Regulations to amend the Proceeds of Crime Legislation

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A decision made (05/10/2009) regarding: Regulations to amend the Proceeds of Crime Legislation.

Decision Reference: MD-E-2009-0181
Decision Summary Title:	Regulations to amend the Proceeds of Crime legislation		Date of Decision Summary:	2 October 2009
Decision Summary Author:	Finance Industry Development Executive		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title:	Regulations to amend the Proceeds of Crime legislation		Date of Written Report:	2 October 2009
Written Report Author:	Finance Industry Development Executive		Written Report : Public or Exempt?	Public
Subject: Regulations to amend the Proceeds of Crime legislation.
Decision(s): The Minister approved the lodging of the following draft Regulations for amending the Proceeds of Crime legislation: The draft Proceeds of Crime (Amendment of Schedule 2) (No. 2) (Jersey) Regulations 200- The draft Proceeds of Crime (Supervisory Bodies) (Amendment of Law) (No. 2) (Jersey) Regulations 200-
Reason(s) for Decision: The draft Proceeds of Crime (Amendment of Schedule 2) (No. 2) (Jersey) Regulations 200- will remove certain activities from the scope of the Money Laundering (Jersey) Order 2008 that are considered to be low-risk from a money laundering/terrorist financing perspective. The draft Proceeds of Crime (Supervisory Bodies) (Amendment of Law) (No. 2) (Jersey) Regulations 200- will make permanent an existing exemption that prevents duplication of a requirement on persons who carry on a ‘regulated businesses’ to give notification to the Jersey Financial Services Commission.
Resource Implications: There are no financial or manpower implications for the States.
Action required: The draft Regulations to be lodged au Greffe for debate on 17 November 2009.
Signature: Senator A.J.H.Maclean		Position: Minister for Economic Development
Date Signed:		Date of Decision:

Regulations to amend the Proceeds of Crime Legislation

The Minister for Economic Development (“the Minister”)

Regulations to amend the Proceeds of Crime legislation

1. Issue and Recommendation

1.1. The draft Proceeds of Crime (Amendment of Schedule 2) (No. 2) (Jersey) Regulations 200- will remove certain activities from the scope of the Money Laundering (Jersey) Order 2008 that are considered to be low-risk from a money laundering/terrorist financing perspective.

The Proceeds of Crime (Supervisory Bodies) (Amendment of Law) (No. 2) (Jersey) Regulations 200- will make permanent an existing exemption that prevents duplication of a requirement on persons who carry on a ‘regulated businesses’ to give notification to the Jersey Financial Services Commission.

It is recommended that the Minister approves both draft Regulations and that these be lodged au Greffe for debate by the States on 17 November 2009.

2. Background

Draft PROCEEDS OF CRIME (AMENDMENT OF SCHEDULE 2) (NO. 2) (JERSEY) REGULATIONS 200-

2.1. The draft Proceeds of Crime (Amendment of Schedule 2) (No. 2) (Jersey) Regulations 200- will amend Schedule 2 to the Proceeds of Crime (Jersey) Law 1999 (“Schedule 2 POCL”) to remove from its scope certain businesses and activities that are considered low-risk from a money laundering/terrorist financing perspective.

2.2. The principal effect of Schedule 2 POCL is that a person who carries on certain activities is subject to the Money Laundering (Jersey) Order 2008, which requires a person to put in place certain measures for the prevention and detection of money laundering.

2.3. The draft Regulations will take outside of the scope of Schedule 2 POCL:

1) Persons who “participate in a joint enterprise”

i.e. persons who “participate in a joint enterprise” as defined in paragraph 8 of Schedule 2 as defined in paragraph 8 of Schedule 2 to the Financial Services (Jersey) Law 1998 (“FSJL”).

JFSC guidance states that:

“This is low-risk from a ML/TF perspective because the investment business activity being carried on is by persons participating together in a joint enterprise and the investment business activity is undertaken for the purposes of that joint enterprise.”

2) Persons who can rely upon the “employee share schemes” exemption

i.e. persons who can rely upon the “employee share schemes” exemption in paragraph 9 of Schedule 2 to the FSJL.

JFSC guidance states that:

“This is inherently low-risk from a ML/TF perspective because the investment business being carried on relates to the award of securities in a company (or a group company) of which a person is an employee (or a relative of such an employee).

In addition, many of the companies that rely upon the exemption in paragraph 9 of the FSJL will be non-Jersey companies with a Jersey subsidiary. Making such a non-Jersey company subject to the MLO would require the company to enter into arrangements with a person in Jersey so that it could meet the requirements of the MLO. This would place a disproportionate burden to the ML/TF risk posed and may have the perverse effect of discouraging non-Jersey companies from offering employee share schemes to Jersey-resident employees of the group.”

3) Persons who can rely upon the “incidental providers of services”

exemption

i.e. persons who can rely upon the “incidental providers of services”

exemption in paragraph 7 in the Financial Services (Trust Company

Business (Exemptions)) (Jersey) Order 2000.

JFSC guidance states that:

“Persons that use the ‘incidental providers’ exemption will be low-risk from a ML/TF perspective because the exemption requires them not to be carrying on trust company business (“TCB”) as their sole or main profession and they must not be remunerated for the TCB service they provide.”

2.4. All of the above activities are considered low-risk from a money laundering/terrorist financing perspective and the application of the Money Laundering (Jersey) Order 2008 to persons carrying on such activities is considered by the JFSC to be disproportionate.

Draft PROCEEDS OF CRIME (SUPERVISORY BODIES) (AMENDMENT OF LAW) (NO. 2) (JERSEY) REGULATIONS 200-

2.5. The draft Proceeds of Crime (Supervisory Bodies) (Amendment of Law) (No. 2) (Jersey) Regulations 200- will make some clarifying amendments to the Schedule to the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 (“the Schedule”).

2.6. The inclusion in the Schedule of a specified business or activity requires a person carrying on such a business or activity to register with the JFSC so that they can be supervised for compliance with anti-money laundering/ countering the financing of terrorism measures.

2.7. The draft Regulations will avoid an anomaly whereby a person who carries on a ‘regulated business’ would have to notify the JFSC if, in addition to their regulated business, they are carrying on certain activities that are exempt from registration under two of the regulatory laws administered by the JFSC. Such notification is unnecessary given that the person would already be known to the JFSC by virtue of carrying on a regulated business.

This anomaly was temporarily resolved by virtue of the Proceeds of Crime (Supervisory Bodies) (Transitional Provision) (Jersey) Order 2008, which expires on 30 November 2009.

3. Recommendation

It is recommended that the Minister approves both draft Regulations and that these be lodged au Greffe for debate by the States on 17 November 2009.

FINANCE INDUSTRY DEVELOPMENT EXECUTIVE

2 October 2009