National Risk Assessments: Terrorist Financing (2021 and 2023)

Overview

Jersey published its first Terrorist Financing (TF) National Risk Assessment (NRA) in April 2021, based on data which was available for the period 2017 to 2019. In May 2023 an update building on the work of the 2021 TF NRA was published, and should be read in conjunction with the 2021 TF NRA.

Terrorist Financing National Risk Assessment update 2023

In the video below Pia Holm talks about the importance of considering terrorist financing when putting together your strategy for dealing with financial crime.

Introduction to terrorist financing on YouTube

In the following video she talks more specifically about the findings of the 2023 Terrorist Financing Risk Assessment.

Terrorist Financing; Jersey's National Risk Assessments on YouTube

Find further information on financial crime on the JFSC and typologies booklet 2023 on States of Jersey Police.

The 2021 TF NRA identified a number of areas where more data was needed, and specific actions were recommended in the following broad categories:

improve and develop understanding of risks
test and strengthen existing controls
build countering TF (CFT) capacity
strengthen connections with internal and external stakeholders

The Government committed to addressing the actions by the end of 2022. The 2023 report summarises the actions Jersey has taken in respect of these categories and reassesses Jersey's exposure to TF risk. It also identifies opportunities to further strengthen our controls and understanding, in an endeavour to counter potential TF risks satisfactorily.

While the implementation of several measures identified in the 2021 TF NRA has helped strengthen mitigations in multiple areas, there is still insufficient evidence to support a reduction of risk overall. As such, the updated report concludes that the risk of Jersey being used as a conduit for TF remains medium to low.

The prior report, Bailiwick of Jersey: National Risk Assessment of Terrorist Financing, was the first assessment of the threats that Jersey faces of being a conduit for terrorist financing.

The report is part of the requirements of the international standard-setter on financial crime, the Financial Action Task Force (the FATF), and it followed the publication of Jersey’s first National Risk Assessment of Money Laundering in September 2020.

The work to conduct the NRA of Terrorist Financing started in 2017 and the data underpinning the assessment is taken from 2015 to 2019.

Bailiwick of Jersey: National Risk Assessment of Terrorist Financing

Key findings of the 2021 NRA of terrorist financing

The key findings of the Bailiwick of Jersey: National Risk Assessment of Terrorist Financing are:

Jersey is a leading international finance centre with a strong reputation in upholding high standards of financial regulation, in line with international standards, and is consistently looking to take a proactive approach to developing understanding of the financial crime risk that the jurisdiction, and other IFCs, may face.
IFCs face particular challenges in detecting terrorist financing due to the absence of common indicators, and are not immune from terrorist financing risk. They can be misused for cross-border movement of terrorist funds including flow-through of terrorism funds; service provision; use of complex structures, abuse of philanthropy; and use of funds generated domestically by illicit activities.
Jersey actively participates in discussions with other IFCs and international bodies to better understand the risks.
Jersey's first terrorist financing risk assessment used a methodology produced by the World Bank, enhanced by documents produced by the Financial Action Task Force as well as work conducted by Jersey and other IFCs.
Given the challenge in identifying common indicators of terrorist financing, a large proportion of the work has focussed around financial flows from/to and activities in target jurisdictions. A list of those jurisdictions has been compiled using reliable independent indices which indicate that:

individuals in, or from, that jurisdiction are at a heightened risk of being involved in financing terrorism;
there is active terrorism or terrorist financing threats
there are strong geographical or other links to countries that have an active terrorism or terrorist financing threat; and
there is secondary terrorism or terrorist financing threat (jurisdictions where crimes occur whose proceeds finance terrorism).

This work identified 21 target jurisdictions which were split into two tiers based on risk level.
The assessment confirmed that:

there are a number of areas where Jersey has adequate systems and controls in place to mitigate the risks of being used as a conduit for terrorist financing; and
there are areas where additional focus and action is required to both test and strengthen existing controls and further develop understanding.

Overall, there is a medium low risk of Jersey being used as a conduit for terrorist financing.
In order to determine if this rating could be lower, Jersey will need to conduct more work in a number of areas to fully understand the risk it faces from terrorist financing. This will particularly involve data collection (which will be required to support a lower rating) and analysis concerning:

the transfer of funds to target jurisdictions (jurisdictions at heightened risk of being involved in terrorist financing)
the activities of legal entities incorporated in Jersey in target jurisdictions
the activities of not-for-profit organisations (NPOs) and charities from Jersey in target jurisdictions
the compliance with preventative measures of the regulated sector and their associated understanding of terrorist financing risk

Jersey must conduct a further risk assessment of NPOs that are at higher risk of being involved in terrorist financing and also conduct a risk assessment of how virtual asset service providers (VASPs) operating in or from within Jersey might be exposed to terrorist financing risk.
Jersey must also look to further develop terrorist financing understanding and capacity across the public and private sector and ensure it develops a more robust skills base to identify, investigate and supervise compliance with terrorist financing requirements.
The UK is a close partner jurisdiction where authorities have significantly greater terrorist financing expertise – Jersey should look for ways to enhance existing arrangements with the UK to assist in identifying any terrorist financing with a link to Jersey and successfully investigating it. Overall, the island should look to utilise the wider skills base in relation to TF that is available in the UK which could be of benefit to Jersey.
The Government of Jersey has undertaken to revise the risk assessment addressing the further work required and initial recommended actions by the end of 2022.