 2019, I must acknowledge what we are in our infrastructure, human resources and our
was not an easy process and I am grateful to
experiencing as we compile this document in 2020. As our newly appointed approach to risk-based supervision.
our Board of Commissioners, our excellent staff,
Chair rightly highlights, our operational resilience has certainly been tested and key external partners for their part in those But change never stops and 2019 saw the creation by the outbreak of Covid-19. constructive conversations that resulted in our of the next stage of our journey; our strategic
four-year strategic roadmap.
roadmap, which focuses our work under three priorities and will enhance our regulation and
A clear message that came out of our planning
In my mind, there has been no greater challenge for businesses and registry operations.
exercises was that Jersey s financial services
communities to overcome in recent times. Having said that, I feel that, as an industry holds an enviable position for an
organisation, we have responded in an appropriate and effective manner to the international finance centre. The economic build even more effective supervision pressures facing us. Our first concern has been minimising the human impact success of Jersey will always be subject to the embed risk-focused choices throughout
headwinds of the global economy and never more our work
as our people have contended with the need to take care of their families and than in 2020 has this been put to the test. Our
community. Equally, every business in Jersey has similarly focused on doing position as the Island s regulator is strong enough strengthen our organisational resilience. the right thing by their staff and clientele. to weather storms and support our community
during harder times. In 2019, we decided it was time for us to make
critical investments, even if some find the
This focus continues as we look to the next stage of managing the gradual approach to recovery, yet it inevitable call for increased funding unpopular.
is a testament to the integrity of Jersey s finance industry that amongst the management of very real A period of prosperity Indeed, today we are laying the foundations for human needs, regulated businesses have also worked to ensure continuity in the services they provide success. Foundations that are resilient to change. to their global client base. A significant part of Jersey s ability to respond to the shocks the world has While we know that the picture for the remainder
experienced is its pragmatic commitment to high standards. This is a practical benefit of Jersey s strong of 2020 presents significant challenges, the As you will see throughout this annual report, regulatory regime and the high quality people and businesses that operate here. stability and growth that Jersey s financial services the achievements of the JFSC during 2019 have
industry has experienced means we enter the delivered direct benefits to the Island. If 2019 was Jersey s enviable digital infrastructure has played a part in rapidly enabling the shift from face-to-face next stage from a position of strength. As with all a year of taking stock and reflection, it was business to virtual with minimal impact. For our part, not only have we worked to maintain the right level of jurisdictions, in the coming months and years, anything but idle. Our people, alongside the vast engagement between our Supervision team and regulated businesses, but we have also accelerated the Jersey will be put to the test. A key part of passing majority of our Industry, have demonstrated their progress of our work to digitise our Registry and, where possible, our other initiatives. that test will be ensuring that the Island continues absolute commitment to improving the work of
to lead the way in complying with international the JFSC, particularly when it comes to fighting Our readiness to respond during the events of early 2020 has been supported by the Government standards and the global transparency agenda. financial crime.
of Jersey s commitment to ensuring that the environment for doing business accommodates the
unexpected. Island agencies have pulled together to protect the environment in which our regulated This annual report demonstrates our
maintaining high standards not just when times are good, also when times are tough. By making these
businesses operate and this, in turn, reinforces the strength of the Island s collaborative approach to achievements in 2019 and our vision for the years
critical investments ahead. It therrembark on our strategulator that wefore will become be servegic journees as a litmus ty.y 2023, as west for the e The impact of the virus is already substantial. As the Island s regulator, we will work with our regulated
community tenjoyed for mano nay yvigatears.e our way out of this crisis and hopefully return to the prosperity this Island has we are laying the
foundations Martin MoloneDirector Generaly
Reflecting on 2019 for success.
This annual report details our many achievements during 2019. Over the year, the volume of activity across our Registry, Authorisations, Supervision and Enforcement teams was greater than ever and our work in policy development, as well as information technology and other aspects of our operations, grew
p14 p15 Annual Report 2019
03.
2019
At a glance _ Digitised 99% of registry transactions
Hosted more than 1,500 members of Industry at our outreach events
Gave more than £15,000 to £15,000 charitable causes thanks to
Continued to support the Government s Completed three on-site thematic staff fundraising
National Risk Assessment examinations across 42 businesses
Automated numerous registry and Processed huge volumes of data including: regulatory processes, including
Set standard for international finance online applications and submissions
3,231
centre regulation with top ratings from Group Incorporations and of International Finance Centre Supervisors registrations
ImplementComputchecks on rer sed Pegulatystem tolice National ed o conduct 292 Regulatory applications
businesses and individuals
44,033 Beneficial ownershipupdates Issued our first civil financial penalty tlocal financial firm for £381,000 o a Represented Jersey on the Receivenquiries comparGlobal Financial Innoed triple the number oed t vo 2016 and joined the ation Nef innotworkvation 35,000
FATF, MONEYVAL and registry fora 98 TBusiness vrust Companerificationsy international stage including IOSCO,
Suspicious activity Inguidance on riskCFT supervisionvit-based AML/ed to 83
co-author FATF reports
New enforcement cases
Secured access to UK markets ahead
of the UK leaving the European Union Set up dedicated Financial Crime Examination
Unit, recruiting eight staff and completing Carried out a comprehensive three visits Became an accredited ILM centre review of all our activities and
for leadership and management planned our strategic journey training for the next four years
Awarded positive rating for
Implemented first phase of our risk model the Exchange of Notes review
to focus our resources on the areas of of management of our central
greatest risk register of beneficial ownership Worked with the Government of and control Jersey on Registry Law and limited
liability companies
Hosted our second
Launched our new website to facilitate cyber-security masterclass better engagement and online interaction with global expert guest speakers
p.16 p.17 Annual Report 2019
04.
2019 in detail
p.18
04.1
Supervising with a focus on fighting
financial crime
Jersey s reputation is critically dependent on our ability to demonstrate, through our regulatory and registry activities, that we can effectively regulate and supervise businesses in the Island.
The strategic review that we undertook in 2019 reinforced this message. To improve our effectiveness, we have devoted more resources to financial crime, increased the number of examinations that we undertake, and laid the foundations for more risk-focused work through data collection and development of our risk model.
Creating a dedicated team
In 2019, we created the Financial Crime Examination Unit in order to prioritise specific examinations with a financial crime focus, formalising the specialist capability to address relevant threats.
By ensuring that our supervisory examinations team has the specialist skills and resources to conduct specific financial crime examinations, we have simultaneously enabled our wider programme of examinations to undertake more thematic reviews across all risks and address the ongoing conduct and prudential threats present in Industry.
p.19
Increasing our engagement with businesses
Over the course of the year, we significantly increased our interactions and engagement with regulated businesses.
Our supervisory teams devoted increased resource to examinations with a particular focus on the
role of the Money Laundering Reporting Officer the key person responsible for coordinating a business front-line fight. The output of our Supervision Examination Unit increased by 18% compared to 2018 and we completed three thematic examinations across 42 businesses with feedback published for outsourcing, property managers, letting agents and estate agents.
During 2019 we collected the second full year of supervisory risk data which supported our work on the Island s National Risk Assessment and powered the development of our risk model. The core purpose of the risk model is to ensure that the activities we undertake are focused on the areas of greatest risk of which terrorist financing and financial crime are the most significant.
Building on the rich dataset that we will continue to develop beyond 2019, we were able to complete the first phase of our risk model during the year, which will support our supervisory and enforcement teams in continuing to hone our focus on the financial crime threat.
Working together to tackle the threat
This work is a joint effort, both within the JFSC and with key Island agencies.
We saw the increased benefits of a closer working relationship between our Supervision and Registry teams to share common issues and escalate matters to our newly formed High Risk Business Committee, which considers applications that could potentially pose higher risk due to the nature of the business. As we progress our strategic roadmap, this relationship will intensify with the development of Registry supervision - adding additional oversight to our registry processes in our fight against financial crime.
We equally have our own role to play in spotting and reporting suspicious money laundering activity and, in 2019 alone, 35 members of our staff submitted 98 suspicious activity reports to the Government of Jersey s Joint Financial Crime Unit.
Authorisations and Cessations in 2019
Thematic examinations conducted on regulated businesses
Applications successfully processed
model examinations 381 Outsourcing MLRO* Reliance General MLRO*
17 effec14tiveness 11 12 effec20tiveness
Licences and CertifiedIn2vestment F8unds r1evoked Applications stillpending at end o37f 2019
Supervision Examination Unit Pooled Supervision Unit
* Money Laundering Reporting Officer
04.2 Taking action to
01 02 03 protect the public
Live cases
in 2019 Protecting consumers is at the heart of our work as the Island s financial
tools at our disposal including enforcement and education. This section sets 97
services regulator. In part, we do this through supervision, but we have other
out the work we undertook in 2019 in both of these areas.
04
Our Enforcement team witnesses
first-hand the emotional journey that
people go through when they learn Cases carried into 2020
51 that they have lost their money.
Targeting financial grooming
Sadly, the nature of the work we do means that Consequently, we have started analysing cases 07
we meet people who have lost some or all of their where we identify that an Islander has been
life savings. These investors have typically been financially groomed. We have researched victim
mis-sold high-risk investments by independent and perpetrator profiling, and identified red flags so
financial advisers. In most instances, they are we can spot this behaviour at its earliest stages.
vulnerable, elderly, and alone. The majority are not
financially sophisticated consumers, but ordinary During 2019, we continued to collaborate with
people, and the impact of losing their money is life the States of Jersey Police and the Jersey Fraud
changing; both financially and emotionally. Prevention Forum to build on our research and
we will continue this work in 2020. In particular, Notices compelling individuals presents unique challenges. Our Enforcement 18
In 2019, we identified a rogue independent financial we are looking at strengthening our regulatory to attend an interview adviser and managed to intervene just in time to rules and raising further public awareness, similar
prevent a pensioner from losing their life savings. to the campaign we did in early 2017 to highlight
Unfortunately, this case is one example of the investment mis-selling.
type of financial grooming that we are increasingly
seeing. For us, as the regulator, engaging with
victims once they have been skilfully groomed
team witnesses first-hand the emotional journey
that people go through when they learn that they
have lost their money.
65Cases carried ofrom 2018 ver 83Nein 2019w cases
05 06
5Requests for assistance from overseas regulators 129Formal Noissued tices
08 09
Public statements issued Calls to whistleblowing line
05 26
One of which prevented/ 16 of which led to active restricted the individual from investigations
Working with other agencies to protect Islanders
10
Suspicious activity reports received from JFCU
372
11
Raising awareness is one of the main ways we can help to reduce the risk of members of the public losing money. Our most effective work is in collaboration with other island and overseas agencies.
Through our on-going financial education programme and targeted public awareness campaigns, we already reach a large proportion of the local community and schools.
Jersey Fraud Prevention Forum World Investor Week
Increase in suspicious
2acto 2018tivity r3eports compar3%ed Since 2015, wmember ogrwith the primary aim oIn 2019, woup of local ae issued public wf the Jersee hagencies that have play Ff raising ayraud Pred a significant rarnings in our ev wve come tention Forum; a areness about ogeole as a ther For the thirIOSCOglobal campaign timportance oan arra s Wy of acord yd Inf intivities, including a public drear running, wvv estesto raise aor Wor education and preek - a wware supporteness about the eek long, ed o op-in tection.
frauds and scams to help protect the public.
One of 88 jurisdictions to take part, we arranged newsletters and the media after a local man lost session with the Channel Islands Financial
£1.2 million in a bitcoin scam and a number of other Ombudsman and the Office of the Information Islanders were conned out of more than £350,000 Commissioner, and an interactive competition in separate cases of romance fraud. to engage local primary school pupils.
