Channel Islands Regulatory Calendar 2021

Potential Addition to EU Blacklist

On January 22, 2021, the European Parliament adopted a resolution to change the criteria used to assess whether a jurisdiction should be included on the EU’s list of tax havens or “blacklist” (i.e., non-cooperative jurisdictions for tax purposes). One of the criteria was to automatically include jurisdictions with a 0% tax rate policy in the blacklist. This places the Channel Islands, which have a corporate income tax rate system known as “Zero/10,” at risk of inclusion on the blacklist.

While this has no immediate effect on the Channel Islands, this could potentially introduce greater reporting obligations for intermediaries and could lead to the application of certain defensive measures. The Channel Islands will continue to monitor any developments regarding decisions made by the European Parliament.

To be monitored over the course of 2021.

Banking, TCB, FSB, IB

Beneficial Ownership Registers

On June 19, 2019, the governments of Jersey, Guernsey and the Isle of Man jointly announced a series of stages detailing how they will move towards developing standards of accessibility and transparency in the coming years, consistent with the EU’s approach set out in the fifth anti-money laundering directive (5MLD), particularly for their central registers of beneficial ownership information of companies. The stages are as follows:

1. Interconnection with the EU member states’ registers and being accessible to designated competent authorities and financial intelligence units (FIUs)
2. Provision of access to “obligated entities” (i.e., financial service businesses and certain other prescribed businesses) for corporate due diligence purposes
3. Consideration of allowing public access, aligned to the approach taken by the EU

Stage 1: Expected to happen during 2021

Stage 2: Expected as soon as reasonably practicable following Stage 1 and before the end of 2022

Stage 3: Expected within 12 months following the final outcome of the EUs implementation of 5MLD in January 2022.

TCB, FSB

Brexit

The Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the EU (“the Withdrawal Agreement”) came to an end on December 31, 2020. It was immediately replaced by the Trade and Cooperation Agreement (TCA) between the EU and the United Kingdom of Great Britain and Northern Ireland.

The key points for the Channel Islands following the introduction of the TCA include a reaffirmation of the Channel Islands’ constitutional position with the UK; introduction of a new customs arrangement between the UK and the Channel Islands; extension of the UK’s membership of the World Trade Organization (WTO) to the Channel Islands; and continuation of the Common Travel Area (CTA) between the Channel Islands, the UK and Ireland.

The UK and the EU have agreed to implement structured regulatory cooperation regarding financial services and a memorandum of understanding (MoU) establishing the framework for this cooperation by March 2021. As the Channel Islands are not members of the EU, there is no immediate direct effect; however, the MoU may introduce new terms that will have to be considered by financial services firms based within the Channel Islands at a later date.

Furthermore, the Jersey Financial Services Commission (JFSC) published a Position Paper on December 3, 2020, which summarizes the legislative changes in Jersey that came into effect on January 1, 2021, made to the alternative investment fund (AIF), FSB and certified funds (CIF) codes.

To be monitored over the course of 2021

Banking, TCB, FSB, IB

6th EU Anti-Money Laundering Directive

On November 12, 2018, the European Parliament published further rules to strengthen measures against money laundering through the 6th EU Anti-Money Laundering Directive (6AMLD). The 6AMLD contains key amendments, including:

• The development of a unified list of predicate offences
• Making—aiding, abetting, attempting and inciting to commit money laundering offences a crime
• Increased international cooperation and tougher punishments

The UK has opted out of the 6AMLD as the government believes it to be already compliant. The Channel Islands will monitor developments in the UK; however, Jersey and Guernsey are likely to adopt AML/CFT standards that are equivalent to those of the EU.

For member states that have transposed the 6AMLD into national legislations, the relevant regulations must be implemented by firms within these states by June 3, 2021.

This deadline does not apply to the Channel Islands.

