Keeping up with the Vidamours, the Smiths and the Quayles

A while ago, I confessed to my addiction to consultations.  Give me the chance to have my say, and I’m there, all opinions blazing.  This past summer there was quite a rash of them (consultations, not opinions), including one issued by the Jersey Financial Services Commission on proposed changes to the island’s AML regime, and specifically to its Money Laundering (Jersey) Order 2008.  I put in a response – of course I did, despite not being regulated by the JFSC, or living in Jersey, or doing much more than liking their ice-cream (well, apart from caring really quite a lot about their AML regime).

Over the years I have responded to perhaps a dozen consultations on this same model: here are changes we would like to make to our AML regime – what do you think of them?  But this one had an added dimension that jumped out at me.  If you look at the initial consultation document, you will see that for every revision suggested, the JFSC compares it to what is being done in Guernsey, the UK and the Isle of Man.  In other words, it is benchmarking its AML regime.  It doesn’t say (otherwise it wouldn’t be a neutral consultation) whether it thinks one approach or another is better: it just lays them out.  And in the feedback on the consultation, the points at which respondents pointed out similarities to or differences from the other three jurisdictions are noted.  And where the JFSC has decided to follow the lead of one of the other three, this is also stated.

I have always thought that one of the simplest ways to foil money launderers would be to eliminate differences between national AML regimes – to remove all the loopholes, so that the criminals have nowhere to turn, and no-one to play off against anyone else.  And seeing this very small step towards homogenisation (note use of dairy term in deference to Guernsey and Jersey readers) gives me a bit of hope that one day, perhaps one day, it could just happen.

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6 Responses to Keeping up with the Vidamours, the Smiths and the Quayles

  1. Roy McCarthy says:

    God forbid that we could learn something from Guernsey 😉

  2. Des says:

    I agree with your comment regarding the elimination of differences between national AML regimes. To widen that approach, i would appreciate your thoughts with regards to EU countries that allow facilitated naturalisation on grounds of investment(http://www.economist.com/news/international/21586843-hard-up-countries-flog-passports-papers-please)

    Now Malta is getting in on the act and looking to raise €30 million from the sale of citizenship to some 65 prospective entrants under a naturalisation programme. Apparently the “individual investor programme” will put Malta alongside Spain, Austria and Latvia with their own lucrative citizenship programmes.

    So a spare €650,000 can get the rich a new passport but those that cannot afford it become “boat people”.

    Should i consider raising my country risk profiles on these countries when i see individuals from Eastern Europe or other countries with dual citizenship or, because they now hold EU passports, treat their new country’s application of AML regulations the same as the rest of us?

  3. I did wonder, Roy – I did wonder! I understand that they say flattering things about you too…
    Best wishes from Susan

  4. Dear Des

    This is a very interesting comment – not a dilemma I had considered before. Thanks for the link to the Economist article. I am not sure if you are asking tongue in cheek, but as with all AML decisions, I think the wise MLRO would add this information to his store of knowledge and use it to temper the more bland “good and bad” lists that we get (equivalent countries being one of those).

    I suppose the other question is whether selling citizenship, whatever your moral take on the practice, actually increases money laundering risk. Presumably, as long as the countries involved do EDD to check the source of the funds being offered by these “investors”, the risk is just as with any other payment…? Of course, the questions like “why do you want to have our passport?” would be essential.

    Other MLROs out there: what do you think?

    Best wishes from Susan

    • Kay says:

      In one of my previous roles, we had a very large number of clients who ‘brought’ their passports in the UK through the investor scheme and we actually sat on the other side as investment managers for people within this scheme. Most of them originating from the same, high risk, region of the world. One thing that became very clear is that, certainly in the UK, it is still the instituion that holds the funds that is responsible for the EDD. No comfort should be taken AT ALL that the relevant govermental department has seen fit to issue these people with a passport and in doing so has satisfied themselves that the client is ‘clean’.
      All our clients were very upfront about the fact that a UK passport provides them with the respectability that their own cannot, and this in itself should not necessarily be cause for concern (who wouldn’t prefer a UK passport to a Russian one??)

      However not all of our dual nationality clients had obtained their 2nd nationalities from ‘equivalent’ jurisdictions, in fact often they come from some quite questionable places, which made no sense other than to divert focus from their original place of birth, which was clearly a concern and as such, each client was assessed based on A) their reasons for wanting dual nationality and B) Where it was that their MONEY was generated (don’t forget it’s the money we’re following, not the people!)

  5. Dear Kay

    Very useful comments from the sharp end of AML-ing – thank you. As always, it’s a question of conducting due diligence in the round – against the background of where, when and why. For some clients, it is a perfectly reasonable thing to do – as you say, some passports are not much use. But for others, their motives may be more opaque…

    Best wishes from Susan

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