Financial Services

The financial services industry accounts for nearly 40% of economic activity in Jersey, and around 70% of tax revenue.

Priorities

The Chief Minister’s Ministerial letters, published on 10 August 2022, included the following on the financial services industry –

To support our well-established and high standard financial services industry, you will, I know, also devote considerable attention - being responsive, innovative, and providing the right framework within which it will thrive and be competitive. This will include delivering a positive outcome from our forthcoming Moneyval assessment in 2023.

The Ministerial plans for 2024, published on 19 September 2023, identified two priorities in respect of financial services -

1. Maintaining and enhancing Jersey’s position as a leading and well- respected international finance centre while responding to the needs of Islanders to access financial services products, by:

• continuing to enhance the industry’s ability to take advantage of the opportunities created by fintech and Open Finance
• developing an appropriate legislative framework for regulation of digital assets
• enhancing consumer protections by implementing consumer lending legislation and a comprehensive framework for pension regulation
• responding to the conclusions of the MONEYVAL report and developing international best practice, reviewing the Island’s approach to financial regulation with a view to bringing forward any necessary proposals in order to maintain the island’s position as a leading responsible jurisdiction
• enhancing the product offering for financial services through legislative amendments to key financial services legislation
• effecting the transfer of the Depositors’ Compensation Scheme to the Jersey Resolution Authority.

2. Maintaining and developing a strong regime for combatting financial crime in Jersey in line with international standards, best practice and the Island’s long-term prosperity by:

• Continuing with the process of the 2023/2024 MONEYVAL evaluation, which will assess Jersey against the Financial Action Task Force (FATF) international standards on anti-money laundering and countering terrorist financing including preparing for the findings of the evaluation in the summer of 2024 and publishing a comprehensive response on behalf of the Government and island authorities to the conclusions of the MONEYVAL evaluation.
• continuing to implement the National Strategy for Combatting Money Laundering, the Financing of Terrorism and the Financing of Proliferation of Weapons of Mass Destruction 2022- 2026 and associated action plan
• chairing the Financial Crime Political Steering Group, which takes strategic policy decisions, ensures national cooperation between all agencies and monitors the delivery of the national action plan
• providing for the full transition of the Financial Intelligence Unit out of the States of Jersey Police with legislation and necessary funding
• developing an enhanced approach to law enforcement agencies investigating complex financial crime by considering further changes to the legislative framework
• receiving reports on the effectiveness of financial crime agencies from the Financial Crime Agency Review Group (“FCARG”) which will drive decisions on national policy.

Regulatory regime

The Jersey Financial Services Commission (JFSC) is the Island’s financial regulator. Its mission is to maintain Jersey's position as a leading international finance centre, with high regulatory standards.

It supervises businesses in respect of their compliance with the obligation to counter money laundering, terrorist financing and proliferation.

The JFSC operates around guiding principles which are -

• reducing risk to the public of financial loss due to dishonesty, incompetence, malpractice or the financial unsoundness of financial service providers
• protecting and enhancing the reputation and integrity of Jersey in commercial and financial matters
• safeguarding the best economic interests of Jersey
• countering financial crime both in Jersey and elsewhere

Its statutory responsibilities are set out in the Financial Services Commission (Jersey) Law 1998 and include –

• authorising, supervising, overseeing and developing financial services in Jersey
• enforcing the Commission Law
• reporting, advising, assisting and informing the Government of Jersey and public bodies
• developing policies
• operating the Companies Registry.

Money laundering and financing terrorism

In September 2022 Jersey’s National Strategy for Combatting Money Laundering, the Financing of Terrorism and the Financing of Proliferation of Weapons of Mass Destruction was published. This lists seven strategic priorities -

1. Understanding the threat and performance metrics.

2. Better information sharing and co-ordination.

3. Powers, procedures, preventative measures, and tools.

4. Enhanced capabilities of law enforcement, the justice system and private sector.

5. Risk-based supervision and risk management.

6. Transparency and ownership.

7. International strategy .

The priorities are supported by an action plan.

The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism - MONEYVAL - is a permanent monitoring body of the Council of Europe directly to the Committee of Ministers.

