One size does not fit all

The 2019 GFSC Handbook introduced the concept of Enhanced Measures. These apply to particular business relationships and, crucially, apply whatever the assessed AML/CFT risk of the business relationship.

To recap: the business relationships (and occasional transactions) to which Enhanced Measures apply are those which involve or are in relation to:

• a customer who is not resident in the Bailiwick,

• the provision of private banking services,

• a customer which is a legal person (e.g. a company) or legal arrangement (e.g. a trust) used for personal asset holding purposes,

• a customer which is a legal person (e.g. a company) with nominee shareholders or is owned by a legal person with nominee shareholders.

So, if any of your business relationships fall within any of these categories, Enhanced Measures will apply to those relationships – be they high, medium or low risk.

What enhanced measures are appropriate? First you should note that where a relationship involves more than one category more than one Enhanced Measure may be needed. This goes to the heart of the requirements: you cannot carry out a generic Enhanced Measure against all of these types of relationship and then sit back and consider it a job well done.

The Enhanced Measures must be relevant to and address the inherent risk in each relationship. For example, taking reasonable measures to establish and understand source of wealth and source of funds and considering if this is consistent with your understanding, might be suitable Enhanced Measures for a non-Guernsey resident customer and a customer which is a company being used for personal asset holding purposes. However, it would not be relevant Enhanced Measures for a customer which is a company with nominee shareholders. The Enhanced Measure needs to be seen to be relevant to the inherent risk in a relationship.

The final point worth considering carefully is that you will be expected to be able to point to a particular record to evidence the Enhanced Measures taken. So even for high risk relationships, it is worth recording somewhere on the customer’s file what you consider to be the Enhanced Measures you have taken to address the inherent risk(s). On a practical level this involves decisions about recording this in databases or in other records. That is one reason firms are finding this a challenging area to implement.