Having had rather a busy time of it recently, it is only this week I have had a good chance to read in detail the latest news from the GFSC. What caught my eye was , not only the new website, but the latest addition to the Frequently Asked Questions issued on the 3rd October which is aimed at lawyers.
In the early 1990’s, I was asked to advise the partners of my law firm on the effect of the requirements brought in under the Money Laundering Regulations 1993 which came into force on 1 April 1994. These regulations implemented what has become known as the first Money Laundering Directive or 91/308/EEC of 10 June 1991. There was much confusion at the time as to what was required by way of identification of the firm’s clients. I remember well trying to explain that I did not need to see my client’s passport if I wanted to just prepare their Will.
In the end, because of that confusion, and my view that the requirements of AML/CFT would creep to most of our work, it became a question of whether to differentiate between clients depending on their instructions or have a consistent approach which would ensure all staff were aware of the Rules. As we know, the number of businesses affected by the AML/CFT legislation generally did increase but, as it turned out, the type of legal work covered is still restricted to five main areas.
So for lawyers, notaries and other independent legal professionals in Guernsey, paragraph 5 of Schedule 2 of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 applies to their business when they prepare for or carry out transactions for a client in relation to the following activities:
- the acquisition or disposal of an interest in or in respect of real property;
- the management of client money, securities or other assets;
- the management of bank, savings or securities accounts;
- the organisation of contributions for the creation, operation, or management of companies; and
- the creation, operation, management or administration of legal persons or arrangements, and the acquisition or disposal of business entities. (my emphasis)
Thank you to my colleague and fellow AML/CFT professional for pointing out that the FAQs miss out the activity of administration of legal persons or arrangements. This may be an error as, when I first saw the FAQs, I noted that the date of the Regulations was also incorrect. I am pleased to say that the date has been changed in the main body of the FAQs although it has not been amended in the link on the new website.
The FAQs go on to note that the activities, as described in paragraph 5(e) of Schedule 2, if undertaken within the Bailiwick, are regulated activities for the purposes of the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. ( Bailiwick of Guernsey) Law, 2000 and any legal professional carrying them out by way of business requires a licence to do so.
The activities in Section 2 Paragraph 5(e) are:
“the creation, operation, management or administration of legal persons or arrangements, and the acquisition or disposal of business entities,” (again my emphasis)
It is important to note that, when deciding whether any particular activity constitutes “preparing for or carrying out a transaction” and, therefore, subject to the obligations in the Regulations and Handbook, it must be determined on a case by case basis.
Whilst the information is helpful, the most important aspect of the legislation affecting lawyers was brought out in the last part of the FAQs – I have set this it out in full below:
“Are the reporting obligations under the Disclosure (Bailiwick of Guernsey) Law, 2007 and the Terrorism and Crime (Bailiwick of Guernsey) Law, 2002 applicable in relation to legal services that do not constitute preparing for or carrying out a transaction?
Yes. The reporting obligations apply to knowledge, suspicion or reasonable grounds for suspicion that a person acquires in the course of any trade, profession or economic activity, irrespective of whether or not that trade, profession or economic activity is covered by the AML/CFT regulatory framework.”
As this was a little confusing – did it cover all relevant employees or just those that are involved in the listed activities? – I wrote the GFSC to obtain clarification and was assured, as I hoped I would be, that this included all relevant employees.
So lawyers must remember that they should train their staff accordingly, including those not preparing for or carrying out a transaction for a client in the five activities listed.