Offshore Financial Centres - Treasury Contents

Memorandum from the Jersey Financial Services Commission


  1.1  This submission, in response to the Treasury Committee's inquiry into offshore financial centres, is made by the Jersey Financial Services Commission (the "JFSC"). The JFSC is Jersey's financial services regulator.


  2.1  This paper seeks, in particular, to draw the Committee's attention to:

    2.1.1  The role of the JFSC as Jersey's independent, appropriately resourced financial services regulator with clear purposes, aims and statutory powers.

    2.1.2  Jersey's modern framework for the prudential supervision of financial services businesses, and the comprehensive measures in place to prevent and detect money laundering and the financing of terrorism.;

    2.1.3  Jersey's commitment to meeting international regulatory standards and the independent assessments that have confirmed that Jersey does indeed meet those standards.

    2.1.4  The JFSC's active engagement with the international regulatory community and the involvement of its staff in providing support and training to other regulatory bodies.

    2.1.5  The assistance and co-operation that the JFSC provides to other regulatory bodies.

    2.1.6  The JFSC's commitment to providing publicly available information on the breadth and size of Jersey's finance industry.


  3.1  The JFSC is responsible for the regulation and supervision of the financial services industry in Jersey. It is a statutory body corporate, set up under the Financial Services Commission (Jersey) Law 1998 (the "Commission Law").

  3.2  The JFSC also operates Jersey's Registry for companies, limited partnerships, limited liability partnerships and business names. The types of companies on the Register include special purpose vehicles and, on a smaller scale, structured investment vehicles. Jersey companies are either required to provide beneficial ownership information to the JFSC or, in cases where the company is administered by a regulated trust company business (see 4.1), the JFSC may obtain such information from the trust company business. By law, trust company businesses are required to obtain beneficial ownership information on companies they administer. (Failure to do so is a ground for a criminal penalty or a regulatory sanction to be applied (which, in the latter case, may include the revocation of a firm's regulatory licence)).

  3.3  The Commission Law provides for a Board of Commissioners to be the governing body of the JFSC. The Board presently consists of 10 Commissioners, who—as required by the Commission Law—are made up of a balance of persons covering providers of financial services, users of financial services and persons representing the public interest.

  3.4  The Commission Law established the JFSC as an independent body, fully responsible for its own regulatory decisions. The JFSC is accountable for its overall performance to the States of Jersey (the Island's parliament).

  3.5  The JFSC's key purpose is to maintain Jersey's position as an international finance centre with high regulatory standards by:

    3.5.1  reducing risk to the public of financial loss due to dishonesty, incompetence, malpractice or the financial unsoundness of financial service providers;

    3.5.2  protecting and enhancing the Island's reputation and integrity in commercial and financial matters;

    3.5.3  safeguarding the Island's best economic interests; and

3.5.4 countering financial crime both in Jersey and elsewhere.

  3.6  In support of its key purpose, the JFSC aims to:

    3.6.1  ensure that all entities that are authorised meet fit and proper criteria;

    3.6.2  ensure that all regulated entities are operating within accepted standards of good regulatory practice;

    3.6.3  match international standards in respect of banking, securities, trust company business, insurance regulation, anti-money laundering, and terrorist financing defences;

    3.6.4  identify and deter abuses and breaches of regulatory standards; and

    3.6.5  ensure that the JFSC operates effectively and efficiently, and is accountable to the States of Jersey.

  3.7  The JFSC presently has a staff complement of 105 (full-time equivalent).

  3.8  Further information about the structure and governance of the JFSC can be found on its website ( and in its recently published 2007 Annual Report.[562]


  4.1  The JFSC has responsibility for the prudential oversight of banks, insurance companies, fund services businesses, investment businesses (investment managers, dealers and advisers), trust company businesses (trust and company service providers), general insurance mediation businesses and money service businesses (bureaux de change and money transmitters). Collectively, these will be referred to herein as "regulated businesses".

  4.2  The legal basis for overseeing regulated businesses is contained in the following laws: the Banking Business (Jersey) Law 1991; the Collective Investment Funds (Jersey) Law 1988; the Financial Services (Jersey) Law 1998; the Insurance Business (Jersey) Law 1996 (the "four regulatory laws"). Copies of these laws are publicly available from the website of the Jersey Legal Information Board.[563]

  4.3  The four regulatory laws, combined with the Commission Law, provide the JFSC with the statutory power to conduct off-site and on-site supervision of regulated businesses. (With regard to the latter, 155 on-site examinations were completed in 2007.) The four regulatory laws also provide the JFSC with various tools and powers to ensure that it can carry out effective supervision. The JFSC is able to require the provision of information and documents, to conduct investigations and to enter and search premises (upon issue of a warrant).