The aim of Moneyval is to ensure that its members have effective systems in place to counter money laundering and terrorist financing and comply with the relevant international standards in these fields -

• Recommendations of the Financial Action Task Force (FATF), including the Special Recommendations on Terrorist Financing.
• 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.
• United Nations Convention against Transnational Organised Crime.
• 1999 United Nations International Convention for the Suppression of the Financing of Terrorism.
• Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and the relevant implementing measures.
• 1990 Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, concluded within the Council of Europe.

Moneyval undertakes a number of tasks in relation to this, including being entrusted with the task of assessing compliance with all relevant international standards to counter money laundering and the financing of terrorism and the effectiveness of their implementation, as well as with the task of making recommendations to national authorities in respect of necessary improvements to their systems.

Through a dynamic process of mutual evaluations, peer review and regular follow-up of its reports, Moneyval aims to improve the capacities of national authorities to fight money laundering and the financing of terrorism more effectively.

In November 2022 Moneyval launched its fifth-round mutual evaluation process of Jersey. The report was published on 24 July 2024. The text of the press release is set out below.

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In a report published today, the Council of Europe’s anti-money laundering body MONEYVAL commends the UK Crown Dependency of Jersey for taking steps to strengthen its legal and regulatory framework to combat money laundering (ML), financing of terrorism (FT) and financing of proliferation (FP). It also calls on the jurisdiction to further reinforce the practical application of its frameworks for investigations and prosecutions for ML, as well as the enforcement of sanctions related to AML/CFT preventative measures.

The Council of Europe’s anti-money laundering body conducted a comprehensive assessment of the country’s level of compliance with international standards set by the Financial Action Task Force (FATF).

MONEYVAL concludes that, having significantly strengthened its legal framework since the last mutual evaluation, Jersey has most elements of an effective AML/CFT, but still needs to improve the implementation of measures in certain areas.

On the operational side, Jersey has achieved a high level of effectiveness for its understanding of ML/TF risks and implementing adequate AML/CFT policies and strategies to mitigate them. The report commends the authorities for concluding multiple high-quality, comprehensive and detailed risk assessment products informed by a variety of sources. National co-ordination and co-operation between agencies, as well as private sector awareness of risks are also strengths of the system.

The operational independence of Jersey’s Financial Intelligence Unit (FIU) and its resources have significantly improved since the last MONEYVAL assessment. Financial intelligence is regularly used to develop evidence and trace proceeds in ML, TF and predicate offence investigations, although the trend is relatively recent and authorities are encouraged to make increased use of these resources. While ML cases are routinely investigated and proceeds of crime are pursued as a policy objective, the modest number of ML prosecutions, including those for third-party and autonomous ML, call for a more proactive approach by the competent authorities. However, MONEYVAL recognises the positive results of alternative measures put in place such as civil forfeiture mechanisms, introduction of deferred prosecution agreements and the introduction of a criminal offence of the failure to prevent ML.

Jersey has appropriate mechanisms in place to identify, investigate and prosecute TF. The low number of investigations and the absence of prosecutions and convictions has been assessed as consistent with the jurisdiction’s low TF risk profile. Mechanisms to implement, without delay, targeted financial sanctions (TFS) on terrorism financing and proliferation financing are equally in place. Notwithstanding, the assessment detects room for improvement regarding supervision of TFS requirements and the risk-based oversight of the non-profit sector.

Steps have been undertaken to reinforce the AML/CFT supervisory framework, which concentrates on the higher-risk entities and sectors, in line with supervisors’ good understanding of risks. However, the approach to ensure compliance with AML/CFT obligations greatly relies on remedial actions, with a modest imposition of sanctions, which is not considered to be sufficiently in line with the number and types of breaches detected. Measures aimed at preventing criminals from entering the market are in place for all sectors, but the report calls for a more robust process for conducting criminality checks.

The private sector demonstrated a good level of understanding of the risks and compliance with AML/CFT obligations. However, the report makes clear that the private sector’s implementation of measures on complex structures, assessment of the risks for the application of exemptions, application of enhanced due diligence measures (EDD) to politically exposed persons (PEPs) and the detection and prompt reporting of suspicious transactions would merit further improvements.