At the end of the year, the Forum secured funding
from the Jersey s Criminal Offences Confiscation
Fund, which will enable it to continue its Taking action against misconduct valuable work helping to protect the Island
community for the next three years.
In addition to information shared by our supervisors, our intelligence function receives confidential leads from a variety of sources, including suspicious activity reports (SARs) submitted to the States of Jersey Police's Joint Financial Crimes Unit (JFCU).
In 2019, we received and successfully processed 372 SARs from the JFCU, up from 160 in 2018. We attribute this increase primarily to the revamped triage process we now have with the police and this reporting can only put our Supervision and Enforcement teams in a more informed position.
We verify the information we receive and, where appropriate, act upon it. In the most serious cases, vital intelligence has helped us to use our regulatory powers to protect some of the most vulnerable members of our community and to address significant business compliance failings that risk exposing Jersey to money laundering.
Using our powers to protect the public Educating our young people
During 2019, we imposed our first civil financial penalty on a regulated business. The £381,000 fine was
for a serious and material contravention of our Codes of Practice, in relation to conflicts of interest, JFSC schools programme
compliance and staff training on money laundering and record keeping. We simultaneously issued a
public statement setting out the background to the penalty and sharing the lessons learned from In addition to our supervisory and enforcement activity, during the year members of staff from across the this case. organisation continued to contribute
to our financial education work.
Over the course of the year, we also issued four directions preventing individuals from fulfilling specific
functions and directed a number of businesses to stop taking on any new business while they remediated Supplementing the local curriculum, and working with other local agencies, we delivered financial literacy regulatory shortcomings. classes to more than 3,000 secondary school pupils over the course of 2019.
We also issued five public statements and resolved four enforcement cases through settlement Our next step is to adapt and take our programme into primary schools so we engage at an early age with agreements, which is a proportionate solution when a regulated business has acknowledged its our youngest consumers.
shortcomings and made binding commitments to resolve them.
Building our Our risk-based
understanding approach informs how of risk wresoe allurocescate our finite
One of our strategic goals is to embed risk-focused choices in our work and, during 2019, we increased our focus in this area.
In the Governance section of this annual report, we set out the governance
changes the Board made during the year. In addition and as a precursor to 2019: Risk reports
risk-based supervision, we developed and launched a new risk model, which will help us assess where we should focus our supervisory resources.
We will use information from the National Risk Assessment and other Risk reports captured by Breaches of the regulatory Serious issues (unauthorised
our Supervision division framework business and client money in 611 245 29
supervisory data to drive our risk model. jeopardy) Developing our risk-based approach
Breakdown of
In order to deliver on our key purpose and aims, we have developed an enterprise risk management the risks:
framework, which covers the key risks around the macro-environment in which we operate, the
businesses we regulate and our operations. This risk framework helps us allocate our finite resources to
the highest areas of risk, balancing protecting the public and the reputation of Jersey as a financial centre
22% Our risk-based approach informs how we allocate resources to:
with the creation of a regulatory framework that facilitates the economic well-being of the Island.
develop and maintain a regulatory framework for financial services activity Conduct of business
controls
supervise regulated businesses to assess compliance with the regulatory framework
49%
take appropriate enforcement action where our requirements have been breached
operate the Registry.
Governance risk and
Re-evaluating our own risk 15Other%
compliance issues
As risk is a considerable component of our overall strategy, it was a natural step for us to establish a
Risk Committee in 2019, chaired initially by Mark Hoban and now by Tracy Garrad. This committee has
oversight of the JFSC s enterprise risk management framework and, during the course of the year, played
The Committee also undertook a full risk stocktake, simplified our enterprise risk management framework 1Financial crime4% a key governance role for the launch of our risk model and the general enhancements we made to our
internal risk reporting.
with revised risk taxonomy, reporting format and engagement cycle, and reviewed macro-environmental controls
and emerging risks to produce a consolidated list of risks that include operational and regulatory risks.
Developing our risk model
In 2019 we developed and launched the new risk allow good businesses to flourish while we can model; a tool to help us prioritise where to deploy better identify those firms with poor compliance our limited supervisory resources and demonstrate at an earlier stage. This demonstrates effective
a risk-based approach to supervising the financial remediation to improve standards overall. services industry in Jersey.
With the risk model now a tool for supervisors to When developing the model, we took into account use on a daily basis, we can put individual events the current thinking on international standards, into the context of everything else we know about particularly those relevant to the fight against a business and consistently assess them against financial crime. This is paramount if Jersey is our risk appetite.
to maintain its reputation as a well-regulated
international finance centre.
By using the risk model to ensure that we deploy our resources to the areas of greatest risk, we can regulate in a proportionate way. This will
Using data to drive our work
The National Risk Assessment and our own supervisory risk data collection exercises have been substantive undertakings for both the regulated community and ourselves. The data we have and continue to collect is vital for informing our approach to risk-based supervision and our financial crime examination process. We will use it to feed our risk model, which will allow us to build a better understanding of the Industry we regulate.
Police National Computer Sharing risk insights
A significant and successful piece of work was securing access to the Police National Computer in High-profile cyber security breaches occur the Security Awareness Special Interest Group November 2019. This allows us to carry out background checks to identify and prevent individuals, seemingly daily with corporations' reputations (SASIG), to brief local business leaders about the with certain criminal convictions, from entering or continuing to work in Jersey s finance industry. being seriously harmed and customers becoming real nature of cyber threat. International experts
increasingly untrusting. We are all on the front line from the National Cyber Security Centre (NCSC), Having direct access to this database will allow us to speed up our processing of principal and key and Jersey is no exception. the National Police Chiefs' Council (NPCC), and the person applications and conduct additional checks. International Airlines Group were among the guest
We do what we can to raise awareness among our speakers at the event.
This is a real achievement for the JFSC as it demonstrates our commitment to meeting international regulated community about cyber and information
standards and good practices such as those set by the Financial Action Task Force and the Group of security. In November, we hosted our second
International Finance Centre Supervisors. cyber security masterclass, in partnership with
Background checks using Police National Computer
2019 Total checks Positive matches November 62 7
D 2019ecember T5otal check8s Positi7ve matches
Cyber security
01 02 03
8Receivrbusinesseseports fred eight security om regulated 4Assistfour cincidentsyber security ed Industry with Assistthrplatform3ough UK ced with thryber intee r elligenceequests
04 05 06
20Receivquestionnairfrom the banking seced 20 e responses tor Held nine con-Industry9site meeybertings with -focused Hosteo2vf Industryent for 200+ members ed c0yber security 0
04.4 Helping to build Engaging internationally
regulatory and Our DirJerseIOSCOy and the JFSC on the int, working as Chairman oector General, Martin Moloneernational staf a special working y, representge at ed and wwherSwitze businesseserland and South Ae took part in se home rven banking colleges frica. egulators are in the UK, registry standards grEsand Eindustrytogeuxoup on the markchccessther tangxchange Commission in W, financial economists and rful worke o analyTraded Fshop hostse the riskeut risknds. Hs arising in re ed bs and how best tled y the Securities aashingt huegulatgeelation tly on wherors goo o e t RegistryWa centrGlobal standare have oe an intf excellence for our rernational rd setters and the inteputation for being egistries. ernational
manage them. This IOSCO work is on-going and is registry community consider Jersey to be in a
a key part of a wider IOSCO agenda to develop its leading position for our central register of
standards and supporting guidance to respond to beneficial ownership and control. During 2019,
growth and change in the funds industry across FATF explicitly recognised this in its newly Leading the way the globe. This is an example of where we are published guidance, highlighting the work of
contributing to developing global standards. the JFSC to develop good practices in this area.
In 2019, the JFSC was recognised for setting the standard for international finance centre regulation. In Speaking on emerging risks, our Director We have worked tirelessly to uphold that standard, the first evaluation of its kind by the Group of International Finance Centre Supervisors (GIFCS), we were General also took part in other events such as in particular by satisfying the Exchange of Notes awarded the top ratings for our trust company regulation. a closed-door workshop on emerging risks signed between the Jersey and UK Governments
organised by Harvard University, with key US and in 2016. This agreement is in place to ensure that As a founder member of the GIFCS, we felt it was important to lead the way and help set a standard for European regulators and asset management we keep our register accurate and up-to-date, future evaluations. Other jurisdictions are now able to use our evaluation to make changes to their own industry leaders. He was also a member of the and that we share highly sensitive information with regimes, which can only lead to higher standards of international regulation among other finance centres. MONEYVAL Strategy Review Group that worked trusted international law enforcement agencies We are committed to working with other jurisdictions to achieve this. out the approach the FATF-Style Regional Body/ and tax authorities on request. Following the first
Assessment Body will now take to expanding its mutual review of the Notes, we achieved a positive
critically important work over the next period. review in 2019, demonstrating that we are maintaining our exemplary standards.
Our Chief Adviser of Financial Crime, Hamish
Armstrong, took a leading role in the inaugural In late 2019, members of our Registry team
Focusing on fighting financial crime FATF Supervisors Forum, which aimed to identify attended a workshop in Rome, Italy, on beneficial
challenges and propose projects for the FATF to ownership and control.
deliver in relation to AML/CFT supervision held
As we have already highlighted in this annual As we seek to further enhance our supervisory by the new Chinese Presidency of FATF in Sanya, Our Registrar Julian Lamb is highly respected in
report, we have renewed focus on countering the approach to anti-money laundering and fighting China. Subsequently Hamish was asked to registry circles and is a member of a number of financial crime threat, particularly as we embark financial crime, during 2019 we continued to make co-chair the FATF working group to develop new Boards, including the International Association
on our four-year strategic roadmap. valued contributions to international standard guidance for supervisors in this key area. When of Commercial Administrators (IACA) and
setting. Particular accomplishments included the well-known Toronto Centre in Canada recently the European Business Registry Association
During 2019, in preparation for the Island s receiving positive references in a FATF beneficial compiled guidance for regulators across the globe (EBRA). Ensuring the Island is benchmarked and forthcoming assessment of its compliance with ownership best practice paper and undertaking on how to do risk-based supervision, it singled out positioned correctly, Julian represented Jersey
the 40 FATF Recommendations and 11 Immediate considerable work at and for the MONEYVAL the JFSC as an example of good practice. at other fora during the year.
Outcomes, we continued to devote substantial plenaries. This included our Chief Adviser for
resources to the National Risk Assessment, Financial Crime participating in MONEYVAL s As an organisation, we participated in four GIFCS
providing aggregated industry data to all the evaluation of Malta s AML/CFT regime. regulatory colleges in relation to trust company
14 project teams, chairing 11 of them and significantly businesses with a multi-jurisdictional presence
contributing to the work of the other three. We also Many of our enforcement investigations have
played a key role in supporting the Government connections to other jurisdictions so effective
with its project governance culminating with us collaboration with international regulators and law planning and overseeing the World Bank Workshops enforcement agencies is a critical component
in November. Overall, our work in this area has of our work. In 2019, we attended the first Crown
been an impressive achievement for the whole Dependencies Enforcement meeting and
organisation. We received positive feedback from cooperated with other international enforcement Connecting with our domestic stakeholders
the World Bank on our role. divisions on their investigations.