Banking, TCB, FSB, IB

Amendments to Economic Substance

Two amendments to Jersey's Economic Substance legislation were lodged on December 29, 2020, regarding the inclusion of self-managed funds that fall within the scope of Economic Substance rules in terms of their fund management activities and the strengthening of the general exemption for fund vehicles managed by other entities that currently rely on guidance.

The Economic Substance rules may also be extended to Channel Island partnerships following the recommendations made by the Code of Conduct Group (Business Taxation) report published on November 20, 2020.

Similar amendments have already been introduced in Guernsey. Self-managed collective investment schemes were brought within the scope of the Income Tax (Substance Requirements) (Implementation) Regulations 2018 with effect from October 1, 2020 and are required to demonstrate an appropriate level of substance.

To be monitored throughout 2021 for any developments

TCB, FSB, IB

National Risk Assessment

The National Risk Assessment (NRA) was published by the Government of Jersey on September 30, 2020, which documented the potential risks, threats and vulnerabilities that Jersey faces as an international finance center.

The NRA represents the first centrally coordinated exercise by Jersey to identify, assess and understand the ML risks faced by the island. The NRA confirmed that there are several areas where Jersey has adequate systems and controls to mitigate ML risks; however, it also identified 10 residual risk areas that require additional focus.

An action plan is being established to address the detailed findings of the NRA. Regulated businesses are also expected to update their AML/CFT business risk assessments to reflect the findings of the NRA. 

The NRA that was published will be reviewed and updated in response to emerging threats and risks on an ongoing basis.

The NRA will be updated on an ongoing basis. 

The following sector-specific webinars on the NRA will be delivered by the JFSC in 2021:

• Investment business - January 20, 2021
• Accountants - February 17, 2021
• Lawyers - March 17, 2021

Banking, TCB, FSB, IB

Supervisory Risk Data Collection

Similar to the requests in 2017 to 2020, the JFSC is continuing its supervisory risk data collection exercise in 2021 to determine its approach to risk-based supervision and the financial crime examination process. Supervised businesses will have to provide the JFSC with this data relating to 2020 between January 1, 2021 and March 31, 2021. This also supports the development of the national risk assessment.

March 31, 2021.

Banking, TCB, FSB, IB

Control of Borrowing Order Consents

The Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 (“new Law”) came into effect on January 6, 2021. This new Law includes requirements for providing beneficial owner and controller information and to update this information within 21 days of any changes.

Under the new Law, there is no requirement to obtain prior consent to a change of beneficial owner.

Until the control of borrowing order (COBO) consents have been reissued, an entity will be deemed compliant with the conditions of its COBO consent, if it complies with the aforesaid new Law requirements.

The JFSC will be reissuing COBO consents throughout 2021.

TCB, FSB

Jersey Financial Services Commission Registry and Notifications of Changes

The JFSC launched its digital registry and customer account, “myRegistry” on January 6, 2021, to coincide with the legislation passed by the Government of Jersey under the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 (the “New Law”).

Under the New Law, the annual return has been replaced by an annual confirmation statement to collect more information for the central registers, including the appointment of a nominated person for companies.

Significant person information will be collected for all incorporations, registrations and continuances into Jersey. Any changes to an entity must be submitted by the nominated person, including directors, company secretaries, lawyers or accountants resident in Jersey and Jersey registered trust companies or funds service businesses.

For any changes in significant persons from January 6, 2021 to April 30, 2021, the nominated person must inform the JFSC within 21 days’ notice from May 1, 2021.

Further, nominated persons will also have to inform the JFSC of any changes in beneficial ownership and/or controller information between December 19, 2020 and February 1, 2021, within 21 days from February 1, 2021.

The deadline for notification of special resolutions (including the dissolution of companies) was January 25, 2021; however, the nominated person had to give prior notice via email by December 31, 2020.

Effective January 6, 2021.

Annual confirmations are due to be completed by April 30, 2021.

