Consultancy

The Jersey Financial Services Commission (“JFSC”) intends to undertake a significant number of on-site examinations in 2022 requesting disclosure of information prior to the visit and conducting lengthy interviews with staff selected at random across the business.

The interview of staff within a financial services business by the regulator is now a key part of the on-site examination. Even with Covid restrictions, the regulator has remained focused on conducting virtual interviews with staff from across the organisation irrespective of seniority. The interviews are seen as a valuable source of evidence when assessing the AML knowledge of staff, how systems and controls operate in practice and generally assessing the AML culture within the business. Regulators have received training on how to conduct such interviews and will have comprehensively prepared the interview team.

The impact of a staff member failing to articulate themselves adequately in an interview can have significant consequences for the business.

Despite such a key part of the process the overwhelming majority of those interviewed have never been trained in how to participate in such an interview. Staff members often find it a daunting and stressful experience. Undertaking a mock interview with a supportive and experienced trainer is likely to bolster performance and provide considerable reassurance.

The team at Baker Regulatory Services (“BRS”) have significant experience and training in conducting interviews and have trained regulators in various jurisdictions, including members of the JFSC.

BRS are available to undertake mock interview training for staff scheduled to participate in an interview with the regulator.

Such training will: –

• Help the interviewee with essential interview preparation.
• Explain the approach that will be adopted by the JFSC interview team.
• Boost the confidence of the interviewee.
• Provide reassurance to those who have never been interviewed in this context before.
• Provide the opportunity to read and research likely subjects that may be covered during the course of an interview.
• Ensure that clearly articulated information is provided to the JFSC.
• Reduce the risk of incorrect information being provided.
• Provide the business with the opportunity to demonstrate the capability and commitment of their staff.

Those participating in interviews should be just as prepared as the regulator. If you would like to receive further information, please contact Barry Faudemer.

Financial services businesses are required by the Jersey Financial Services Commission (“the JFSC”) AML handbook to periodically assess the effectiveness of their compliance function, ensure that the compliance monitoring plan is not falling behind schedule and undertake ongoing monitoring of client transactions. Failing to manage such regulatory requirements can have significant consequences as evidenced by regular sanctions imposed by the JFSC. BRS can audit the effectiveness of each area and provide a report to the Board with recommendations on how enhancements can be achieved.

Failing to effectively complete a remediation program places a business at significant risk of being subject to a regulatory sanction. There are clear benefits to securing an independent assessment of the completion of a remediation program. Furthermore BRS advises that verification should be undertaken BEFORE institutions confirm to their regulator that such programs have been completed satisfactorily. The level 2 civil penalty has been specifically devised by the JFSC and creates a penalty for the failure to satisfactorily complete a remediation program as previously been agreed with the JFSC.

BRS staff have extensive investigatory experience including conducting interviews, sifting through evidence and compiling reports that meet evidential standards. Such skillsets are particularly useful in the sensitive and often confidential investigation of employment disputes, especially where the regulator expects the business to undertake a detailed, impartial and thorough investigation.

In its most recent annual report the JFSC clearly sets out that it is devoting more resources to financial crime and is increasing the number of examinations with an AML/CFT focus. In 2019 the JFSC created a dedicated Financial Crime Examination Unit.  Failing to achieve compliance with the AML/CFT standards places financial services businesses and individuals working within those businesses in serious jeopardy of significant criminal and civil sanction together with the associated loss of reputation. In recognition of that, organised crime groups are constantly probing AML/CFT defences to identify the weak link, Regulators worldwide have imposed strict AML/CFT regulatory requirements upon financial services businesses and introduced substantial penalties for non-compliance.

Baker Regulatory Services offers an unprecedented level of expertise on how to achieve and maintain compliance with the most recent AML/CFT standards thereby minimising the risk of censure and exposure to financial crime.

Failing to conduct a business risk assessment is a breach of the JFSC Codes of Practice. On the basis of its risk assessment the Board is required to establish a formal strategy to counter money laundering and the financing of terrorism. The Board must also assess both the effectiveness and compliance of its systems and controls (including policies and procedures) and take prompt action necessary to address any deficiencies. The Jersey regulator has clearly set out in its AML handbook that the Board must consider what barriers (including cultural barriers) exist to prevent the operation of effective systems and controls to counter money laundering and financing of terrorism and must take effective measures to address them.

Baker Regulatory Services has the expertise to assess and recommend ways of strengthening business risk assessments and provide reassurance to boards that their systems and controls are operating as effectively as possible.

Baker Regulatory Services has conducted skilled person reports either voluntarily at the request of the financial services business or statutory enforced appointments under the regulatory laws together with acting as Inspectors under the Companies (Jersey) Law. Through such investigations, opportunities are often identified to strengthen corporate governance, enhance financial crime defences and develop regulatory compliance functions.  We are highly skilled in collating information, identifying issues and making recommendations whilst still respecting the needs of the business and staff.