Closer to home, and in September 2019 we hosted Every year we engage with the local trade
three seminars in one day for circa 900 Industry associations and Jersey Finance to update and
practitioners to update them on our supervision raise awareness of key regulatory matters. 2019
and registry activities. The supervisory outreach was no exception with members of JFSC staff had a particular focus on fighting financial crime presenting at events held by STEP, the Jersey
and our new Financial Crime Examination Unit, Compliance Officers Association, the Jersey
while our Registry event, co-hosted with the Association of Directors and Officers, the Jersey
Government of Jersey, outlined the new Registry Association of Trust Companies and Jersey
Law and associated processes for Registry Finance.
We equally engaged regularly with the Jersey We also further developed our working relationship Bankers Association, Jersey Law Society, the with the Government of Jersey so that we could Jersey Funds Association and the Jersey Gambling complete the development of the Registry Law Association. We also presented at numerous and Limited Liability Companies legislative packs.
events arranged by Jersey law firms and attended JFSC Innovation Hub unique enquiries
a number of round- table and panel discussions During the year, a Registry Law Working Group
arranged by regulatory consultancy firms. was established with JFSC-wide representation.
Heading into 2020, the group had produced the
We held regular meetings with the Channel Islands third version of the law drafting for review, which 60
Financial Ombudsman and, through the Jersey was ready for the launch of the Government s
Consumer Council, we delivered several lunchtime public consultation. 50
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talks to members of the public about what good
financial advice looks like. 40
30
20 Collaborating on innovation 10 0
The work we do in the Fintech space really gained momentum in 2019, as we started to take an even more 2016 2017 2018 2019
proactive approach to working with local agencies and innovators. Consequently, we saw the number of
Fintech related enquiries we received during the year double, compared to 2018, and triple from 2016.
Innovators continue to face challenges in gaining traction in this globally regulated and complex sector and we are strongly committed to working with them to roll out viable and internationally credible products.
Having launched our dedicated Innovation Hub in 2014, we increased our activities during 2019 by starting Proposed types of activity by enquiry to engage with businesses at an earlier stage and working more closely with the Government, Digital
Jersey and Jersey Finance on emerging technologies. We helped to develop the Island s first Fintech
roadmap and our Fintech lead started to base herself at Digital Jersey for one day a month to offer
on-hand informal support to start-up businesses. This type of activity will continue in 2020 and beyond.
On the international stage, we joined the Global Financial Innovation Network, a group of 57 regulators and observers from around the world who are focussing on cross-border testing, regulatory technology and collaboration. 2019 saw us participate in a pilot for cross-border testing.
We continued to be involved in the IOSCO groups for Fintech and Initial Coin Offerings, having attended
two Fintech conferences and one Hackathon.
Research
Trading platform Regtech
Custody
Crowdfunding
Payments
Token Issuance
Other
Building better Going live with our new website
processes Our prbuilding our neorganisation. Delivereed in December 2019, the nevious ww websitebe wsitas 20 ye was a subears old so its rw wstantial prebsite is rojeceplacement wesponsivt, which re on all modern deequiras someed expertise frwhat ov vices, easer om inside and outside the due. Redesigning and y to navigate with
optimised search functionality, and properly integrated with our other JFSC systems.
Before designing and launching the site, we engaged heavily with our stakeholders to get their feedback. We will continue to interact with all users of the site and test new functionality with them to make sure we are continuously improving the website to meet their needs.
Our five-year change programme officially came to an end in 2019. One of its
main objectives was for the JFSC to become more e-enabled and achieve Handling data
enhanced information management by overhauling our processes.
Due to our commitments to support the National Risk Assessment and to undertake our own annual data
collection exercises, we now handle large volumes of data, in addition to the information housed in our We have made significant progress and laid some strong foundations so various registers.
we can continue to improve our operations and make it easier for all our
stakeholders to interact with us. Modernising our systems and digital capabilities was a key driver for this and 2019 was the culmination of a
number of large projects designed to automate and update our infrastructure. Modernising our Registry
We reviewed our effectiveness in rolling out technology over the period of At the time of compiling this report, our Registry Registered Office. This covered some 35,000
had made the recent move to completely digital businesses and means that our data is accurate our change programme. It is now evident that the capacity to implement and operations. This transition would not have been and up-to-date.
constantly develop technologically-enabled processes is a core skill for any possible without the foundations we had laid in
regulator and we are committed to using our recent experience to get even previous years, and in particular during 2019. Behind the scenes, we began the long-term work better, as we move on to the next stage of our evolution. By the end of year, we had digitised 99% of all tthro imprough our portal and the scoping prove customer access and experience ocess to
our outgoing transactions, such as certificates, comprehensively overhaul our services, which
correspondence and search results, and 90% will start to take shape in 2020 and beyond. of all incoming submissions such as forms and
document searches. Preparing for our 2020 Registry Programme of Work, we also did the groundwork in 2019 for the
Accepting documents online We handle huge volumes of data through the Register of Directors, Accuracy and Integrity, and
Registry, particularly for beneficial ownership the Limited Liability Companies Register, which and control information. In 2018 we held more places us in a good position to deliver our new
During the year, we successfully moved more of our registry and regulated operations online. By using our than 380,000 records which rose to in excess registry systems in the latter half of 2020.
portal, certain regulated businesses can now provide us with their audited financial statements online and of 410,000 in 2019. On average, our small team
registered trust companies can submit applications for non-domiciled non-fund structures or non-fund processes nearly 1,000 transactions per week for
Jersey unit trusts. Equally, banks were able to send us their Basel III updated prudential reporting through changes in owner and controller details.
the portal in 2019.
To ease the manual burden until we implement
completely new systems, we made further
enhancements to our systems in 2019. We also Launching our risk model completed a large data remediation project to
verify administrating trust companies based on
As covered earlier in this annual report, we successfully launched the first iteration of our risk model in late 2019. Following extensive scoping, planning, development and testing, its delivery was a considerable milestone and will shape the way we supervise moving forward, broadening our understanding of risk and allowing us to apply our finite resources where they are needed most.
Companies incorporated
2019 2018
686 629 881 844
195 314
529 331 507 257
2017 2016
502
2 hour fast track 887 1290
1 day 400 1229 2 day
3 day 214
561
5 day
Types of enquiries
Period 2018 2019
Companies incorporated 2,551 2,622 Companies dissolved 2,736 2,370 Total live entities 56,126 57,062 Total registrations 3,400 3,508 Total dissolutions 3,147 2,617 Changes on beneficial owners/controllers 43,792 47,819 Beneficial owners/controllers records 382,920 410,930 Total actions 395,000 407,298
Developing our people
Developing our people Average headcount across departments
Supervision Enforcement Registry
58.5 13.6 14.5
Attracting and fostering talent
We are a highly specialised organisation that requires distinct skill sets
among our workforce. Recognising that it is sometimes difficult to find the
very specific skills we need, we have adopted a grow our own approach, Policy & Risk Operations
and are building on our existing pool of expertise. 16.8 41.1 T1o 4tal 4avera.5ge
In 2019, we conducted 110 interviews for 40 vacancies
Long service milestones New joiners (15-25 years)
27 6
2Intpromoernal 0tions Qualifications 4achie1ved
Focusing on learning and development
Over the year, we focused heavily on our own development needs while helping them to achieve Learning and Development: 2019 highlights learning and development programme in order their full potential through on-the-job training,
to satisfy our growing skills requirements and to relevant courses and qualifications, and internal invest further in the professional development of and external secondments. our people.
To improve our leadership and management, we Career development
have embedded a coaching culture across the
JFSC, cemented by the organisation becoming During 2019, we reviewed how we help staff
an accredited Institute of Leadership and to develop their own skills and meet their own Management (ILM) centre. We have successfully ambitions. Having rolled out a comprehensive put a number of staff through leadership and Learning and Development framework, we asked coaching programmes / qualifications and we ourselves if we needed to go further. We decided have also launched our own in-house Manager s to set out a completely new career development Toolkit course to support our managers. framework that we will apply for the first time in
2020.
Our dedicated Learning and Development
Manager revamped our structured training This allows members of our staff to work out a programme for new joiners and introduced plan with us to develop their own skills and have bespoke development days to encourage their achievements acknowledged by us as an employees to further their professional employer. We are turning the JFSC into not only a qualifications. place to work but a place to develop. We want to
be an influence for good on the lives of our staff.
Our next focus is to consolidate all our learning and development activities into the JFSC Academy. This will allow us to keep prioritising our staff s
Giving staff the opportunity to commit to and fulfil their career ambitions in
a structured and supported way
Effective workplace coaching
Introduced programme to train in-house coaches
Exam success
Staff achieved more than 40 qualifications.
Seven completed the ICSA regulatory qualification
Essential leadership skills
Ran in-house programme with 11 managers achieving leadership qualification
Soft skills workshop
Delivered in-house sessions on handling difficult conversations, giving feedback, developing high performing teams and recruiting excellence
ILM Centre
Became an accredited Institute of Leadership and Management centre
Bespoke training
Delivered workshops on PEACE interviewing, presenting skills, and report writing
CIPD Awards
Shortlisted for Best Learning and Development Strategy
Technical learning programme
In-house subject matter experts delivered 18 bite-size briefings, 12 foundation modules and seven masterclass training sessions for colleagues
Health and well-being
Scheduled regular talks, activities and fitness classes for staff.
Promoting diversity and inclusion Recognition
Having established a dedicated forum in 2018, we were able to further prioritise and promote equality, 2019 was a positive year for the organisation as at the Citywealth Powerwomen Awards for 2019 diversity and inclusion in our workplace and culture. In 2019, we undertook a number of proactive and we were recognised for our continued efforts in in the Government, Regulatory and Non-Profit positive activities, including supporting International Diversity and Inclusion Week, carrying out a disability championing well-being, learning and development, Organisations category. Then in December, we audit, hosting a topical staff briefing presented by our Director General and hearing from Commissioner and diversity and inclusion. received the fantastic news that the JFSC had Monique O Keefe about women in leadership. We also produced a detailed calendar of events for 2020 been shortlisted for the 2020 awards for Company to promote diversity and inclusion. We were shortlisted for the Chartered Institute of the Year for female leadership and our Director
of Professional Development s award for Best of Supervision, Jill Britton, had been nominated for It has become very clear that to recruit, retain and develop good staff, an organisation like ours needs Learning and Development Strategy and we Woman of the Year. We are delighted to report that a strongly inclusive culture, where there is a focus on giving everyone the space to contribute. This were delighted to receive a commendation in in March 2020 Jill won and the organisation picked is a relentless focus of how we think about our work environment, for example facilitating charitable the 2019 Leaders in Wellbeing Awards for Best up silver in the Government, Regulatory and initiatives and encouraging staff to support each other, while making sure we leave no space for old Workplace Culture, Caring Employer of the Year, Non-Profit Organisations categories.
prejudices that might have the opposite impact. and Healthiest Workplace. Our Head of Human
Resources, Susan Russell, was also recognised as
our Wellbeing Ambassador.
Early in the year, one of our Commissioners, Annamaria Koerling, collected a silver award
Prioritising health, well-being and the environment
We value our people s views, particularly when it comes to what we are doing right and how we can improve. During 2019, we held dedicated workshops to get staff input and feedback to help develop our People Strategy.
A key area of focus for us is the health and well-being of our workforce and, as we strive to be an employer of choice, we endeavour to do all we can to ensure our employees are happy and healthy.
Over the course of the year, we offered free health checks for all staff, arranged talks with guest speakers on well-being, and trained up members of staff as mental health first aiders.
Our team of Staff Forum volunteers continued to be the voice of the workforce, collectively contributing ideas and planning activities and campaigns.
Celebrating success
Qualifications
Over the course of 2019, 40 members of our staff successfully achieved qualifications. This included exam success for seven employees who achieved the new regulatory qualification, the International Certificate in Financial Services Regulation, awarded by ICSA: The Governance Institute.
