Provisions for Enhanced Measures were introduced in 2019 as a consequence of a specific recommendation made by Moneyval in its 2015 report on Guernsey and by the International Monetary Fund in its assessment of Guernsey in 2010.

It is highly likely that the implementation of the Moneyval recommendation by both the GFSC and industry will be scrutinised by Moneyval during its next evaluation of the Bailiwick in 2024.

Why has this letter been issued?

The GFSC has observed that while there are firms which understand the requirement to apply enhanced measures, a number are not applying these measures or are not applying measures tailored to specifically address the risk factor(s) presented by the customer.

The letter provides information to firms to assist in their development and maintenance of effective anti-money laundering and countering the financing of terrorism controls.

GFSC Observations

Practices observed from onsite GFSC inspections include:

Good Practice

Policies and Procedures which:

• Demonstrate that a firm applies a risk-based approach by differentiating between Enhanced Measures and Enhanced Customer Due Diligence.
• Define the categories of customers to which enhanced measures apply.
• Explain the types of enhanced measures which could be applied.
• Acknowledge that a customer may exhibit one or more risk categories.
• Explain that decision-making on the enhanced measures to be applied is aligned with the higher-risk factor(s) being mitigated.
• Mandate that the choice and type of measure(s) applied and the risk factor(s) presented are documented and explained within customer assessments/review forms.

Customer risk assessment forms which capture the higher risk factor(s) the customer presents, and which detail the corresponding enhanced measure(s) applied.

Where a non-resident customer is using Guernsey for tax mitigation, that the reason is supported with a copy of the relevant tax advice.

Poor Practice

Policies and Procedures which:

• Do not make a distinction of what/when/to whom enhanced measures must be applied within due diligence processes.
• Confuse enhanced measures with enhanced customer due diligence for high-risk customers.
• Do not reference the application of enhanced measures.
• Make assumptions that controls will cover specific risks without ensuring that this is actually the case.
• Apply an enhanced measure irrespective of the customer and relevance of higher risk factors represented.
• Insufficiently examine instances where a customer chooses to use Guernsey as a jurisdiction, and the utilisation of a trust or company vehicle and/or nominee arrangements.
• A tick-box approach to customer risk assessments.
• No or insufficient compliance monitoring.

What to do next and how can we help you?

We recommend that firms consider the following actions:

• Evaluate internal policies, procedures, and controls and make the necessary amendments where gaps are identified.
• Review Customer Risk Assessments to consider if these allow for a proper evaluation of individual customers and trigger suitable enhanced measures.
• Perform a review of the current compliance monitoring programme to ensure this supports testing of enhanced measures and evaluates the effectiveness of the design and application of relevant policies, procedures & controls.

If you require any assistance please contact us, our team of Compliance & Regulatory Professionals will be glad to support you.

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