TCB, FSB

Anti-Money Laundering and Sanctions Legislation

The definition of “anti-money laundering legislation” has been amended in the JFSC Codes of Practice due to legislative amendments and following the UK’s departure from the EU. 

Further legislation will be introduced throughout 2021 to move from EU sanctions regulations to UK sanctions legislation.

The definition changes came into effect on January 1, 2021.

Developments to sanctions regulations are to be monitored over the course of 2021.

Banking, TCB, FSB, IB

2021 JFSC Program for Onsite Thematic Examinations

The JFSC has announced two thematic examinations to be undertaken in Q1 2021. These examinations will consist of:

• Enhanced due diligence (EDD) and simplified due diligence (SDD), focusing on when and how Relevant Persons have applied EDD measures, where they have identified and assessed there are higher risks of financial crime and how firms apply exemptions and SDD to identification measures
• Wire transfers that were postponed in 2020 due to COVID-19; questionnaires have been issued that are intended to identify, assess and mitigate risks posed by wire transfer activity, particularly those that reflect FATF Recommendation 16.

Further thematic examinations are due to be scheduled for early 2021.

Outsourcing Policy and Guidance Note

A full review of the Outsourcing Policy and Guidance Note is planned for 2021, focusing on IT providers. 

A minor amendment has already been made relating to general issues, providing clarity on corporate governance. In this regard, the following sentence has been included: “The governing body should also receive reports regarding any issues of non-compliance with the outsourcing policy (i.e., exceptions) identified as a result of the monitoring and assessment required by Core Principle No. 3 (“a registered person must maintain the (i) capacity; (ii) resources; and (iii) policies and procedures to monitor, assess and ensure that any outsourced activities are being performed adequately and the service provider remains fit and proper.”) The JFSC would expect to see these recorded and considered in the board meeting minutes.”

Expected to be introduced in 2021.

Banking, TCB, FSB, IB

Further Implementation of Basel III

Following the implementation of capital quality and liquidity elements of the Basel III framework set by the Basel Committee on Banking Supervision, the JFSC intends to implement this further in line with actions by other major financial centres, with plans to carry out further consultations during 2021. This intends to set out a general solution for complex, lower impact aspects of the Basel III framework.

Currently scheduled to be implemented by the end of 2022.

Banking

Feedback and Further Consultation on Investment Business Regime

On November 23, 2020, the JFSC published feedback regarding the initial consultation on legislative proposals to enhance Jersey's Investment Business regime and is now seeking further consultation on three amendments to the Financial Services (Jersey) Law 1998 (FSJL). These amendments are regarding enhancements to the definition of derivatives; the introduction of arrangements within the activity of dealing; and updating legislation relating to client assets.

Responses are required by February 26, 2021.

IB

Revisions to the AML/CFT Handbooks

On May 28, 2020, the JFSC issued a consultation paper asking feedback on the proposed revisions to the AML/CFT handbooks. The revisions are required in order to implement the 2012 FATF recommendations, specifically in relation to:

• Business risk assessments
• Customer due diligence
• Reliance
• Equivalent countries and territories
• Merging the AML/CFT handbooks for licensed businesses and DNFBPs

To be monitored throughout 2021 for any developments.

Banking, TCB, FSB, IB

Bank Financial Reporting and Audit

On December 15, 2020, the JFSC issued a consultation paper asking feedback on the proposals to introduce new requirements for Registered Persons operating under the Banking Business (Jersey) Law 1991 enacted under a new legislation titled the Banking Business (Accounts, Auditors and Reports) (Jersey) Order. This addresses the appointment of auditors; financial statements and their publication; prudential returns; and a declaration of compliance. 

This would also introduce new requirements to the code of practice for deposit-taking businesses regarding related processes.

Responses are required by March 31, 2021.