Mike Jones, our Director of Policy and Risk, completed the Harvard Business School General Management Programme and Tony Shiplee, one of our Heads of Unit in Supervision won the top student award for the STEP Certificate in International Trust Management.
Making a difference
A very strong aspect of the JFSC culture is our commitment to making a positive contribution to our community and the environment.
2019 exceeded all our expectations for fundraising. We raised more than £15,000 over the course of the year, smashing previous years totals, with money going to the JSPCA, Jersey Hospice Care, Jersey Mencap and other charitable causes.
We actively encourage our staff to support
charities and eco initiatives, and we facilitate this through our corporate social responsibility policy, which gives staff paid time off (up to two days each year) to dedicate to their chosen cause.
We have dedicated volunteers on our Staff Forum and Green Team who drive forward our fundraising initiatives and environmental projects.
Whether donating their time or their money, the goodwill of our staff never ceases to impress; it equally engenders a sense of unity and teamwork across the organisation.
Finance and resources
06. Finance and resources Costs
Total expenditure increased by 8% to £19.0 million Professional services costs principally comprised (2018: £17.6 million). IT technical specialists. This resource was primarily
of a temporary nature and involved in the design Staff costs are the most significant item of and development of new registry systems to expenditure with the average number of full-time deliver the Island s commitment to increased employees increasing during 2019, giving rise public access to registry data.
to a year on year cost increase of 8% including
inflation. The headcount increase was due Investigation and litigation costs were below
In 2019, we recorded a surplus of £338,000 (2018: £843,000) compared to a break even budget. principally to the creation of our new Financial the historical average. A number of regulatory
Our reserves increased to £6.7 million, still significantly short of our target level. Crime Examination Unit. enforcement cases are in hand but did not
necessitate significant third party costs during
Our finances remain under pressure, with a challenging period ahead of us, as set out in our 2020 The continued trend of increasing computer the year.
Business Plan. The surplus against budget arose principally from litigation and investigation costs systems costs, combined with depreciation and
being lower than budget by £385,000. amortisation costs, is due to the investments
in digital and automated processes. This
necessitates the use of leading technology
Regulatory fee income increased by 4% year on year due to inflation and stronger than expected funds including state of the art cyber defences given
sector applications. Registry fee income was similar to 2018 as the number of registered entities was the sensitive nature of the data we hold.
largely unchanged from previous years.
Total expenditure for the year was above budget, and 2018, predominantly due to increased staff numbers and professional services costs. Staff numbers increased as we resourced the new Financial Crime Examination Unit, whilst higher professional services costs were mostly related to the upgrade of the registry systems.
Financial position and forward look
We continued to make significant investments in our information systems as we sought to modernise
and improve digital capabilities both internally and for the benefit of external stakeholders. The net book Financial reserves improved during 2019 to Our costs structures are also changing as we
value of fixed assets increased to £6.9 million by year-end (2018: £5.3 million) with annual depreciation and £6.7 million (2018 £6.4 million). However, they make necessary and planned investments in amortisation increasing to £1.4m (2018: £0.9m). remain materially below our target level of £10 capital intensive undertakings to enhance our
million, being six month expenses and one year registry systems and implement Industry portals. of average litigation costs Both of these projects will bring substantial
benefits to all stakeholders who interact digitally
Our overall financial position remains under with us but initially require significant investment Income pressure and we expect this to continue as set of time and funds.
out in our 2020 Business Plan and our strategic
Regulatory income reached £18.9 million that the number of annual returns processed in roadmap. As set out in our strategic roadmap, the fees (2018: £18.2 million) following increases in both 2019 increased by only 1.4%. The total increase needed to fund our 2020 programme of work are supervisory and registry fee income. in registry income equated to 0.8%, given an The scope of our activities is ever-increasing in place. However, we plan to consult more widely
increased ratio of online to paper submissions, and can involve, for example, enhancing our on the structure of our fees base and ensure that Supervisory fee income rose by £0.6 million with online submissions being at a reduced rate. supervisory capabilities to tackle the ever- it is sustainable as it can be in the face of changing compared with 2018. Registry fee income evolving threat of money laundering or taking on and competitive markets and that we have increased more moderately, taking into account new regulatory roles, such as potential roles in sufficient resilience to deliver on our mission
relation to the resolution of financial institutions, and objectives in the medium term.
the regulation of lenders and pension providers.
Whilst such potential new activities may be
funded by additional income streams, they can attract significant upfront cost in advance of these additional income streams and where our supervisory capabilities have to be enhanced, this does involve significant increased costs.
Governance
07 . Governance Engagement with our workforce
The JFSC continues to observe the Corporate Governance Code issued by the UK and notes the changes regarding improving stakeholder engagement, including that of the workforce. We are considering ways in which we can incorporate these changes into our governance structure.
Several Commissioners spent time engaging with the JFSC workforce during 2019, including Commissioner
O Keefe who held a panel session regarding her experience of, and in, the finance industry.
Constitution
We are a statutory body established under Article 2 of the Financial Services
Commission (Jersey) Law 1998 (FSC(J)L) which provides that the JFSC shall Delegation of powers
be governed by a Board of Commissioners comprising persons with financial Our Board delegates its powers to the Director General and the Executive where possible to ensure services experience, regular users of such services and persons representing that the JFSC can act and respond without undue delay. However, in some areas, the power of the
the public interest. Commissioners ta tribunal for conto delegatested enfore is rcement cases. Consequently our Boarestricted by legislation. For example, our Board is more ind acvolvts ied in some arn a similar manner teas of o detail than the Board of a listed or private company. You can find a full explanation about our Delegation
of Powers on our website.
Accountability arrangements
We are an independent body, accountable to the public through the Island s elected representatives namely
the Minister of External Relations and the Government of Jersey. Our relationship with ministers is set out in a Composition of the Board and appointment of Commissioners
Memorandum of Understanding to ensure our independence, whilst facilitating effective dialogue and working
practices. Article 12 of the Commission Law provides that the Minister may give the JFSC general directions, Our Board currently consists of the Chair, Deputy Chair and eight other Commissioners, including the subject to significant safeguards. Director General. All of the Commissioners are considered to be independent with the exception of the
Director General. A chart of our current Commissioners is set out on pages 90-91 of this annual report In 2017, an Article 12 Direction was issued in order for the Exchange of Information on Beneficial Ownership (BO) and you can find further information on their skills, knowledge and experience on our website.
agreement with the UK to be implemented to allow the Island s Joint Financial Crimes Unit (JFCU) to access
our relevant information and databases on beneficial ownership. The intention is that the Direction will be
withdrawn once appropriate substitute legislation has been enacted.
We produce an annual business plan, and separately an annual report, to inform Members of the States Assembly and other stakeholders. We consult extensively on all proposals to create or amend laws and regulations, and we provide feedback statements to explain how we have taken responses into account.
Governance arrangements
Our Board of Commissioners believes that high quality effective governance arrangements are essential for well-run organisations. There are no comprehensive Codes or Standards for the governance of a financial services regulator, but the Board believes that the UK Corporate Governance Code (Code) is an appropriate benchmark. The Code requires Boards to comply with its high-level principles or explain how the objectives behind those high-level principles have been met through other arrangements.
We comply with the vast majority of the high-level principles in the Code. For example, we ensure there is a clear division of responsibility between the Chair and the Director General, that no individual has unfettered decision-making powers and that we have transparent procedures for the appointment and re-appointment of Commissioners.
Board activities
The majority of our Board s time in 2019 was spent on succession planning, strategy, recruitment, MONEYVAL and enforcement matters.
Recruitment of Chair
In mid-2018, our Board reviewed and reconfirmed the requirements for the role of Chair, in particular the continued necessity to appoint a Chair with strong links to UK and EU financial services policy makers at both political and executive levels.
Working with the Government and the Jersey Appointments Commission, it was agreed that we would search for a new off-island Commissioner who could be appointed future Chair, if supported by the Board, without incurring the costs of a further recruitment exercise.
Our Board was pleased to appoint Mark Hoban as Commissioner in late 2018 and delighted that in October 2019 the Commissioners were able to unanimously recommend to the Minister his appointment to replace Lord Eatwell, whose fixed term of office ended in April 2020.
Mark s first Chair's statement is set out on pages 08-09.
Recruitment of other Commissioners
Commissioners Ruetimann and Whelan complete their fixed terms in 2020. Our Board is seeking to recruit new Commissioners with the necessary skills and experience to complement those of the current Commissioners.
Commissioners Morris and Pichler were re-appointed for a final four-year term on 21 January 2020.
Recruitment of new Director General
Our Board spent significant time during the latter part of 2018 and early 2019 clarifying the role of the Director General, refining the job description and then conducting a search. Martin Moloney was appointed as our new Director General and an ex-officio Commissioner in February 2019. His Director General s report is set out on pages 12-13.
Strategy
Our Board, Director General and senior executives reconsidered the organisation s long-term strategy at an annual away day. We undertook a lot of work to understand our true capacity and what we could realistically undertake year on year. We published our four-year strategy as a formal document and presented it, with our annual business plan, to Industry in February 2020. Feedback received at our annual business plan event was positive.
Responding to MONEYVAL The committee has appropriate financial and other experience. Ian Wright is a Qualified chartered
accountant (FCA) and a former Senior Partner of Price waterhouseCoopers. Cyril Whelan is a Crown Planning for Jersey s next MONEYVAL evaluation dominated many of the Board meetings during the Advocate and currently Senior Consultant at Baker & Partners, Peter Pichler is a Qualified chartered year. The Island has historically been successful in implementing the FATF Recommendations as they accountant (FCA) and a former Finance Director.
have been developed. However, these FATF Recommendations and associated compliance assessment
methodology have been revised, necessitating difficult decisions about the extent and cost of resources The committee met three times during 2019 and all members were present, in person or by telephone, necessarily devoted to anti-money laundering and countering the financing of terrorism. Our Board for each meeting. The committee reviewed the management accounts, the annual capital and revenue reaffirmed its commitment to being best in class in meeting the demands of the FATF Recommendations budgets, and the draft annual reports and accounts. It recommended the annual report and accounts and the next assessment, recognising that the consequent staff and IT costs will be a significant and the auditors letter of representation to the Board for approval. It reconsidered the appointment additional burden. and independence of the auditors and reviewed their reports at the completion of their audit work. The
committee also discussed in detail a number of accounting issues including sums retained from the annual return fees not claimed by the Government.
Enforcement matters
Our Board spent significant time developing, consulting and implementing its methodology for determining the amount of civil penalties that it may apply for significant and material contraventions of the Codes of Practice. The principles are established in Law, but the methodology sets out how the JFSC plans to interpret those requirements to ensure that final amounts are proportionate and replicable on a consistent basis. Our Board has reserved the right to agree the amount of any penalty and has spent time considering the facts and then applying the principles to a significant case.
Our Board also spent significant time on a number of enforcement matters that arose through the application of the JFSC s Decision Making Process. These cases tend to be highly complex and involve the actions of regulated persons over a considerable period.
The Commissioners also focused their attention on improving the Board's consistency for dealing with applications to vary directions. From time to time, our Board issues directions on regulated businesses and individuals, which may restrict their activities or ability to apply for a job in the finance industry without our prior permission. Such individuals retain the right at any time to apply to the Board for a variation in those directions, for example where they have conducted a period of retraining or heightened supervision.
Activities of the Board Committees
Our Board delegates certain areas to Board Committees. During the year, the Commissioners agreed to the creation of a Risk Committee to increase the focus and support on the JFSC s risk management function.
