Guernsey financial crime evaluation highlights continued scrutiny

The recent evaluation, alongside the introduction of proliferation financing rules, underscores the continued focus on financial crime in the region, prompting firms to ensure their approach continues to be effective against evolving risks.

As part of the ‘mutual evaluation’ process, a team from the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) conducted an on-site visit focused on Guernsey’s adherence to international anti-money laundering and combating the financing of terrorism (AML/CFT/CPF).

While the results are yet to come in, the evaluation itself is unlikely to unearth any significant shortcomings. Although against the wider context of Guernsey’s ongoing commitment to position itself as a safe and attractive place to invest and do business, firms can expect policies, procedures and practices to be under the microscope for the foreseeable future.

Proliferation financing regulation adding to workloads

The introduction of proliferation financing regulation last year has also been adding to the already significant workload of firms. With the goal of preventing the funding of weapons of mass destruction and their delivery systems, there’s a pressing need to enhance due diligence processes, transaction monitoring systems, and risk assessments to identify and prevent any involvement in proliferation financing activities. Alongside additional training for staff, investments in technology and resources, and adjustments to existing compliance frameworks, there’s a significant mountain to climb.

Strengthening your three lines of defence

The ‘three lines of defence’, consisting of robust policies and procedures, a comprehensive compliance oversight function, and an annual independent audit of the compliance function, can provide clarity to individuals and functions, hold them to account and maintain effectiveness as risks emerge or evolve.

Policies and procedures

Clear and thorough policies and procedures outline expectations, processes, and controls to mitigate risks associated with money laundering, terrorist financing, and proliferation financing. A robust set of policies and procedures ensures that employees understand their roles and responsibilities in compliance efforts, reducing the overall likelihood of regulatory breaches.

Compliance oversight

A compliance oversight function acts as a central authority responsible for monitoring and enforcing adherence to regulatory requirements and internal policies. This includes conducting regular risk assessments, monitoring transactions for suspicious activities, and providing guidance and training to employees. A dedicated compliance oversight function can proactively identify and address gaps, strengthen controls, and respond effectively to emerging risks.

Independent audit

An independent audit of the compliance function can provide an objective evaluation of the effectiveness of compliance efforts and internal controls. These audits, conducted by both external auditors or internal audit teams, assess the design and implementation of compliance programs, identify areas of non-compliance or weaknesses in controls, and recommend improvements. They allow organisations to gain assurance that their compliance function operates efficiently, mitigates risks effectively, and meets regulatory requirements.

We can help

Our team of experts can run health checks to assess your current approach and support in implementing a robust three lines of defence to build an effective, scalable compliance function. Get in touch if you’d like to discuss further.