Banking

Beneficial Ownership of Trusts

The Guernsey Financial Services Commission (GFSC) is undertaking a short consultation on changes proposed to the rules and guidance in chapters 3 and 7 of the Handbook on Countering Financial Crime and Terrorist Financing (the “Handbook”) on the risk-based approach and on legal persons and legal arrangements, specifically on trusts or trust relationships.

The proposed changes to the Handbook include the requirement to at least identify the beneficiaries’ full name and date of birth; to understand the ownership and control structure of the trust; and to identify and take reasonable measures to verify the identity of beneficial owners.

An additional change includes the requirement to regularly review any relationship risk assessment and the extent to which a business relationship must be monitored based on risk.

Feedback was required by close of business on January 18, 2021.

Banking, Fiduciary, Investment, Insurance

Handbook on Countering Financial Crime and Terrorist Financing

The GFSC issued the final version of its Handbook on November 29, 2019. In addition to, the mandatory reporting deadlines set during 2019, such as those relating to the appointment of an MLCO (and subsequent notification to the GFSC) and the completion of AML/CFT business risk assessments.

The GFSC has made various amendments to the Handbook in order to take into account Guernsey's NRA, with the intention to assist firms in identifying high-risk countries and territories for both AML/CFT purposes. 

During 2020, in accordance with the Handbook, Guernsey firms were required to review their policies, procedures and controls, and all high-risk business arrangements. All remaining business arrangements must be reviewed during 2021.

All remaining business arrangements must be reviewed by December 31, 2021.

Banking, Fiduciary, Investment, Insurance, Pension

Data Protection Registration

Every controller and processor of data is required to comply with the Data Protection (Bailiwick of Guernsey) Law, 2017 (the “DP Law”). From January 1, 2021, all exemptions to register with the Office of the Data Protection Authority (ODPA) under the DP Law will end. All previously exempt local entities that are processing or controlling personal data will be legally obliged to register with the ODPA and pay a small annual fee that will contribute to the ODPA's operational activity.

Effective from January 1, 2021.

Banking, Fiduciary, Investment, Insurance, Pension

Consultation on Increasing Private Investment Fund Options

The GFSC published a consultation paper on December 9, 2020, seeking feedback on proposals to allow different investor categories to take advantage of an appropriately regulated fund structure.  While the proposals would allow the current approach to register a private investment funds (PIFs) to continue, other paths would be introduced to complement this, including the placement of PIFs as bespoke private wealth structures.

If the proposals are implemented, new guidance on PIFs’ promoter due diligence would be provided, and a standardized declaration form would be introduced.

Closing date for feedback was February 1, 2021.

Investment 

Consultation on Deregulation of Non-Guernsey Fund Scheme Rules

The GFSC published a consultation paper on December 8, 2020, seeking feedback on proposals for changes to the Non-Guernsey Fund Scheme regime. Non-Guernsey fund schemes are collective investment schemes not established or incorporated in Guernsey, and not authorized or registered by the GFSC. Protection of Investors (PoI) licensees are permitted to act for these schemes without prior approval if authorized in Jersey, Isle of Man, the UK or Ireland.

The proposals would revoke these existing rules; however, any entity undertaking restricted activities within Guernsey in connection with a collective investment scheme (wherever domiciled) will still be required to be licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 2020.

Closing date for feedback was January 27, 2021 – this is to be monitored throughout 2021 for further developments.

Investment

Sanctions Legislation

The States of Guernsey introduced a new legislation for sanctions titled, The Sanctions (Implementation of UK Regimes) (Bailiwick of Guernsey) (Brexit) Regulations, 2020 (the “2020 regulations”) effective from December 31, 2020.

The intention of the 2020 regulations is to change Guernsey’s sanctions framework to implement targeted financial sanctions and other measures under the UK sanctions regimes, rather than those of the EU. 

The UK regimes largely mirror the UN regimes; however, some differences exist, particularly those regarding the scope and the persons designated under those regimes.

Effective from December 31, 2020

Banking, Fiduciary, Investment, Insurance, Pension