The regulators of Guernsey, Jersey and the Isle of Man are developing a uniform set of money laundering rules and principles to govern those...

The regulators of Guernsey, Jersey and the Isle of Man are developing a uniform set of money laundering rules and principles to govern those who set up and administer companies in their jurisdictions. Comments about this from interested parties have just been received.

Company services

John Aspden, chief executive officer of the Isle of Man’s Financial Supervision Commission, told Complinet that the Corporate Service Providers Act, which went into operation at the end of last year and has its counterparts in the Channel Islands, dictates that all companies and individuals who set up, incorporate and administer companies on behalf of others will have to be licensed.

"Now the comments are in, we’re going through applications from corporate service providers. In due course we intend that the Act will cover the separate matter of trusts. We’re still consulting people about that. The part of the legislation that pertains to trusts will come into force when the FSC decides to activate it. It is important to note that nobody will be grandfathered in under any regime in the Isle of Man. We hope that the majority of our reforms will be finished in the second half of this year.

"This does not mean an increase in staff for the FSC. We’ve already done that in anticipation of these corporate service reforms. We’ve increased staff across the board, but in the companies area we now have six people we didn’t have before."

KYC and KYCC

The regulatory regimes of all the UK’s immediate offshore islands contain know your customer rules and these already apply to all corporate service providers. They were introduced as a result of the Edwards report, published in 1998 by a UK civil servant who was charged by the Treasury to examine the anti-laundering procedures of the islands.

The document that the three jurisdictions released in December last year, entitled 'Overriding Principles for a Revised Know Your Customer Framework', proposes that financial businesses should always know the identity of their customers or their beneficial owners.

Complinet asked Richard Pratt, director general of the Jersey Financial Services Commission, about the three jurisdictions’ plans to extend their know your customer rules. He explained the idea of each financial institution knowing its customer’s customer.

"The US Senate Committee, the Financial Action Task Force and the Basel group are all looking at know your customer’s customer at the moment in the context of loosely introduced business. This means that if your business has a counterparty, you look at the beneficial owners of that counterparty and then you look at the beneficial owners of its counterparties.

"KYC regulations exist already, but nothing has changed in that paper we released last year with a view to tightening them up. There are two main things it seeks to do:

it expects institutions to go back and obtain documentation about customers who were customers before the reforms of 1999 which followed the Edwards report; and
in the case of introduced business, you will have to look at the relevant customers yourself and not rely on the word of your intermediary to know that the documentation is there."