  4.4  In addition, the four regulatory laws provide for the JFSC to be able to revoke a regulated business's licence (or refuse to licence an applicant), to set conditions on a licence, to issue directions requiring a regulated business to take or not take specific action, to appoint a manager to manage a regulated business, and to issue public statements that warn the public and/or censure the regulated business.

  4.5  The four regulatory laws also provide for criminal offences to be committed where (inter alia) a person conducts a financial service business without the relevant licence from the JFSC or provides information to the JFSC that is false or misleading.

  4.6  The JFSC has powers under the four regulatory laws to issue Codes of Practice that set standards that regulated businesses must meet. The Codes that have been issued are available from the JFSC's website[564] and these set, for example, conduct of business rules and financial resource requirements.

  4.7  The Committee may have noted from the list of regulated businesses in 4.1 that Jersey is one of the few jurisdictions in the world that comprehensively regulates and supervises trust and company service providers.

  4.8  The JFSC currently supervises 47 banks, 184 insurance companies, 480 fund services businesses, 115 investment businesses, 192 trust company businesses, 120 general insurance mediation businesses and 48 money service businesses.


  5.1  As well as the prudential supervision of regulated businesses, the JFSC is also responsible for overseeing regulated businesses for their compliance with AML/CFT legislation and associated regulatory requirements, as well as for their compliance with United Nations and European Union sanctions requirements.

  5.2  The JFSC issues and maintains Jersey's "Handbook for the Prevention and Detection of Money Laundering and the Financing of Terrorism". This is available from the JFSC's website.[565] The Handbook sets AML/CFT regulatory requirements on regulated businesses.

  5.3  Non-compliance with Jersey's AML/CFT legislation by a regulated business attracts a range of criminal offences, with various levels of fine and terms of imprisonment. In addition, the four regulatory laws provide for AML/CFT breaches to attract regulatory sanctions by the JFSC (including those listed in 4.4). For example, in a recent case, AML/CFT breaches were a significant factor in the JFSC's decision to close down a trust company business.

  5.4  The JFSC works closely with Jersey's joint police/customs financial intelligence unit (the "Joint Financial Crimes Unit" or "JFCU"). There is a regular exchange of information in relation to regulated businesses, in particular where a suspicious activity report submitted to the JFCU indicates that there may be issues at the regulated business that the JFSC should look into. Conversely, there have been a number of instances where an on-site examination of a regulated business has resulted in the JFSC becoming aware of potential breaches of AML/CFT (and other) legislation and a referral to the JFCU has been made. Investigations and criminal prosecutions have resulted from these referrals. These have included a major criminal prosecution where a regulated trust company and one of its directors was convicted of breaching statutory "know your customer" requirements and fined a total of £100,000.

  5.5  Regulated businesses play a key role in the Island's fight against criminals and the "know your customer" requirements they must follow enables them to be in a position to recognise suspicious or unusual activity by their clients. The vigilance of regulated businesses is reflected in the large number of "suspicious activity reports" submitted by them to the JFCU. For example, in the period January 2005 to December 2007 regulated businesses submitted in excess of 3,500 SARs for investigation. (Further statistical and other information about SARS and the work of the JFCU generally can be obtained from the States of Jersey Police Annual Performance Report).[566]

  5.6  The States of Jersey has recently adopted a new law (currently awaiting Privy Council approval) that will extend the remit of the JFSC to overseeing lawyers, accountants, estate agents, high value goods dealers, and a number of other business sectors, for their compliance with their statutory AML/CFT obligations. The JFSC has already recruited the additional staff necessary to ensure that it has the resources to carry out effective oversight of these new sectors.


  6.1  Jersey's government has publicly committed the Island to meeting international standards on financial regulation and AML/CFT controls. The JFSC is fully supportive of this and attaches particular importance to independent assessments of its compliance with standards set by the FATF, IOSCO, IAIS, and the BCBS.

  6.2  In 2003, the IMF carried out an assessment of Jersey's compliance with these standards. The IMF concluded that "the financial regulatory and supervisory system of Jersey complies well with international standards". The full text of the IMF report can be obtained from the JFSC's website.[567]

  6.3  Since then, there have been significant changes in the international standards to be met, most particularly in respect of those set by the FATF and the BCBS, and more emphasis on the effectiveness with which those standards are being met. The JFSC (and other relevant Island agencies) has been, and continues to be, actively engaged in a process of updating relevant legislation, regulations and procedures to ensure that the Island will continue to meet international standards.