MONEYVAL finds that Jersey authorities demonstrated a good understanding of the extent to which legal persons and arrangements can be misused for ML purposes. Jersey ensures the availability of adequate, accurate and up-to-date basic and beneficial ownership (BO) information of legal persons and arrangements through a fully populated Registry and trust and company service providers (TCSPs), as well as conducting comprehensive checks, risk assessments and vetting processes on an ongoing basis.

Jersey authorities demonstrated commendable efficiency in actively seeking and providing mutual legal assistance (MLA) and other forms of international co-operation, particularly in the later years of the assessed period. Similar conclusions were drawn regarding the process of BO information sharing. Nevertheless, authorities are encouraged to seek informal cooperation more frequently and continue to increase their outreach to foreign counterparts via MLAs.

Jersey is expected to report back to MONEYVAL under its regular follow-up reporting process in December 2026.

OECD initiative on taxation

The international tax policy landscape is evolving rapidly, with new cross-border initiatives being developed and rolled out at pace. Key to this agenda is the Organisation for Economic Cooperation and Development (OECD) two pillar tax initiative that is aimed at large multinational groups.

Jersey is a founding member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and joined the international consensus of 137 Inclusive Framework member jurisdictions on the two pillar initiative in October 2021. Jersey is thus committed to implementation of the Minimum Standards contained in the two pillar package.

The Pillar One Minimum Standard targets the largest and most profitable global multinational groups – those with annual revenues of at least €20 billion and a profitability margin above 10%. It seeks to allocate a share of residual profits earned by qualifying groups across jurisdictions, based on the location of the group’s customers. Of particular relevance for Jersey, it will contain an important exclusion for certain regulated financial services businesses.

Pillar Two comprises a Minimum Standard treaty-based measure called the Subject to Tax Rule, which is intended to ensure that developing countries are not disadvantaged by low withholding tax rates in their Double Tax Agreements (DTAs). As a Minimum Standard, Jersey – along with other jurisdictions – will be required to implement this rule, to the extent that any of Jersey’s DTAs are not in line with the rules when they are ultimately finalised later in 2022 or into 2023.

The second part of the Pillar Two package is a significant new Global Anti-Base Erosion (GloBE) regime. GloBE is a set of international tax rules that have been carefully designed with interlocking mechanisms to ensure that in-scope multinational groups will pay a 15% minimum effective rate of taxation in each jurisdiction in which they operate.

In April 2022, the Government of Jersey published a consultation paper entitled OECD Pillars 1 & 2: tax policy reflections. The aim of the paper was to provide as much clarity as possible on Jersey’s position regarding the two pillars, to assist in-scope groups in their preparation for global implementation.

The next 12 months will be key to the global implementation of this OECD initiative. Jersey officials continue to participate in intensive OECD technical discussions on design aspects of Pillar One and on the Pillar Two GloBE implementation framework. This includes important work on GloBE “safe harbours”.

Jersey is also carefully monitoring the international developments on GloBE adoption in the EU, US, UK and elsewhere. No political decision has yet been taken on GloBE implementation in Jersey – that will be a matter for the States Assembly to determine, when the landscape on global implementation becomes clearer.

Financial Services Policy Framework

The Financial Services Policy Framework was published in December 2021. This includes a comprehensive analysis of the current position of the financial services industry in Jersey. It lists ten strategic priorities -

1. Maintain and develop the four pillars [private wealth, funds, capital markets and banking] of Jersey’s financial services industry.

2. Enable Jersey to be a leading international financial centre for sustainable finance.

3. Harness the opportunities created by fintech and digitalisation.

4. Maintain an attractive and agile operating environment.

5. Maintain strong adherence to international standards.

6. Review and refresh Jersey’s strategy for combatting financial crime.

7. Enhance Jersey’s profile internationally.

8. Grow and deepen Jersey’s footprint in new and existing markets.

9. Deliver strong and effective stakeholder cooperation.

10. Deepen and broaden the skills and expertise of Jersey’s workforce.

Jersey Finance

Jersey Finance is the representative and promotional body for the finance industry in Jersey. It is funded by the Government and the industry. Its website includes detailed papers on the industry.