JFSC Consults on Widening Civil Financial Penalty Scope and Streamlined Decision-Making Process

Changes proposed by the Jersey Financial Services Commission (“JFSC”) will enable the regulator to operate more streamlined investigations and decisions with regards to regulatory sanctions, and will also broaden the regulator’s reach in terms of imposing civil financial penalties.

The changes have been proposed to make the existing processes more efficient, and to bring the Island’s regulatory regime in line with the global Financial Action Task Force (“FATF”).

The changes are set out in two consultation documents, and are summarised below.

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Consultation – Review of the JFSC’s civil financial penalties regime

The JFSC is proposing changes to its civil financial penalties regime aimed to strengthen its powers in line with those of other international regulators, and to comply with a recommendation of the FATF (in line with a commitment made by the Island’s Chief Minister).

In summary:
  • The JFSC would have the power to impose civil financial penalties in respect of breaches of the Money Laundering (Jersey) Order 2008 – under the current rules, penalties can only be imposed where contraventions breach relevant codes of practice, not the order itself. The change would enable the commission to impose civil financial penalties in respect of failures to meet AML/CFT requirements by registered persons and principal persons, for significant and material contraventions of the MLO, in addition to contraventions of the existing Codes of Practice.
  • The existing caps on civil financial penalties for registered persons (not natural persons) would be removed. The current civil financial penalty structure is based on the nature of contraventions and defined “Relevant Income”, and is capped at £4m for a registered person.The new system would issue fines in proportion with aggregate turnover.
  • The JFSC would have the power to impose civil financial penalties on “Designated Non-Financial Businesses and Professions” – a group that includes casinos, real estate agents, accountants, and lawyers. Also, the JFSC would have power to impose penalties on not just those who meet the current definition of “Key Person” or “Principal Person” but anyone who performs “a senior management function”.
  • Finally, the JFSC would have the power to impose civil financial penalties on persons who should have been registered, but were not.

Currently, where someone has not registered in accordance with the regime, they cannot have a civil financial penalty imposed upon them.

You can view the full consultation here: https://www.gov.je/SiteCollectionDocuments/Industry%20and%20finance/Consultation%20on%20FSC%201998%20Law%20regarding%20civil%20financial%20penalties.pdf

Consultation – Review of the JFSC’s Decision-Making Process

The JFSC has undertaken its first major internal review of the process that it follows when taking administrative action that could result in the imposition of a regulatory sanction, and is consulting on changes to streamline the process.

This follows concern that the process is taking longer than necessary, leading to unnecessary cost for the regulator and the businesses and individuals who are subject to the decision making process.

The JFSC’s decision-making process was first published in 2006 and has been revised several times, notably in 2015 when the JFSC was given the statutory power to impose civil financial penalties. The review that has been undertaken is the first holistic review of the process in 15 years.

The JFSC has proposed a new, steamlined process (which has been reviewed by a leading QC) which includes two key changes:

  • The final determination on whether a sanction should be imposed and on the level of the sanction will not be made by the full board of the JFSC, but by a board constituted of three Commissioners – these boards will be convened on an ad hoc basis to ensure that cases are heard as quickly as possible.
  • The existing Review Committee stage early in the process in which senior JFSC officers decide if a case should go to the board with a recommendation for a sanction, will be replaced by a quicker, less formal process.
You can view the full consultation here: https://www.jerseyfsc.org/media/4777/consultation_paper_dmp.pdf

Next Steps

Both consultations are due to run until the end of August.

At the conclusion of the consultations, changes to give effect to the proposals are likely to be lodged for debate by the States of Jersey by the end of September.

JERSEY
Jonathan HeaneyManaging PartnerT +44 (0)1534 700 786jonathan.heaney@walkersglobal.com
Marc SeddonPartnerT +44 (0)1534 700 761marc.seddon@walkersglobal.com
Dilmun LeachGroup Partner*T +44 (0) 1534 700 783dilmun.leach@walkersglobal.com
Daniel ReadSenior CounselT +44 (0) 1534 700 764daniel.read@walkersglobal.com
Tom FothergillSenior AssociateT +44 (0) 1534 700 724tom.fothergill@walkersglobal.com
James TurnbullSenior AssociateT +44 (0)1534 700 776james.turnbull@walkersglobal.com