  6.4  The next assessment of Jersey's regulatory standards by the IMF—under its FSAP[568] Updates programme—will take place in October and November of this year. The enactment of updating legislation and the implementation of updated Codes of Practice, and the planning undertaken for the IMF assessment generally, is expected to put Jersey in a good position to achieve standards of compliance that compare favourably with those of other countries, including many EU Member States and G7 countries. The IMF assessment will also include "stress-testing" to assess the likely resilience of the banking sector to financial sector shocks. The JFSC is confident that its regulatory framework for banks in Jersey will ensure that they are well prepared to cope with such shocks.

  6.5  Jersey's AML/CFT systems have recently been subject to review by the European Union's Committee on the Prevention of Money Laundering and Terrorist Financing. The committee has been considering which jurisdictions should be considered by Member States to have equivalent AML/CFT systems to the European Union. In a "Common Understanding" published last month the committee stated that "the UK Crown Dependencies (Jersey, Guernsey and the Isle of Man) may also be considered as equivalent by Member States". Following the publication of the Common Understanding, the United Kingdom government publicly confirmed that it considers Jersey to have EU equivalent AML/CFT systems.[569]


  7.1  The JFSC is committed to active engagement with the international regulatory community and does this in a number of different ways.

  7.2  The JFSC is a member of the International Organisation of Securities Commissions (IOSCO), the International Association of Insurance Supervisors (IAIS), the Offshore Group of Banking Supervisors (OGBS), and the Offshore Group of Insurance Supervisors (OGIS).

  7.3  Officers of the JFSC sit on IOSCO Standing Committee 5 (investment management) and also the Implementation Task Force, which developed the Methodology used to assess compliance with IOSCO's Objectives and Principles. An officer of the JFSC also sits on the IAIS's pensions committee and the OGIS management committee.

  7.4  The JFSC has been a member of the OGBS since its creation in 1980, and has played a leading role in the OGBS's anti-money laundering programme; particularly through the OGBS Chairman Colin Powell, who is also Chairman of the JFSC.

  7.5  Through its membership of the OGBS, the JFSC works with the Financial Action Task Force (FATF) (the international body responsible for setting AML/CFT standards) and the Basel Committee on Banking Supervision (BCBS). The JFSC's Chairman attends all FATF meetings. The Chairman co-led the FATF typologies project on the misuse of corporate vehicles, the report on which was published in October 2006. The JFSC's Chairman also co-chaired the Basel Committee Working Group on Cross-Border Banking, which issued a paper on customer due diligence for banks. The OGBS is also involved in Interpol's Working Group on Anti-Money Laundering and Terrorist Financing.

  7.6  As part of the OGBS, the JFSC has also participated in the development by the OGBS of a statement of best practice for trust and company service providers.

  7.7  The JFSC also attends and contributes to the work of the Wolfsberg Group, an association of eleven global banks, which aims to develop financial services industry standards, and related products, for "Know Your Customer" and AML/CFT policies.

  7.8  The JFSC's Companies' Registry division is also active internationally. The JFSC's Director, Registry sits on the board of the European Business Register (EBR). The EBR is responsible for maintaining access to the data of 20 million companies held in the Registries of 19 European jurisdictions (including the United Kingdom and Jersey). The EBR also manages a number of research projects funded by the European Union.

  7.9  The JFSC's Director, Registry also sits on the board of the International Association of Commercial Administrators (IACA) as the director representing the international section chair. IACA is the association of all United States and Canadian companies' registries.

  7.10  The JFSC actively monitors international regulatory developments. For example, it has recently completed a comprehensive review of the April 2008 Financial Stability Forum's report on "Enhancing Market and Institutional Resilience" and assessed what action the JFSC should take in support of the report's recommendations.

  7.11  The expertise of the JFSC has resulted in its staff being asked to participate in assessment exercises and to provide training to regulators and other bodies. Some examples are given below.

  7.12  Officers of the JFSC have been seconded to the International Monetary Fund (IMF) to act as subject experts on IMF assessments of the standards of financial regulation in Cyprus, Vanuatu and the Bahamas. In addition, a JFSC officer provided AML/CFT training at a seminar hosted by the World Bank for North African and Middle East regulators. Earlier this year, a JFSC officer provided AML/CFT training to the financial services regulator in Nevis. Later this month, a member of the JFSC's staff, at the invitation of the European Commission under its TAIEX[570] programme, will provide anti-money laundering training to the Serbian Ministry of Finance.

  7.13  To assist in the development of the skills of overseas regulatory staff, the JFSC has provided secondments to officers of financial service regulators from the British Virgin Islands, Bahrain, China, the Netherlands and Vanuatu. JFSC staff have also provided training on "Effective Supervision" to regulators situated in a number of Caribbean jurisdictions as part of initiatives funded by the IMF or the Foreign and Commonwealth Office.

