Guernsey to consider increasing penalties for finance crimes

The States of Guernsey next week will consider a plan to significantly raise the fees levied on those financial services firms doing business on the island which are found to have broken the rules, including money laundering.

Among the proposed changes to Guernsey’s existing package of penalties for major financial crimes is an increase in the maximum possible fine, to £4m from the current £200,000. Fines above £300,000 would be limited to a maximum of 10% of the licensee’s turnover.

The proposed changes are contained in a “Billet d’État”, which outlines items to be addressed and debated at next Tuesday’s regular States of Guernsey meeting.

The Billet d’État is dated 19 January,  four days after a relatively critical report on Guernsey’s handling of financial services crimes was released by the Council of Europe’s anti-money laundering committee, MONEYVAL.

As reported, MONEYVAL said that the Guernsey Financial Services Commission’s existing maximum discretionary penalties weren’t sufficiently dissuasive, and the jurisdiction was urged to strengthen them.

At issue are a package of penalties that exist to be levied on Guernsey-licensed financial services businesses that are found to have failed to carry out the necessary checks on their customers; failed to carry out regular risk reviews; and/or failed to make various disclosures required of them under Guernsey law.

‘Rapid response’

In an introduction to the 11-page Billet d’État, which may be found on the Guernsey government’s website, the Policy Council, an arm of Guernsey’s government which is responsible for drafting laws of this type,  noted that it had “undertaken a review of the level of discretionary financial penalties available to the GFSC” in light of, among other things,  “one of the findings of the MONEYVAL report… and in order to demonstrate a rapid response to that finding”.

It also cited “international expectations for the level of financial penalties which should be available to financial services supervisory authorities” as well as “the need to ensure that Guernsey is prepared for future evaluations of its financial supervisory framework”.

Other proposed changes to the existing regulations covering financial crimes in Guernsey, contained in the Billet:

  • The maximum level of fines  applicable to so-called relevant officers – for example, directors and other executives of Guernsey licensed businesses, and formerly-licensed businesses – as well as to personal fiduciary licensed businesses, should be raised to £400,000 from £200,000, with the income “arising in respect of the relevant officer’s (or personal fiduciary licensee’s) position” to be taken into account as well
  • The Policy Council should be given additional powers to “make regulations on such matters as it considers appropriate in relation to discretionary penalties, and by way of example these should include the meanings of ‘turnover’ and ’emoluments'”

In a statement, a Policy Council spokesman told International Investment that the body was “committed to showing leadership in its response to the MONEYVAL recommendations”, and that the package of proposed changes was “an important part of that response.”

The Policy Council is reported to have consulted with the GFSC and the Guernsey International Business Association in drawing up the proposed changes to the regulations.

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