No significant changes were made to the terms of reference of the Audit, Legal Proceedings, and Remuneration Committees.
Audit Committee
The Terms of Reference for the Audit Committee are available on our website. Its principal activities are to monitor the Internal Control Systems and work with the Executive and the External Auditors to ensure the quality of the management financial reports and the annual accounts.
In 2019, Commissioner Wright chaired the committee with members Crown Advocate Cyril Whelan and Peter Pichler.
Legal Proceedings Committee
The Legal Proceedings Committee terms of In 2019, the committee was Chaired by Lord reference are set out on our website. Its role is Eatwell and its members comprised Cyril Whelan to bring skills and experience to legal matters who is a Crown Advocate and Monique O Keefe and potential litigation arising from enforcement who previously practiced as a solicitor in England cases. The committee considers whether the and Australia.
JFSC will initiate or defend any legal proceedings
arising from any law under which the JFSC has The committee met once during 2019 and statutory powers. The committee takes into considered issues arising from a significant account potential legal costs when making enforcement case. All members were present decisions. for each meeting.
Remuneration Committee
The committee's Terms of Reference are available on our website. The committee s remit includes keeping under review the fees paid to the Chair and other commissioners and the pay and bonus arrangements for the Director General and Commission staff. Consistent with the UK Corporate Governance Code, the remit has extended in recent years to staff working conditions and welfare. Commissioner Annamaria Koerling is Chair of the Remuneration Committee, she is joined by Monique O Keefe and Markus Ruetimann as members of the committee.
The committee met on four occasions during the year and all committee members attended the scheduled meetings, apart from one member being unavailable for one meeting. Certain members of the Executive and the Head of Human Resources attended the meetings as required. The remit of the committee, being broad, encompasses a wide range of remuneration and Human Resources functions and regular discussions were had regarding remuneration strategy.
One of the committee's principal functions is to approve the staff salary and bonus allocations for the year and this process took place in November 2019. Remuneration and bonus payments are awarded strictly by reference to performance and the committee was pleased to note high performance ratings for several individuals.
Risk Committee Board effectiveness review
During 2019, the Chair identified that insufficient progress was being made with the development of our
The Board is committed to conducting regular Board effectiveness reviews. A review was not conducted thinking on risk and risk management. As a result, the Board agreed to form a Risk Committee. The terms
during 2019. However, the Board issued a tender in January 2020 for an effectiveness review to be
of reference of the Risk Committee are published on our website.
conducted by an external party soon after the appointment of the new Chair. We have awarded the review tender and interviews are underway.
Responsibility for risk and risk management remains with the full Board but the Risk Committee will
oversee and guide the Executive risk unit as the organisation develops its risk-based supervision
strategy. The Risk Committee advises and partners with the Executive to fulfil the Executive s accountability to the Board regarding risk management.
The committee was chaired initially by Mark Hoban and its members include Peter Pichler and Tracy Garrad, all with a wealth of experience in risk management. From 23 April 2020, the Committee has been chaired by Tracy Garrad.
The Risk Committee met five times in 2019 and consolidated the existing risk management framework, setting a strategic direction for the risk function, and working with the Executive on the governance and development of the new risk model.
Board meetings and attendance
Commissioners Board Audit Remuneration Risk LP** Lord Eatwell (Chair) - retired April 2020 7/7 1/1
Ian Wright ( Deputy Chair) 6/7 3/3
Tracy Garrad* 6/7* 5/5
Annamaria Koerling 6/7 4/4
Mark Hoban 7/7 5/5
Simon Morris 7/7
Monique O'Keefe 6/7 4/4 1/1 Peter Pichler 7/7 3/3 5/5 1/1 Markus Ruetimann 6/7 3/4
Cyril Whelan 7/7 3/3 1/1 Martin Moloney (Director General)* 7/7* 3/3 4/4* 4/5 1/1
* Note Tracy Garrad and Martin Moloney attended February 2019 Board meetings as observers only pending their appointments as Commissioner and Director General respectively
** Legal Proceedings
Our Board met seven times during 2019 to Regular discussions took place over the year with consider strategy, risk and regular business. the Government in terms of significant financial
services matters, the National Risk Assessment Our Board also met several times in 2019 to review and Brexit preparations.
and consider enforcement settlement cases and
contested matters. The Commissioners worked Board members consider carefully the potential closely with the Executive Board on formulating for conflicts of interest to arise and excuse
the methodology for civil penalty cases. themselves if any perceived or actual conflicts
are identified.
In addition, the Board and the Executive met for a strategy day and also participated in events with fellow regulators, Industry representatives and Government ministers.
Our Board reaffirmed its commitment to being best in class in meeting the demands
of the FATF Recommendations
Commissioner remuneration
Commissioners receive a fixed annual amount. No additional amounts are paid for participating or chairing subcommittees, dealing with enforcement cases or attending to other matters. Off-island Commissioners receive an uplift in remuneration to account for additional burden of travel time and taxes.
Fees paid to Commissioners were not increased in 2019. The existing annual amounts will be reviewed following the pending external governance effectiveness review.
2019 was a busy year for Commissioners, several of them were engaged in a number of enforcement and other matters, on behalf of the JFSC. The Board noted, and thanked, Commissioners who had devoted significant time to JFSC matters.
Fees paid to Commissioners during the year
2019 2018
£ £
Lord Eatwell of Stratton St. Margaret ( Retired as Chair 22 April 2020) 150,000 150,000
John Harris (Retired 10 July 2018) - - Martin Maloney (Appointed 28 February 2019) - -
Cyril Whelan 26,000 26,000
Ian Wright (Appointed Deputy Chair 29 November 2018) 33,350 26,740
Peter Pichler 26,000 26,000
Simon Morris 36,500 36,500 Markus Ruetimann 36,500 36,500 Annamaria Koerling 36,500 36,500 Monique O'Keefe (Appointed 9 November 2018) 26,000 2,167
Mark Hoban (Appointed 9 November 2018 - Assumed role of Chair 22 April 2020) 36,500 3,041
Tracy Garrad (Appointed 8 February 2019) 33,458
Michael De La Haye (Resigned 31 December 2018) 26,000
Debbie Prosser (Retired as Deputy Chair 29 November 2018) 30,571
440,809 400,019
Director General remuneration
Martin Moloney was not paid any fees in his capacity as a Commissioner but rather was paid as an Executive Director in his capacity as Director General. During the year, he received pro rata remuneration of £241,324 (fixed remuneration: £257,500, variable remuneration : £23,185).
Auditors
BDO LLP (the auditors) undertook the annual audit as approved by the Audit Committee in November 2019.
The audit partner met with the Audit Committee at the planning stage of the 2019 audit to agree scope and areas of focus, and at completion stage to discuss audit findings.
Responsibility for annual report and accounts
This annual report and accounts comply with the requirement in the FSC(J)L to produce an annual report to the Chief Minister and to be presented to the Members of the States no later than seven months after the end of the financial year.
The statutory obligations on the Commissioners are not extensive, requiring only that the annual accounts shall be prepared in accordance with generally accepted accounting principles and show a true and fair view of the surplus or deficit for the period and state of affairs at the period end. The Commissioners have elected to prepare the financial statements in accordance with Financial Reporting Standard 102 (FRS102); the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland.
Taking into account general practice, the Commissioners confirm that they are responsible for:
Keeping adequate accounting records sufficient to show the financial position within a reasonable period of time
Safeguarding the assets and for taking reasonable steps for the prevention and detection of fraud and other irregularities
Preparing the financial statements in accordance with applicable laws and regulations Selecting suitable accounting policies and applying them consistently Making judgements and accounting estimates that are reasonable and prudent
Preparing the accounts on a going concern basis unless it is inappropriate to presume that the JFSC will continue in business.
The Board has reviewed the effectiveness of the principal financial controls over its financial accounting systems with the external auditors.
The Commissioners have considered the financial statements on pages 70-87 and are satisfied that they show a true and fair view of the surplus for the year and the financial position of the JFSC at 31 December 2019.
The Commissioners have considered the annual report and, taken as a whole, confirm that they believe it to be fair, balanced and understandable.
For and on behalf of the Board of Commissioners
L Roe
Commission Secretary 5 June 2020
PO Box 267
14-18 Castle Street St Helier
Jersey
Channel Islands JE4 8TP
Independent auditor s report to the Chief
Minister of the
Independent auditor s Key audit matters
report to the Chief Kperoyf aeussdiiot nma al tjutedrgseamree ntht,owsee rme aotft mer os s tth saitg, ninifi ocuarn ce aTonuhdre sadeuir dmeictatotinft egthrsteh wfie neeraffeno acrditasdl sroe tfas ttsheeemd e ei nnng ttahsgeae scmoaenwntehtx ottel eoa,fm.
Minister of the icaonusr osrnrueoerstn asdteu upddee ir trti iosook fdf srt aha ounef dd fim)ni nwa act enelucir ddi ia aeel l n mstthtii afies tes emdt ma ,ot iesne nt cmstluseigdnonit nfi fi( gtwhc teah hne ott s h ee r provide a separate opinion on these matters.
and in forming our opinion thereon, and we do not which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit;
States of Jersey Key audit matter How wthe matte addrer in our auditessed
Opinion
We have audited the financial statements of the Reporting Standard in the United Kingdom and Jersey Financial Services Commission (the JFSC) Republic of Ireland (United Kingdom Generally
for the year ended 31 December 2019 which Accepted Accounting Practice).
comprise the income and expenditure account,
the statement of financial position, the statement In our opinion the financial statements:
of changes in accumulated reserves, the
statement of cash flows and notes to the financial give a true and fair view of the state of the statements, including a summary of significant JFSC s affairs as at 31 December 2019 and of its accounting policies. surplus for the year then ended;
The financial reporting framework that has been have been properly prepared in accordance applied in their preparation is applicable law and with United Kingdom Generally Accepted United Kingdom Accounting Standards, including Accounting Practice; and
Financial Reporting Standard 102 The Financial
have been prepared in accordance with
the requirements of the Financial Services Commission (Jersey) Law 1998.
Basis for opinion
We conducted our audit in accordance with of the financial statements in the UK, including International Standards on Auditing (UK) (ISAs the FRC s Ethical Standard, and we have fulfilled (UK)) and applicable law. Our responsibilities our other ethical responsibilities in accordance under those standards are further described in with these requirements. We believe that the
the Auditor s responsibilities for the audit of the audit evidence we have obtained is sufficient and financial statements section of our report. We are appropriate to provide a basis for our opinion. independent of the JFSC in accordance with the
ethical requirements that are relevant to our audit
Conclusions relating to going concern
We have nothing to report in respect of the the Commissioners have not disclosed in the following matters in relation to which the ISAs (UK) financial statements any identified material require us to report to you where: uncertainties that may cast significant doubt
about the JFSC s ability to continue to adopt the Commissioners use of the going concern the going concern basis of accounting for a
basis of accounting in the preparation of the period of at least twelve months from the date financial statements is not appropriate; or when the financial statements are authorised
for issue.
Income recognition existence For regulatory fees, we reconciled the revenue including cut-off in the financial statements to system generated
reports containing details of the licences held.
