Guernsey hails successful Moneyval report as ‘significant achievement’

The government of Guernsey said that gaining pass ratings in six out of the 11 categories in its latest evaluation by Moneyval, the Council of Europe’s anti-money laundering body, as well as passing all 40 recommendations around technical compliance, was a “significant achievement”.

Moneyval inspectors visited Guernsey in April 2024 to adjudge how local laws and regulatory and enforcement processes had improved against international standards in anti-money laundering and combating the financing of terrorism (AML/CFT) since the last inspection in 2015.

Moneyval evaluations rate 11 ‘Immediate Outcomes’ for their level of effectiveness as either high, substantial, moderate or low, with high and substantial regarded as pass ratings. Securing a positive outcome was a major priority for Guernsey given the importance of the island’s financial services sector.

Guernsey was only the third jurisdiction worldwide, alongside the UK and the US, to receive top rating for its implementation of both ‘sanctions on terrorist financing and oversight of non-profit organisations’ (Outcome 10), and ‘sanctions on financing of proliferation of weapons of mass destruction’ (Outcome 11).

The Guernsey government said two of the substantial pass ratings were of particular strategic importance to Guernsey internationally. In respect of ‘beneficial ownership’ (Outcome 5), Guernsey was described as having comprehensive measures to prevent the misuse of legal persons and legal arrangements and to ensure beneficial ownership transparency for legal persons.

Secondly, in respect of ‘international cooperation’ (Outcome 2), Guernsey said it had long prided itself on assisting other jurisdictions to deal with criminals and the pass rating was important for maintaining its positive regional and international reputation.

Guernsey’s remaining Moneyval substantial pass ratings were in relation to ‘risk understanding, policy and coordination’ (Outcome 1) and ‘terrorist financing investigations and criminal justice measures’ (Outcome 9). On the first of these categories, the report described the published risk assessments as high quality and found that a commendable range of measures had been implemented to address the risks identified.

On the second, Moneyval found that, although there had been no investigations or prosecutions in this area, all possible cases of terrorist financing have been thoroughly considered and the authorities had the skills and the knowledge to successfully detect and prosecute terrorist financing should it arise.

For the five areas where pass ratings were not achieved, four received the higher of the two fail ratings and included a substantial range of positive findings. For example, as regards the measures carried out by the private sector (Outcome 4), Moneyval concluded that most businesses in Guernsey implement effective preventive measures, risk-based due diligence and record keeping.

Other positive findings, included on ‘supervision of the finance industry and other relevant sectors’ (Outcome 3) that the Guernsey Financial Services Commission (GFSC) and the Alderney Gambling Control Commission had a very good understanding of risks, that they exercised their functions on the basis of risk and the GFSC actively exercised its enforcement powers, including against senior officers.

As regards the ‘use of financial intelligence’ (Outcome 6), the report found that the analytical products and intelligence reports produced by the Financial Intelligence Unit (FIU) were high quality, but it highlighted the limited extent to which they were used by law enforcement authorities to initiate investigations. The quality of suspicious activity reports (SARs) also remained a concern.

There were also some positive findings about the ‘confiscation of criminal proceeds and instrumentalities’ (Outcome 8), in particular the effectiveness of Customs in administering the cross-border cash control regime and the capacity to detect and restrain cash related to money laundering.

The only immediate outcome where Guernsey received the lower of the two fail ratings was in relation to the ‘investigation and prosecution of money laundering’ (Outcome 7). The report urged Guernsey to improve in this area while recognising that the establishment of the Economic & Financial Crime Bureau (EFCB) indicated a strategic shift towards pursuing money laundering activity that was more aligned with the island’s risks. It also acknowledged that, despite the low number of cases, all types of money laundering had been successfully prosecuted.

The report recommended 11 priority actions, which include:

• Strengthening efforts to obtain the necessary resources particularly in terms of skilled investigative specialists for the EFCB.
• Enhancing the quality and relevance of SARs, as well as addressing underreporting.
• Improving GFSC supervision by further recalibrating its risk categorisation process for investment firms and fiduciaries and revisiting the extent and frequency of examinations for medium-high risk entities to ensure they are adapted to size and risks.
• The GFSC, Registries and Revenue Service to continue and increase their supervisory activities to ensure that Regulated Entities, legal persons and resident agents are complying with their basic and Beneficial Ownership information obligations.

It its technical compliance assessment, Moneyval found Guernsey to be ‘compliant’ with 25 of the 40 FATF Recommendations and ‘largely compliant’ with 15 of the 40 FATF Recommendations. This demonstrated that Guernsey was one of only a few jurisdictions worldwide to have the necessary framework in place to meet all FATF Recommendations.

As a result, Guernsey has been placed into what is described as ‘regular follow-up’, which secures its position as one of the best, secure and safe jurisdictions in the world for financial services. It is expected to report back to Moneyval, under this process, in May 2027.

“This is about meeting international standards in anti-money laundering and combating the financing of terrorism and, while there are areas we need to improve, and we will, we have shown that overall, we meet the standards and compare positively to most other jurisdictions,” said Deputy Rob Prow, President of the Committee for Home Affairs and chair of the financial crime strategic oversight group.

‘It has been a privilege for me to lead the strategic oversight group for the last four years as we’ve worked towards this significant achievement. It has taken a huge collective effort between the States, industry and many other stakeholders across the Bailiwick to secure this successful outcome.”