‘All change’ for the regulation of Jersey Private Trust Companies
As the name suggests, a private trust company (PTC) is an entity established to provide trust company services to specific trusts (often the concerns of a particular family). PTCs can benefit from an exemption to obtain registration under Jersey’s Financial Services Law if:
- the purpose of the PTC is solely to provide trust company business in respect of a specific trust or trusts;
- the PTC does not solicit from or provide trust company business to the public;
- the PTC is “administered” by a trust company business (TCB) registered by the Jersey Financial Services Commission (JFSC); and
- the name of the PTC is notified to the JFSC.
Previously this also exempted the PTC from having to directly meet the requirements under the Proceeds of Crime (Jersey) Law – reflecting the expectation that the necessary money laundering safeguards flow through from the registered TCB who is administering the PTC. In terms of the Proceeds of Crime Law requirements, however, this has now changed.
When Jersey was last evaluated against FATF standards on AML/CFT by Moneyval, their 2016 report expressed concern that the full exemption of PTCs from the relevant requirements was not in line with the FATF’s view that exemptions only be applied “in strictly [and] justified circumstances, and based on a low risk of ML/TF”.
The assessors concluded, despite the safeguards in place, that PTCs “are high risk activities given that they are generally used by ultra high net worth individuals (UHNWI) that wish their structures to be administered by a separate trust company in order to segregate their family assets from the large number of other trusts that may be administered by a regulated trust company business. PTCs have also been used for structuring purposes in relation to real estate transactions”.
Whatever your view on that conclusion, there was also perhaps something of a weakness in the regime in that the level of “administration” required to be provided by the registered TCB to the PTC for it to be able to benefit from the exemption remained undefined, running the risk that the activities of the PTC may not have been fully understood by the TCB.
Jersey’s government has responded to the Moneyval report by a wholesale re-write of the exemptions to the Proceeds of Crime Law, which now are linked much more closely to the approach set out in the FATF standards. As a result, many of the exemptions which reflected Jersey’s specific regulatory approach to different types of business, have been removed.
This means that the provision of trust company business will be subject to the Proceeds of Crime Law, when such provision is “conducted as a business”. While a PTC would not on the face of it seem to meet some of the indicative tests given for conducting its activity as a business, the “mood music” from the authorities suggests that the intention is for PTCs to be caught.
So what does this mean for PTCs?
In summary, the obligations that now fall on PTCs include:
- the need to appoint a Money Laundering Reporting Officer (MLRO);
- the need to appoint a Money Laundering Compliance Officer (MLCO) (although these can be the same person, they will need to be considered ‘fit and proper’ by the JFSC); and
- the need to adopt appropriate policies and procedures to counter ML/TF, including a risk assessment.
The good news is that both these Officers, and the necessary policies and procedures, can be supplied to the PTC by its current trust company administrator (should the JFSC consent to that trust company acting as its “AML services provider”.)
From a governance point of view, the PTC will need to make the decision to appoint the AML services provider, agree to the appointment of its MLRO and MLCO and be able to demonstrate it can monitor the services being provided. Unsurprisingly, appointing an AML service provider does not entirely remove the responsibility to be compliant from the PTC.
PTCs and their current administering trust companies will need to re-negotiate their current contractual arrangements to reflect the additional AML service provider activities being put in place.
The trust company will need to apply to the JFSC be an AML services provider, amend its own policies and procedures and risk assessment to reflect the additional services being provided and ensure it can meet the new terms agreed with its PTCs.
When does this take effect?
The necessary legal changes are now in effect, and a transitional period has commenced for existing PTCs which expires at the end of June 2023. PTCs and their current service providers should work together to meet the deadline for compliance.