The IMF has issued a series of reports following an inspection of the Channel island’s financial sector and its regulations that was conducted last summer.
‘Disconnect’
In one it cited a “disconnect” between the number of money laundering cases investigated against those actually prosecuted and any resulting convictions. It said this “called into question” the effective implementation of anti-money laundering provisions.
The report added that: “The law enforcement authorities are adequately resourced and trained and have a sufficient legal arsenal at their disposal to effectively conduct a money laundering investigation, but still the results are modest.”
It was also noted that while Guernsey was good at collecting information on potential money-laundering activities, and sharing this with relevant jurisdictions, it did not act enough on its own initiative.
The IMF highlighted that this approach could lead to Guernsey becoming over reliant on foreign enforcement bodies to investigate cases within its own borders.
The IMF also believed Guernsey could do more to identify what it called “high risk customers”, who should be subject to greater due diligence checks. Reliance on introducers such as UK lawyers and accountants to vet such customers was not enough, the report said.
Financial institutions should also be subject to potentially greater fines from the local regulator, the GFSC. The current top level of £200,000 was not “dissuasive or proportionate” in terms of financial companies breaking local rules, found the IMF.
Nevertheless, it said Guernsey’s legal framework provided a sound basis for an effective anti money laundering and financial crime regime, describing most shortcomings as “technical in nature.”
A statement released by Guernsey on publication of the IMF reports last Friday did not touch on the areas cited for improvement, instead focusing on the positives.
Lyndon Trott, Guernsey’s Chief Minister, said: ““The regulatory framework and the Bailiwick’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regime that is now in place has been an important factor in both sustaining Guernsey’s economy and developing and maintaining Guernsey’s international reputation as an excellent place to do business. This in turn has been an important driver in the continuing development of Guernsey’s international identity.
“Whilst we welcome the positive evaluation reports of the IMF, we will by no means rest on our laurels. Our place in the global financial services economy means we need to remain proactive in evolving our regulatory framework, and ensure that we remain in the vanguard of international standards. Indeed the IMF reports fully recognise that we update our regulatory regime continually.”