We tested these reports through performing Revenue consists of regulatory and registry fees, walk-throughs of the relevant systems.
for which annual fees run from different dates
throughout the year depending on the specific fee. We also tested on a sample basis that regulatory Because there is a judgment involved in the timing fees had been calculated in accordance with fee of recognition and the amount to recognise there notices published by the JFSC, agreed to payment is a risk that revenue recognition policies are not received, and was recognised in the appropriate appropriate, revenues do not exist, or that revenue period.
may be incorrectly recorded in the wrong year
resulting in a misstatement of revenue. We recalculated deferred income to check it
had been correctly accounted for in accordance The details of the accounting policies applied with the JFSC s accounting policies, and that the
during the year are given in note 1 to the financial appropriate proportion of fees had been deferred statements and details of regulatory and registry in accordance with those policies.
fee income are given in notes 4 and 5 to the
financial statements respectively. For registry fees, we tested on a sample basis
that fees had been calculated in accordance with fee notices published by the JFSC and agreed to payment received.
We recalculated annual return income based on the number of registered companies, by reference to published annual return rates and the number of registered entities.
We tested a sample of registry fee invoices and receipts processed specifically around year- end to check the related income had been recognised in the appropriate period.
Key observation:
Based on the work performed, nothing has come to our attention which would suggest that revenue has been recognised inappropriately or that it has not been presented in accordance with the JFSC s revenue recognition accounting policy and the accounting standards.
Completeness of income We tested the completeness of regulatory and
registry income throughout the year by selecting Given the number of income streams and the a sample of businesses from the regulatory and ad-hoc nature of some of these fees, there is a registry department systems, independent of the risk that certain fees had not been billed to the finance function, and agreeing these to supporting customer, or that the income had been recognised fee income, checking that the fees had been
in the incorrect period due to billing taking place recognised in the appropriate period.
significantly later than it should have.
We checked for any gaps in the Financing
The details of the accounting policies applied Statement numbers, which are expected to
during the year are given in note 1 to the financial be sequential.
statements and details of regulatory and registry
fee income are given in notes 4 and 5 to the We reviewed a sample of post year- end receipts financial statements respectively. and invoices to check that the related income had
been recognised in the appropriate period.
Key observation:
Based on the work performed, nothing has come to our attention which would suggest that revenue has been recognised inappropriately or that it has not been presented in accordance with the JFSC s revenue recognition accounting policy and the accounting standards.
Annual return fee surplus We considered the JFSC s paper on the accounting
treatment of the surplus to check that the
During the year ended 31 December 2017, an treatment adopted is in accordance with applicable increase in the annual return fee per entity led to accounting standards.
surplus funds being received by the JFSC. This
continued throughout 2018 and 2019. The surplus We reviewed correspondence on this matter,
funds have, on agreement with the States of Jersey, including independent confirmation from the
been retained by the JFSC, partly as an agreed States of Jersey of the position at year-end. recurring uplift in the JFSC s portion of the total
Annual Return fees, and otherwise allocated to We reviewed the accounting entries that had been various projects and expenditure, including the made and compared those to our independent development of the Register of Directors which expectations based on available and applicable took place during the year. supporting documentation.
A risk arose over the accounting treatment as a Key observation:
degree of judgement was involved to ensure that Based on the work performed, nothing has come the accounting treatment reflected the substance to our attention which would suggest that the
of the agreement with the Government of Jersey. Annual return fee surplus has been recognised
inappropriately or that it has not been presented The details of the accounting policies applied in accordance with the JFSC s relevant accounting during the year are given in note 1 to the financial policy and the accounting standards.
statements. Note 12 to the financial statements
provides further information on the treatment of
the surplus funds.
Our application of materiality
We apply the concept of materiality both in planning referenced within the annual report. Average
and performing our audit, and in evaluating the income was used to calculate materiality to ensure effect of misstatements. In order to reduce to any significant increases in fees or aspects of
an appropriately low level the probability that non-recurring income did not bring materiality to an any misstatements exceed materiality, we use a unacceptably high level.
lower materiality level, performance materiality,
to determine the extent of testing needed. We determined performance materiality to be Importantly, misstatements below these levels £230,000 (2018: £211,700). In determining this, we will not necessarily be evaluated as immaterial as based our assessment on a level of 73% (2018: 73%) we also take account of the nature of identified of materiality. In setting the level of performance misstatements, and the particular circumstances materiality we considered a number of factors
of their occurrence, when evaluating their effect including the expected total value of known and
on the financial statements. likely misstatements (based on past experience
and other factors) and management s attitude
We determined materiality for the financial towards proposed adjustments.
statements as a whole to be £315,000 (2018:
£290,000). In determining this in both the current We agreed with the Audit Committee that we
and prior year, we based our assessment on a would report to the Committee all audit differences level of 1.75% of average income over a 3 year in excess of £16,000 (2018: £14,500) as well as period. We used income as a benchmark as this differences below that threshold that, in our view,
is the primary Key Performance Indicator used to warranted reporting on qualitative grounds.
address the performance of the business by the
Commissioners, and is consistently
An overview of the scope of our audit
Our audit of the JFSC was undertaken to the materiality level specified above and was performed partly at the JFSC s office in Jersey and partly remotely due to the restrictions imposed as a result of the Covid-19 virus.
Our audit approach was developed by obtaining an understanding of the JFSC s activities and the overall control environment. Based on this understanding we assessed those aspects of the JFSC s transactions and balances which were most likely to give rise to a material misstatement and designed and performed audit procedures in response to that assessed risk.
Other information
The Commissioners are responsible for the other the other information is materially inconsistent information. The other information comprises the with the financial statements or our knowledge information included in the annual report, other obtained in the audit or otherwise appears to than the financial statements and our auditor s be materially misstated. If we identify such report thereon. Our opinion on the financial material inconsistencies or apparent material statements does not cover the other information misstatements, we are required to determine and, except to the extent otherwise explicitly whether there is a material misstatement in the stated in our report, we do not express any form of financial statements or a material misstatement assurance conclusion thereon. of the other information. If, based on the work
we have performed, we conclude that there is a In connection with our audit of the financial material misstatement of this other information, statements, our responsibility is to read the other we are required to report that fact. We have information and, in doing so, consider whether nothing to report in this regard.
p.68 p.69 Annual Report 2019
Responsibilities of Commissioners
As explained more fully in the Responsibility In preparing the financial statements, the
for annual report and accounts paragraph in Commissioners are responsible for assessing
the Annual Report, the Commissioners are the JFSC s ability to continue as a going concern, responsible for the preparation of the financial disclosing, as applicable, matters related to going statements and for being satisfied that they give concern and using the going concern basis of
a true and fair view, and for such internal control accounting unless the Commissioners either
as the Commissioners determine is necessary to intend to liquidate the JFSC or to cease operations, enable the preparation of financial statements or have no realistic alternative but to do so.
that are free from material misstatement,
whether due to fraud or error.
Auditor s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance A further description of our responsibilities for the about whether the financial statements as a whole audit of the financial statements is located on the are free from material misstatement, whether due Financial Reporting Council's website at
to fraud or error, and to issue an auditor s report www.frc.org.uk/auditorsresponsibilities. This
that includes our opinion. Reasonable assurance description forms part of our auditor s report.
is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement
when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Use of our report
This report is made solely to the Chief Minister and for no other purpose. To the fullest extent
in accordance with Article 21(3) of the Financial permitted by law, we do not accept or assume Services Commission (Jersey) Law 1998. Our responsibility to anyone other than the JFSC and audit work has been undertaken so that we might the Chief Minister, for our audit work, for this state to the Chief Minister those matters we are report, or for the opinions we have formed. required to state to them in an auditor s report
BDO LLP 11 June 2020
Chartered Accountants
Bristol BDO LLP is a limited liability partnership registered United Kingdom in England and Wales (with registered number OC305127).
p.70 p.71 Annual Report 2019
09.
Financial statements
Financial statements
Income and expenditure account Statement of financial position as at 31 December 2019 For the year ended 31 December 2019
2019 2018 2019 2019 2018 2018 Note £'000 £'000 Note £'000 £'000 £'000 £'000
Regulatory income Fixed assets
Regulatory fee income 4 14,428 13,815 Intangible assets 9 6,086 4,697 Registry fee income 5 4,429 4,396 Tangible fixed assets 10 844 621
6,930 5,318 Total regulatory income 18,857 18,211
Current assets
Other income 6 447 194
Trade receivables 417 322
Interest income 60 41
Sundry debtors 52 181
Total income 19,364 18,446 Prepayments 1,128 1,087
Cash and bank balances 11 11,404 9,515
Expenses
13,001 11,105 Staff costs 7 (12,811) (11,837)
Computer systems (1,498) (1,549) Total assets 19,931 16,423 Premises costs (869) (845)
Creditors - amounts falling due within one year
Professional services (937) (956)
Fee income received in advance 6,583 5,903
Investigation and litigation (215) (373)
Creditors 12 6,133 3,656
Other operating costs (822) (730)
Provisions 13 157 183
Depreciation, amortisation and impairments (1,356) (887)
12,873 9,742 Staff learning and development (275) (247)
Travel costs (243) (179) Total assets less current liabilities 7,058 6,681 Total expenses (19,026) (17,603) Creditors - amounts falling due after one year
Provisions 13 366 327 Surplus/(Deficit) for the year 8 338 (843 )
Total assets less total liabilities 6,692 6,354
Represented by
Accumulated reserves 6,692 6,354
The notes on pages 75 to 87 form an integral part of the financial statements.
The financial statements on pages 70 to 87 were approved by the Board of Commissioners on 5 June 2020, and signed on its behalf by:
All the items dealt with in arriving at the net surplus/(deficit) relate to continuing operations.
There are no recognised gains and losses in the current and preceding year other than those included in the net Mark Hoban Martin Moloney surplus/(deficit) above, therefore no separate statement of other comprehensive income and expenditure has Chair Director General been presented.
The notes on pages 75 to 87 form an integral part of the financial statements.
Notes to the
Statement of changes in accumulated reserves £'000 Financial Statements
Accumulated reserves
Balance at 1 January 2018 5,511 For the year ended 31 December 2019 Deficit for the year 843
Balance at 31 December 2018 6,354
Balance at 1 January 2019 6,354
Surplus for the year 338
- Significant accounting policies
Balance at 31 December 2019 6,692
Basis of preparation
The financial statements have been prepared in statements are set out below. These policies have
accordance with FRS 102, the Financial Reporting been consistently applied to both accounting Statement of cash flows Standard applicable in the United Kingdom and years presented.
the Republic of Ireland.
For the year ended 31 December 2019 The financial statements contain information
The financial statements are prepared on a about the JFSC as an individual entity, and do not 2019 2018 going concern basis, under the historical cost include consolidated financial information as the
Note convention. As set out in note 2(b) the board has parent of a group. The JFSC is exempt from the
£'000 £'000
given additional consideration to the use of the requirement to prepare consolidated financial Cash flows from operating activities going concern basis given the impact of COVID 19. statements because the inclusion of its subsidiary
is not material for the purpose of giving a true and Surplus for the year 338 843
The principal significant accounting policies fair view.
Interest receivable (60) (41) applied in the preparation of the financial
Depreciation, amortisation and impairment charges 9,10 1,356 887
Utilisation of provision (62) (111) Income
Movements in provisions 75 108
Deferred rental incentive (26) 6 Income is accounted for on an accruals basis. assistance are recognised when the JFSC has (Increase)/decrease in debtors and prepayments (7) 204 Regulatory and Registry annual fees received are satisfied all of the conditions necessary for the
recognised as income on a straight-line basis funds to be released. Amounts received are Increase in income received in advance 680 462 over the relevant period. Annual registry fees recognised as income in the period in which the
Increase in creditors 2,503 23 and revenue from the operation of Government related costs are incurred or in the periods in
of Jersey registers include only the share of that which any related fixed asset is depreciated
Net cash generated from operating activities 4,797 2,381
income attributable to the JFSC. or impaired.