The benefit of a financial services business having a robust approach to Compliance Monitoring include, being able to demonstrate the Board’s oversight of the effectiveness of controls implemented to mitigate Compliance Risk leading to the proactive identification of control weaknesses, incidents and breaches of relevant legislation and regulatory requirements. Effective Compliance Monitoring creates opportunities for business improvements to reduce risk of legal or regulatory sanctions, material financial loss or damage to reputation. The JFSC has publicly stated in its guidance note on the subject of compliance monitoring that it will look more favourably upon material breaches self-identified by the financial services business and reported to the JFSC rather than uncovered at the instigation of the regulator. This is because it demonstrates effective governance by a registered person and enables the registered person to also report the remedial action taken and/or plan to address the issue.

The JFSC has announced that Compliance Monitoring will continue to be a key area of focus for its examination teams and it is very clear from the content of the Regulators public comments that businesses continue to find integrating effective compliance monitoring very challenging.

Baker Regulatory Services can assist businesses in developing effective Compliance Monitoring and, where necessary, Remediation Plans.

With senior former regulators who helped develop the legislation and the JFSC’s published approach to civil penalties/settlement negotiations Baker Regulatory Services is well placed to advise on the process for conducting successful settlement negotiations.  We intend to publish a series of papers on the subject of civil financial penalties.  The first of which is available here Financial Penalties – what is my risk exposure?

Failing to remediate effectively exposes a financial services business to a JFSC level 2 civil financial penalty. Verification of the effectiveness of any remediation is fundamental to not only providing reassurance to a Board but also to the regulator that the issues identified have been resolved satisfactorily and will not reoccur.

Baker Regulatory Services are able to advise on how best to undertake a remediation that is likely to meet the expectations of the JFSC and assess the effectiveness of the remediation upon completion.

Baker Regulatory Services, together with Baker & Partners, have unrivalled experience in the investigation of serious and complex fraud cases, asset tracing and the recovery of the proceeds of fraud. Barry Faudemer founded the Jersey Fraud Prevention Forum and before joining the firm was formerly one of the longest standing members of the UK’s Fraud Intelligence Network tasked with sharing information on current fraud trends and promoting best practice to combat fraud. Baker & Partners has been at the forefront of not only providing Lawyers to prosecute fraud cases on behalf of Jersey’s Attorney General but also assisting overseas authorities with asset tracing and recovery of the proceeds of fraud.

Baker Regulatory Services recognise the importance of assessing the level of compliance with the regulatory requirements of companies subject to a merger or acquisition to help inform the strategy of the acquirer. Statistically achieving a successful merger or acquisition is recognised as challenging and the importance of undertaking thorough due diligence from the outset cannot be under estimated.

We have extensive experience of mergers and acquisitions and is ideally placed to assess the level of regulatory risk posed by the target company and produce a realistic assessment of any remediation that may be necessary. We can also assess the capacity of the acquirer to undertake a merger or acquisition based on the resources likely to be absorbed in remediating any deficiencies.

Article 11 (11) of the Money Laundering (Jersey) Order 2008 requires a relevant person to establish and maintain adequate procedures for (i) monitoring compliance with and testing the effectiveness of its policies and procedures and (ii) monitoring and testing the effectiveness of measures to promote AML/CFT awareness and training of relevant staff. The JFSC handbook stipulates that the Board’s assessment of the above is required to be kept up to date.

The JFSC AML handbook encourages relevant persons to seek independent verification that such measures are indeed effective.

Baker Regulatory Services has the depth of AML/CFT experience to undertake such independent verification and where necessary provide Boards with recommendations to enhance their systems and controls.

The benefit of a financial services business having a robust approach to Compliance Monitoring include, being able to demonstrate the Board’s oversight of the effectiveness of controls implemented to mitigate Compliance Risk leading to the proactive identification of control weaknesses, incidents and breaches of relevant legislation and regulatory requirements. Effective Compliance Monitoring creates opportunities for business improvements to reduce risk of legal or regulatory sanctions, material financial loss or damage to reputation. The JFSC has publicly stated in its guidance note on the subject of compliance monitoring that it will look more favourably upon material breaches self-identified by the financial services business and reported to the JFSC rather than uncovered at the instigation of the regulator. This is because it demonstrates effective governance by a registered person and enables the registered person to also report the remedial action taken and/or plan to address the issue.

The JFSC has announced that Compliance Monitoring will continue to be a key area of focus for its examination teams and it is very clear from the content of the Regulators public comments that businesses continue to find integrating effective compliance monitoring very challenging.

Baker Regulatory Services can assist businesses in developing effective Compliance Monitoring and, where necessary, Remediation Plans.

The AML/CFT Handbook issued by the JFSC states “the guiding principle for training should be to encourage employees, irrespective of their level of seniority, to understand and accept their responsibility to contribute to the protection of the relevant person against the threat of money laundering and the financing of terrorism”. We could not agree more.

At Baker Regulatory Services we have staff who have been at the forefront of combating financial crime and understand the legal obligations facing relevant persons. Included within this team is the former Manager of Jersey’s FIU who also acted as the MLRO at the JFSC. We understand the importance of making the training engaging and relevant and ensuring that employees understand the subject matter. We have one of the Island’s most experienced MLRO’s within Baker Regulatory Services and we can offer a coaching/mentoring service to those employees who are new to the roles of MLRO or MLCO.