  7.14  The JFSC also hosts periodic awareness-raising seminars for staff of the Metropolitan Police and the Serious Fraud Office on the "uses and abuses of offshore structures" and how to investigate them. Other organisations that have benefited from awareness-raising seminars from subject specialists at the JFSC include the Royal Canadian Mounted Police, French investigating magistrates and the City of London Police.


  8.1  The four regulatory laws provide the JFSC with wide powers to assist regulators in countries or territories outside of Jersey. For example, these include the following powers that may be exercised by the JFSC in order to assist an overseas regulator:

    8.1.1  the power to refuse or revoke a licence;

    8.1.2  the power to impose, revoke or vary conditions of registration;

    8.1.3  the power to obtain information and documents;

    8.1.4  the power to appoint an inspector;

    8.1.5  the power to communicate information that is in the possession of the JFSC (notwithstanding confidentiality provisions).

  8.2  In response to formal requests for assistance from an overseas regulator the JFSC can serve notices on persons/businesses in Jersey requiring the production of evidence on behalf of the overseas regulator making the request. Over the past four years, the JFSC's Enforcement Division has responded to formal requests for assistance from overseas regulators on 42 occasions. Generally speaking, these requests from overseas regulators sought information to assist with investigations linked to suspected insider dealing, market manipulation or the provision of false and misleading information. In addition to these formal requests, the JFSC's supervision divisions respond each year to numerous routine requests from overseas regulators, for example, to confirm that a particular business is regulated, that no adverse information about a particular entity or person is held, etc.

  8.3  Jersey legislation does not require bi-lateral agreements to be in place in order for the JFSC to co-operate internationally. Notwithstanding this, the JFSC is of the view that bi-lateral agreements can be of assistance in setting out the practical steps to be taken when assistance is required. They also publicly demonstrate the JFSC's clear commitment to international regulatory co-operation.

  8.4  To date, the JFSC has concluded 33 bilateral memoranda of understanding with overseas financial services regulators. The full list is available from the JFSC's website.[571]

  8.5  In addition, the JFSC has concluded a letter of intent with the Hong Kong Securities and Futures Commission and a Statement of Co-operation with the China Banking Regulatory Commission.

  8.6  Jersey was amongst the first jurisdictions to become a signatory to IOSCO's multilateral memorandum of understanding. The memorandum sets a benchmark for co-operation on combating securities and derivatives violations, and commits Jersey to sharing a wide range of information about the illegal use of the securities and derivatives markets with securities regulators in other countries. Before signing the memorandum, the JFSC had to satisfy IOSCO that it has the necessary laws, powers and practices to co-operate effectively in investigations. A full list of the 47 signatories to the memorandum can be found on IOSCO's website.[572] The signatories include regulators in major European countries, the Far East and the United States.

  8.7  Given the increasingly cross-border nature of financial services, the JFSC recognises the importance of the publication of statistical information on the size of Jersey's finance industry. The JFSC publishes data in a number of different ways.

  8.8  On a quarterly basis the JFSC collates information on the breadth and size of Jersey's finance industry. This includes, for example, information on the size of bank deposits and funds under management. These statistics are formally published by another Island agency, Jersey Finance Limited, and can be viewed on its website.[573]

  8.9  The JFSC is a voluntary contributor to the IMF's Information Framework (the "Framework"). The Framework is intended to help improve transparency in the operations of international and offshore financial centres by providing jurisdictions with a common template in their information dissemination efforts. The Framework also provides the IMF with a mechanism to collect comparable information on a regular basis to facilitate monitoring developments in financial centres. The most recent data submitted to the IMF can be viewed on the JFSC's website.[574]

  8.10  Another IMF statistics initiative that the JFSC voluntary contributes data to is its Co-ordinated Portfolio Investment Survey ("CPIS"). The purpose of the CPIS is to collect information on the stock of cross-border holdings of equities and long- and short-term debt securities valued at market prices prevailing at the time of the CPIS, and broken down by the economy of residence of the issuer. Jersey's CPIS data is published on the IMF's website,[575] along with the data from the other 73 contributing jurisdictions.

  8.11  On a quarterly basis, the JFSC provides statistics to the Bank for International Settlements (BIS) under its Locational International Banking Statistics programme. Currently, 40 jurisdictions report their aggregate national locational data to the BIS, which uses them as the basis for calculating and publishing global figures. The data are published as part of the BIS Quarterly Review available from the BIS website.[576]

June 2008

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564   See- 

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566 files/StatesofJersey%20Police%202007%20Annual%20ReportFINAL.pdf Back

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568   Financial Sector Assessment Programme. Back

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570   Technical Assistance and Information Exchange programme. Back

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572   http// Back

573   For example, see Back

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