Cash flow from investing activities Annual return fees are deferred in the first Civil penalties are recognised when the penalty Interest received 60 41 instance where the JFSC has agreed with the has been agreed with the regulated entity and
Purchases of tangible and intangible fixed assets 9,10 (2,968) (1,793) Government of Jersey that amounts received are where it has the ability to settle the amount
to be segregated and to be applied to specific involved. Income from civil penalties is deferred Net cash used in investing activities (2,908) (1,752) Registry or MONEYVAL AML projects. Amounts and is released to income in the year in which the
deferred are released to income in the period amount of fees to be paid by Industry is reduced Net increase in cash and bank equivalents 1,889 629 in which the related costs are incurred or in due to the penalty having been received.
the periods in which any related fixed asset is
Cash and bank equivalents at 1 January 9,515 8,886 depreciated or impaired. Recoveries of enforcement costs are accounted for only when they have been agreed with the
Cash and bank equivalents at 31 December 11 11,404 9,515 Revenue from the rendering of services, including regulated entity or awarded by the Royal Court
the design, development and operation of the and it has become virtually certain that they will Cash and bank balances consist of: Government of Jersey Registers, is recognised be received.
based on the stage of completion method. Where
Cash at bank and in hand 297 283 uncertainty exists in relation to the stage of Interest received on bank deposits is accrued completion, revenue recognition is limited to the on a time basis by reference to the principal
Short term deposits 11,107 9,232 extent to which costs have been incurred. outstanding and the effective interest rate
applicable. Sundry income is recognised
Cash and bank balances 11 11,404 9,515 Amounts received from the Government of on receipt.
Jersey in the form of grants and other financial
The notes on pages 75 to 87 form an integral part of the financial statements.
Expenses Intangible assets
All expenses are accounted for on an accruals basis. Intangible assets are stated at historical cost less Gains and losses on disposal of intangible assets
accumulated amortisation and any impairment are determined by comparing any proceeds with losses. Historical cost includes expenditure that their carrying amount and are recognised in the
is directly attributable to the development of the income and expenditure account.
intangible asset. Subsequent maintenance and
Foreign currency support costs are charged to the income and In the requirements gathering phase of an internal
expenditure account during the period in which systems development project, it is not possible to
they are incurred. demonstrate that the project will generate future Foreign currency balances are translated to date of the transaction. Profits and losses on
economic benefits and hence all expenditure Sterling at the rate of exchange ruling on the last foreign exchange are included in the income and
Amortisation of intangible assets is calculated so is recognised as an expense when incurred. business day in the financial period. expenditure account.
as to write off their cost on a straight-line basis Systems developments are recognised as fixed
over their expected useful lives. assets from the development phase of a project if, Foreign currency transactions are translated
and only if, certain specific criteria are met in order into Sterling at the rate of exchange ruling on the
The estimated useful lives used for this to demonstrate the system will generate probable purpose are: future economic benefits and that its cost can be
reliably measured. If it is not possible to distinguish Computer software Up to 7 years between the requirements gathering phase and
the development phase, the expenditure is treated Investigation and litigation costs as if it were all incurred in the requirements
The cost of computer software in respect of major gathering phase only.
Investigation and litigation costs are recognised as incurred. No provision is made for the cost of systems is capitalised within intangible assets. All
completing current work unless a present obligation exists at the balance sheet date. other computer software costs are expensed as
incurred. Computer systems under development
are not amortised until the system has been
completed and is ready for use.
Cash and bank balances
Cash and bank balances comprise cash in hand, deposits and other short-term liquid investments that Impairment
are readily convertible to a known amount of cash, are subject to an insignificant risk of changes in value,
controlled by the organisation and to which the organisation attaches equitable ownership. Assets that are subject to depreciation and and supervisory income are separately identifiable
amortisation are assessed at each reporting and assets are allocated between these cash
date to determine whether there is any indication flows based on their operational application.
that the assets are impaired. Where there is
an indication that an asset may be impaired, Non-financial assets that have been previously
the carrying value of the asset is tested for impaired are reviewed at each reporting date to Government registers impairment. An impairment loss is recognised for assess whether there is any indication that the
the amount by which the asset s carrying amount impairment losses recognised in prior periods
A financial asset is recognised in relation to the cost of design, development and operation of exceeds its recoverable amount. The recoverable may no longer exist or may have decreased. Government registers on an accruals basis, provided such costs are contractually recoverable. amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes
of assessing impairment, assets are grouped at
the lowest levels for which there are separately
identifiable cash flows. Cash flows from registry
Tangible fixed assets
Fixed assets are stated at historical cost less The estimated useful lives used for this purpose are:
accumulated depreciation and any impairment
losses. Historical cost includes expenditure that Motor vehicles 3 years Leases
is directly attributable to bringing the asset to Office furniture, fittings
the location and condition necessary for it to be and equipment 3 to 5 years Rent payable under operating leases is charged For leases entered into after the date of adoption capable of operating in the manner intended by
management. Computer equipment 3 to 5 years to the income and expenditure account on a of FRS 102, lease incentives received to enter into
Leasehold improvements Over the lease period straight-line basis over the term of the lease. income and expenditure account over the full term Repairs and maintenance are charged to the
operating lease agreements are released to the
The JFSC has taken advantage of the exemption of the lease.
income and expenditure account during the
available on transition to FRS 102, which allows
period in which they are incurred. Gains and losses on disposals of fixed assets are
lease incentives on leases entered into before the
determined by comparing the proceeds with the
date of transition to continue to be released to the
Depreciation of fixed assets is calculated so as to carrying amount and are recognised in the income
income and expenditure account on a straight-line
write off their cost less estimated residual value and expenditure account.
basis over the period to the first lease break.
on a straight-line basis over their expected useful
lives.
Pension Costs Provision for long leave entitlements
The costs of defined contribution pension schemes are accounted for on an accruals basis. The costs The balance of the provision for long leave has been determined based on a range of estimates regarding of annual contributions payable to defined benefit schemes operated by the Government of Jersey are the probability that the related leave entitlement will vest and be taken. This represents management s accounted for on an accruals basis because the JFSC is unable to obtain the information necessary to best estimate regarding the expected future cash flows related to long leave entitlements.
apply defined benefit scheme accounting (see note 16).
Provision for premises reinstatement
Annual leave pay accrual
The balance of the provision for premises reinstatement has been determined based on the applicable
A liability is recognised to the extent of any untaken annual leave entitlement which has accrued at square footage of leased premises and the rate per square foot for such reinstatement works published the balance sheet date and can be carried forward to future periods. The liability is measured at the by the Royal Institute of Chartered Surveyors. The provision is adjusted annually based on movements in undiscounted cost of untaken annual leave that has accrued up to the balance sheet date. the published rate per square foot. This represents management s best estimate regarding the expected
future cash flows related to these costs. The balance is discounted if the effect would be material.
Provision for long leave entitlements Useful lives and residual values
Provision is made for the accrued entitlements to long leave as at the balance sheet date, even when
such entitlements may not yet have vested. The provision is increased each year as additional Fixed assets are depreciated over their expected useful lives, taking into account residual values where entitlements are earned. The provision is decreased when long leave entitlements are taken and appropriate. The actual lives and residual values are assessed annually and may vary depending on a when such entitlements expire. number of factors. In re-assessing useful lives and residual values, a wide range of factors are taken into
account. Changes in these assessments are accounted for prospectively and therefore only have
The provision represents management s best estimate of the amounts expected to be paid out, taking a financial effect on current and future periods.
into account long leave entitlements that may be lost when an employee leaves the employment of the
JFSC. The provision is discounted if the effect would be material.
Provision for premises reinstatement b) Going concern
Provision is made for the expected costs of costs of reinstatement and discount rates where Governments and corporates have been taking extraordinary measures to deal with the threat to reinstating office premises to their original applicable. The provision will be reduced when life posed by COVID 19. Governments have found it necessary to provide finance for a wide range condition upon the termination of existing related costs are incurred in future periods. of businesses that have ceased trading or had their trading prospects significantly impaired. Many lease agreements. The balance represents Provisions for premises reinstatement costs are businesses have closed and may not be capable of being restarted leading to impairments and write management s best estimate of amounts to be discounted if the effect would be material. offs. The JFSC has to keep operating, subject to constraints, including staff working from home.
paid for reinstatement. The provision is assessed
each year based on changes in the expected The Board has reviewed in detail the plans put into place by the executive to manage current operations
and revised forecasts for 2020 and 2021 using a base and a stressed case. Under the base case income for 2021 would be reduced on average by 10%, and under the stressed case by on average 20%, due to business and funds that may close together with further industry consolidation reducing the number of regulated entities. Should such circumstances arise the revised forecast for 2020 and 2021 envisages a balanced budget can be achieved through a planned reduction in activity and deferral of projects.
- a) Critical accounting judgements and key sources of estimation uncertainty
The Board has therefore concluded that the JFSC should be able to continue as a going concern and that Estimates and judgements are continually evaluated and are based on historical experience and other it is appropriate to prepare the financial statements on that basis.
factors, including expectations of future events that are believed to be reasonable under
the circumstances.
Key accounting estimates and assumptions
- Taxation
Management is required to make estimates and assumptions concerning the future. The resulting
accounting estimates may not equal the actual outcomes. The estimates and assumptions that have a The JFSC is exempt from the provisions of the Income Tax (Jersey) Law 1961, as amended. significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are outlined next.
- Regulatory fee income 06. Other income
2019 2018 2019 2018 £'000 £'000 £'000 £'000
Banking 1,817 1,775 Investigation and litigation recoveries* 240 - Funds 6,499 6,130 Financial contribution income 195 185 Insurance Companies 863 908 Sundry income 12 9 General Insurance Mediation 149 148 447 194 Investment Business 1,404 1,337
Trust Companies 2,935 2,788 * As part of its regulatory responsibilities, the JFSC carries out investigations and enters into legal actions from time to time,
the costs of which may be significant. In a few cases, some or all of the JFSC s costs may be recoverable.
Designated Non-Financial Businesses and Professions 711 675
Recognised Auditors 30 33
Money Service Business 20 21 07. Staff costs
14,428 13,815
2019 2018 £'000 £'000
Staff salaries 10,453 9,653 Commissioners' fees 404 400
- Registry fee income Social security contributions 503 447 Registry fees arise from the operation of the Companies Registry, the Business Names Registry, the Pension contributions 837 771
Registry of Limited Partnerships, the Registry of Limited Liability Partnerships, and the Security Interests Permanent health and medical insurance 422 360 Register.
Other staff costs 152 135 Registry fees include annual return fees. The amount of the annual return fees payable to the Registry Long leave provision 32 57
includes amounts collected on behalf of and remitted to the Government of Jersey. Annual leave pay accrual 8 14
12,811 11,837
2019 2018 Contributions to staff pension schemes are payable monthly to pension scheme administrators. £'000 £'000 No contributions (2018: £NIL) were payable to the schemes at year end.
The average number of staff employed during the year was 144 (2018: 131).
Total annual returns fee income 7,004 6,905
This is apportioned as follows: 08. Surplus for the year
Collected on behalf of Government of Jersey 3,889 3,838
Surplus for the year is stated after including the below:
Collected by the JFSC 2,011 1,993
Segregated portion as agreed with
the Government of Jersey* 1,104 1,074
2019 2018 7,004 6,905
£'000 £'000
Annual return fee income collected by the JFSC 2,011 1,993 Depreciation of tangible fixed assets (note 10) (272) (273) Other Registry income 2,418 2,403 Amortisation of intangible assets (note 9) (1,083) (614) Total Registry income 4,429 4,396 Foreign exchange differences 15 7
Contributions to employee pension schemes (refer to note 16) (837) (771)
The number of annual returns received during the year was: 2019 2018 Operating lease expenditure (566) (566) Annual returns received 33,818 33,373 Audit fees * (45) (32) Internal Audit fees* (4) -
* See note 12 for further information * Total fees paid to the JFSC s auditors include Audit fees and Internal Audit fees only.
