For more than 5 years now, Brexit has been a talking point for many. As transition ends, it’s no longer words but actions that are needed to adjust the way we work and trade. However, as we live in a third country, this hasn’t affected AML compliance professionals a great deal – that is until we reached “exit day”.
Ever since the Brexit referendum, the Bailiwick has prepared for the UK leaving the EU by enacting a plethora of legislation which came into force on “exit day”. In a circuitous route via The European Union (Brexit) (Bailiwick of Guernsey) Law, 2018 (“the Brexit Law”) and 2020 Regulations*, “exit day” was appointed as 11 pm on the 31st December 2020. One of the main changes on that day – certainly from a financial crime perspective – was that made to the Sanctions Regime.
As an international finance centre, the Bailiwick has long been committed to the effective implementation of sanctions including those imposed by the EU. Prior to 2018, EU sanctions required implementation by Ordinance in the three independent legislatures of Guernsey, Alderney and Sark. However, in its report in 2014, MoneyVal noted that there was an unacceptable delay between the introduction of EU sanctions and the enactment of these Ordinances. So when the Sanctions (Bailiwick of Guernsey), Law 2018 (“the 2018 Law”) was drafted, it enabled EU Sanctions to be brought in Bailiwick-wide by regulations implemented by Guernsey’s Policy & Resources Committee.
As far as the UK leaving the EU was concerned, the importance of remaining aligned with the UK was acknowledged and also incorporated into the 2018 Law. This was done by including in the definition of a “sanctions measure” regulations made by an “appropriate” UK minister under the Sanctions and Anti-Money Laundering Act 2018. By doing so, P&R can implement urgent legislation so that regulations made by a UK minister have full force and effect in the Bailiwick at the earliest possible opportunity.
And this is exactly what was implemented. By virtue of the Sanction (Implementation of UK Regimes) (Bailiwick of Guernsey) (Brexit) Regulations, 2020, signed off by the President of P&R on the last day of 2020, some 35 UK Regulations come into operation in the Bailiwick. Although having direct effect here, these UK Regs have been fairly extensively “Bailiwick of Guernsey-fied” in the process. These amendments are only sensible given, for example, we should not apply UK offences, penalties or enforcement proceeding to our regime.
Similarly, the Bailiwick’s transitional provisions in respect of licences should apply rather than that of the UK and, as would be expected, existing licences transfer to the new regime for the rest of their duration retaining their existing conditions. At Schedule 4 of the 2020 Regs, there is also a helpful list of the 94 pieces of Bailiwick legislation under which previous licences were issued and the corresponding UK enactments under which the replacement licences are now deemed to be issued. Necessarily, pending applications as at “exit day” will be dealt with under the new regime.
As a result, designations that have been and will be made under these UK Regs will need to be included in your firm’s screening programme. As most financial institutions rely on external providers for third-party screening and these should already include all UK designations, it would seem that there may be little to do. However, as with most changes, it is important not only to amend the policies and procedures to refer to this new legislation, it is also important to remove references to the legislation which has been repealed (of which there were 8 Bailiwick-wide and 36 in Guernsey and 34 in each of Sark and Alderney) and to note amendments to the Terrorist Asset-Freezing (Bailiwick of Guernsey) Law, 2011.
Interestingly, before any Committee can make regulations such as these under the Brexit Law (as I have called it), it requires a certificate from HM Procureur confirming, amongst other things, that those regulations are necessary or expedient in both the consequence of the withdrawal of the United Kingdom from the EU and the public interest. That necessity certainly cannot be denied.
Clearly, having a sanctions regime consistent with the UK and one that also ensures EU sanctions are complied with is essential to maintain our international standing. So whilst we have spent many months and years amending our policies and procedures to comply with the requirements of FATF and Europe’s MoneyVal, further amendments are again needed after exit day to cater for the UK’s Brexit.
The full details of the changes and the legislation can be found in the three Sanctions Notices on the home page of the GFSC’s website and the Sanctions pages on the website of the States of Guernsey.
* The European Union (Exit Day and Designated Day) (Brexit) (Bailiwick of Guernsey) Regulations, 2020