Treasury Minister Responds on Financial Regulations

This news published by the Celtic League:

Treasury Minister Responds on Financial Regulations

NEWS FROM THE CELTIC LEAGUE

The Isle of Man Treasury Minister, Eddie Teare MHK has responded to a query sent by the Celtic League asking about financial control and regulation following the NAMA allegations (link):

https://www.celticleague.net/news/how-robust-are-transactions-procedures...

The reply from Mr Teare is set out below:

“Dear Bernard

As was made clear in the “Council of Ministers’ Commitment to Combatting Money laundering and the Financing of Terrorism & Proliferation” document published in June 2012 this Government, and its agencies, recognise that it is imperative to be a responsible jurisdiction and take all steps, in line with international accepted standards, to combat Money Laundering and the Financing of Terrorism & Proliferation (“AML/CFT”) from occurring within its borders.

The International Standards on Combating Money Laundering and The Financing of Terrorism & Proliferation are set out in the FATF Recommendations, the most recent version of which were adopted internationally in February 2012.

The FATF Recommendations set out details of the basic principles which all jurisdictions should apply. The FATF Methodology, the most recent version of which was published in February 2013 sets out more detailed criteria for assessing the implementation and effectiveness of the FATF Recommendations within a jurisdiction. We have updated our regulations with a new Anti-Money Laundering and Countering the Financing of Terrorism Code 2015, and have co-ordinated a national risk assessment of AML/CFT risks.

There is international agreement that the greater risk of facilitating money laundering and, therefore the greater opportunity for identifying suspicions of it, lies with financial institutions and a range of designated non-financial businesses and professions. These persons are best placed to monitor clients’ account activity, and identify and then report any suspicious transactions. This is the principal framework through which potentially illegal activity is monitored and then reported, and there is a legal obligation on such intermediaries in this respect.

The reason there has never been any international consensus around state monitoring or scrutiny of “substantial movements of funds through the jurisdiction” is principally because of the difficulty of reaching a consensus on what constitutes a “substantial movement of funds”. For example for a retail bank the sum of £10,000 might be a substantial transaction in relation to a particular account whereas for another bank a transaction between suppliers of £10 million might represent substantially less than the value of a single shipment. Either of those sums may or may not, depending on the context, be considered suspicious to the institution in terms of its knowledge of its clients and their normal business activity.

The Proceeds of Crime Act 2008 is the principal legislation on the Isle of Man criminalising Money Laundering and includes statutory provisions to prevent the facilitation of money laundering. The legislation defines business which is considered to be that of a financial institution or a designated non-financial business or profession. Such defined businesses are required as a matter of law, with criminal consequences for non-compliance, to obtain information in respect of their customers, monitor the transactions of their customers and assess such information for suspicions of money laundering. The statutory requirements for such businesses are set out in the AML/CFT Code I mentioned earlier. If businesses to which it applies fail to comply with this Code, or if they comply with this Code but fail to disclose suspicions, they commit a criminal offence.

As part of its routine supervisory visit regime the Financial Supervision Commission carries out, on every visit to a licence holder, an assessment of the firm’s documented processes in compliance with the aforementioned Code together with a sampling of client information to assess whether the documented procedures are being effectively and appropriately performed. Should it find that there is any material failing, it will take steps which could range from simply requiring changes in respect of more minor breaches to seeking serious regulatory or criminal sanction for the most serious failings.

The FSC in conjunction with the FCU will also use information from local convictions, and information passed to them for this purpose by overseas investigators in respect of overseas convictions, to assess compliance by local businesses with their statutory obligations and take appropriate steps to deal with any failings identified.

In the absence of any evidence to the contrary and in the context of our overall resources, I am satisfied that the current arrangements provide an effective means of combatting AML/CFT in line with agreed standards. We regularly review the matter of resources set aside for AML/CFT purposes, and there will be an opportunity to do so again when the national risk assessment on AML/CFT mentioned above is completed.

Finally, this response would be incomplete without referring to the significant assistance which we also provide to overseas law enforcement authorities and regulators in response to bona fide requests for information as part of their investigations. This co-operation is a major plank in international AML/CFT work.

As regards costings, the estimate net running cost of the two agencies is £2.9m.

Yours sincerely,

Hon W E Teare MHK
Minister for the Treasury”

The Celtic League are grateful for the prompt and detailed response to our query from the Minister.

J B Moffatt (Mr)

Director of Information
Celtic League

24/07/15

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