09. Intangible assets 11. Cash and bank balances
Computer systems Computer 2019 2018 under development systems Total
£'000 £'000 £'000 £'000 £'000
Current accounts 296 281 Cost
Deposit accounts 11,107 9,232 Balance at 1 January 2019 1,193 7,424 8,617
Petty cash 1 2 Additions 2,632 - 2,632
Completed computer systems (1,875) 1,875 - Cash and cash equivalents at bank 11,404 9,515 Transfer to tangible fixed assets - (160) (160)
Disposals - - - The JFSC s accumulated financial reserves less the funds invested in fixed assets and working capital
are invested in bank deposit accounts. In order to mitigate the credit risk, these deposit accounts are
At 31 December 2019 1,950 9,139 11,089
maintained with five different banks.
Amortisation
Balance at 1 January 2019 - (3,920) (3,920) Included in deposit account balances are funds amounting to £2,822,665 (2018: £1,718,565) which have
been identified as relating to deferred registry fees (see note 12).
Charge for the year - (1,083) (1,083)
Disposals - - -
At 31 December 2019 - (5,003) (5,003)
Net book value at 31 December 2019 1,950 4,136 6,086
12. Creditors
Net book value at 31 December 2018 1,193 3,504 4,697
2019 2018 The principal eupgrades and further dexpenditurve during the yelopment of the rear relationship manaelated to core information sgement systyem rstems relateplacements and ed to risk based £'000 £'000
supervision and expansion of services which will become accessible through the JFSC portal. Trade creditors 1,640 391 Accruals 787 958
Deferred rental incentive 62 88
10. Tangible fixed assets
Financial contributions 162 358 Deferred Registry fees* 2,823 1,719
Deferred Industry fees** 381 - Office furniture, Leasehold Computer Motor Sundry creditors 278 142
fittings & equipment improvements equipment vehicles Total
£'000 £'000 £'000 £'000 £'000 6,133 3,656
Cost
Balance at 1 January 2019 607 311 1,375 13 2,306
Additions 33 - 303 - 336 * It was agreed with the Government of Jersey that a portion of the additional registry fees charged, with Transfer from intangible assets - - 160 - 160 effect from 1 January 2017, be segregated and used for certain current and future enhancements to the
Registry and its systems.
Disposals - - - - -
At 31 December 2019 640 311 1,838 13 2,802 If the amounts are not used for this purpose they are likely to become payable to the Government by way
of adjustment to the Companies (Annual Returns Additional Charge) (Jersey) Regulations 2008 or similar arrangements.
Accumulated depreciation
Balance at 1 January 2019 (556) (103) (1,020) (7) (1,686) Subsequent to the year end, it was further agreed with the Government of Jersey that the amount
segregated may be utilised for 2020 Registry projects and for start-up costs of the Financial Crime Charge for the year (25) (60) (183) (4) (273) Examination Unit.
Disposals - - - - -
** Deferred Industry fees arise from civil penalties received during the year. The Law requires the
At 31 December 2019 (581) (163) (1,203) (11) (1,958)
amount to be credited to Industry by way of reductions in Industry fees that would otherwise be charged in future years.
Net book value at 31 December 2019 59 148 635 2 844 Net book value at 31 December 2018 51 209 355 6 621
13. Provisions 14. Commitments under operating leases
The JFSC had minimum lease payments under non-cancellable operating leases as set out below:
Provision for Reinstatement 2019 2018
long leave Provision Total
£'000 £'000 £'000 £'000 £'000
Not later than 1 year 592 592 Balance at 1 January 2018 269 244 513
Later than 1 year but not later than 5 years 834 1,422 Amounts provided for during the year 71 37 108
Reversal of unused provision - - - 1,426 2,014 Utilised during the year (111) - (111)
Balance at 31 December 2018 229 281 510 Rentals payable under this operating lease are subject to periodic review and are based on market rates.
The most recent rent review was agreed during 2017 and the resulting rental increase was effective from
Amounts provided for during the year 51 44 95 May 2016. The next rent review is due to commence in 2020.
Reversal of unused provision (20) - (20)
Utilised during the year (62) - (62)
Balance at 31 December 2019 198 325 523
Falling due within one year 157 - 157
Falling due after one year 41 325 366 15. Financial instruments
198 325 523 Our financial instruments are analysed as follows:
Provision for long leave 2019 2018 £'000 £'000
The provision for long leave relates to the expected cost of long leave entitlements that have accrued up
Financial assets
to the date of the statement of financial position. Long leave entitlements may continue to accrue up to
June 2043 if all vesting conditions are satisfied up to that period. Financial assets measured at amortised cost 11,873 10,018 Provision for premises reinstatement Financial liabilities
Financial liabilities measured at amortised cost (2,080) (891) The provision relates to the expected costs of reinstatement of office premises to their original condition
on termination of premises leases. The balance at year end has been determined based on a guideline
rate of £16 per square foot (2018: £13.80 per square foot) as determined by the Royal Institute of Chartered Financial assets measured at amortised cost comprise cash at bank and in hand, trade debtors and
Surveyors. The provision is adjusted annually based on movements in the guideline rate. other debtors.
Financial liabilities measured at amortised cost comprise trade creditors and other creditors.
- Pension costs 18. Subsidiary undertakings
JFSC 2012 Staff Pension Scheme At 31 December 2019, the JFSC had an interest in one wholly owned subsidiary company.
Further details are outlined below:
In 2012, the JFSC closed the JFSC s Staff Pension Scheme and replaced it with a new defined contribution
scheme, the JFSC 2012 Staff Pension Scheme. The new scheme is open to staff whose initial employment
by the JFSC occurred after 1 January 1999. Members interests in the previous scheme were automatically
transferred to the JFSC 2012 Staff Pension Scheme. All transfers of interests were completed in 2013. Name: JFSC Property Holdings No.1 Limited The JFSC 2012 Staff Pension Scheme s assets are held separately from those of the JFSC, under the care Country of incorporation: Jersey
of an independent trustee.
% of shares held: 100%
Salaries and emoluments include pension contributions for staff to the schemes of £809,501 (2018:
£746,070). Contribution rates have remained unchanged. Aggregate contributions increased due to Principal activity: Property lease holding
changes in membership numbers, ages and employment grades.
JFSC Property Holdings No.1 Limited entered into an agreement on behalf of the JFSC to lease the JFSC s Public Employees Contributory Retirement Scheme office premises. All expenditure incurred by the Company is borne by the JFSC. The Company has no
assets or liabilities and therefore has not been consolidated in the financial statements.
Staff employed by the JFSC before 1 January The JFSC is unable to identify its share of the
1999 are members of the Public Employees underlying assets and liabilities of PECRS in
Contributory Retirement Scheme (PECRS) which accordance with FRS 102 (Section 28) and
is a final salary scheme. The assets are held accordingly accounts for contributions to the
separately from those of the Government of scheme as contributions to a defined contribution
Jersey. Contribution rates are determined by an scheme.
independent qualified actuary, so as to spread 19. Changes in estimates of useful lives of intangible assets
the costs of providing benefits over the members The most recent published actuarial valuation
expected service lives. was as at 31 December 2018, which reported a During the 2019 financial year, the useful lives of certain assets were assessed to be shorter than
deficit of £1.1 million. No account has been taken of originally expected. A change in the useful lives of these intangible assets has therefore been accounted Pension contributions for staff to this scheme the JFSC s potential share of this deficit because for prospectively by amortising their respective net book values to nil using the straight line method over amounted to £27,054 (2018: £24,807). The average the scheme is accounted for as if it is a defined the shorter remaining useful lives.
contribution rate paid by the JFSC during the year contribution scheme.
was 14.4% (2018: 13.6%) of salary. The contribution The change in estimate has affected assets for which financial contributions were received. As such the rate has not been changed following the actuarial Copies of the latest Annual Accounts for the financial contributions will be recognised prospectively as income over the revised remaining useful lives valuation because the valuation is within the scheme, and for the Government of Jersey, may be of the related assets.
funding parameters specified in the related obtained from the Treasury and Exchequer, 19-21
regulations. Broad Street, St Helier, JE2 3RR. The financial effect of these changes in accounting estimates on the financial statements is as follows:
Effect on income and expenditure account 2019
- Related party transactions £'000 Transactions and balances arising in the normal course of operations Increase in other income (recognised financial contribution income) 130
Increase in amortisation charges (130)
The JFSC has been established in law as an independent financial services regulator and as such the
Government of Jersey is not a related party.
Net effect on the surplus for the year - Remuneration of key management personnel
Effect on statement of financial position as at 31 December 2019 2019 Key management personnel includes the Commissioners, the Director General and Executive Directors £'000
who together have authority and responsibility for planning, directing and controlling the activities of the
JFSC. Total remuneration paid to members of key management personnel during the year was £1.9 million Effect on assets
(2018: £2.4 million). Increase in cumulative amortisation and net book value of intangible assets (130)
Effect on assets
Remuneration of Commissioners Increase in in cumulative amortisation and net book value of intangible assets 130 Remuneration of the Commissioners and the Director General is set out on page 60 of this annual
report. There were no other transactions with key management personnel other than reimbursement of Net effect on accumulated reserves - expenses incurred for JFSC purposes.
Appendices
Appendices 01
Commissioners
As at 31 May 2020
Mark Hoban
Chair
Ian Wright
Deputy Chair
Tracy Garrad Annamaria Koerling Martin Moloney Simon Morris Monique O'Keefe Peter Pichler Markus Ruetimann Cyril Whelan
Commissioner Commissioner Director General Commissioner Commissioner Commissioner Commissioner Commissioner
Appendices 02
Executives & Heads of Unit
Martin Moloney
Director General As at 31 May 2020
Jill Britton Sarah Kittleson Mike Jones David Porter Dennis Dixon Barry Faudemer John Gavey Julian Lamb
Director of Supervision Director of Supervisory Director of Policy and Risk Director of Policy General Counsel Director of Enforcement Chief Operating Officer Director of Registry
Engagement
Sam Davison Tony Shiplee Andrew Garbutt Jon Stevens Hamish Armstrong Kerry Petulla Caroline McGrath Abi Nance Kathryn Campbell
Head of Regulatory Maintenance Head of Relationship Head of Risk Head of Policy Chief Adviser, Head of Enforcement Head of Programme Head of Communications Head of Registry and Pooled Supervision Managed Supervision Financial Crime Management Office and Digital Development
Roy Geddes Amanda Reilly Denis Philippe Susan Russell Dawn Kennedy
Head of Authorisations Head of Examinations Head of ICT Head of Human Resources Head of Registry
Operations and Processing
Mark Syvret
Head of Facilities
Notes
International regulatory bodies with which the JFSC is either associated or an active member:
- Full member of:
International Organization of Securities Commission (IOSCO) Group of International Finance Centre Supervisors (GIFCS)
International Association of Insurance Supervisors (IAIS)
- Participates fully in the processes, and is subject to the procedures, of:
Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of terrorism (MONEYVAL)
- Participates in the work of the following through membership of GIFCS:
Basel Committee on Banking Supervision (BCBS) Financial Action Task Force (FATF).
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