Mar 20 2009 Martin Coyle Complinet exclusive
Guernsey is likely to adopt the Third Money Laundering Directive as part of its attempt to bring the island into line with the rest of Europe, according to Nick Van Leuven, QC, HM Procurer. The island's chief legal officer also suggested that the Financial Services Authority's tough new approach to enforcement might not be the way forward.
Speaking at a Guernsey anti-money laundering conference earlier this week, which Complinet attended, Van Leuven told delegates that the recent focus on offshore financial centres, as well as the global financial strife, meant that Guernsey had to be above reproach in terms of its regulation.
"We all need to retain cool heads and demonstrate a clear and effective commitment to international standards rather than deploy the ostrich position. There is going to be more focus on international issues and regulation. A failure to embrace this will lead to the death of Guernsey," he said.
Van Leuven said that it was clear that part of this enhanced international scrutiny would fall on the island's attitude towards money laundering. He said that it was "likely" that Guernsey would move to adopt the directive, as the International Monetary Fund and the Financial Action Task Force were likely to judge harshly any shortfall in the island's current money laundering legislation.
"Bad business drives out good business. It is all about reputation and the perception of regulation. Bad business attracts more bad business and those with good businesses get tainted," he told the event that Offshore Professional Conferences organised.
Van Leuven added that the financial strife that had engulfed the world's financial services industry was likely to lead to more uncovering of instances of money laundering and illegality. The focus in the fallout will be on fraudsters and launderers, he said. He noted that Guernsey was aiming to recruit a financial crime barrister, while 2010 would herald the formation of a new financial and cross-border financial crime unit. Guernsey faced a tough challenge, he conceded.
"Only by being better can we survive," he said.
Massive change
Van Leuven said that it was clear that the nature of financial services regulation was about to undergo a massive change and pointed to a recent speech by Hector Sants, FSA chief executive, who said that firms needed to "fear" the FSA more. "Regulation in the UK is about to get much tougher. Personally, I don't think that it helps the industry to have a regulatory system based on fear. It is better to have a closer dialogue with the industry," he said.
The Guernsey Financial Services Commission, which is aiming to begin dialogue with the industry to close any gaps in legislation with Europe, backed his stance. Richard Walker, GFSC director of policy and international affairs, told the audience that the regulator would begin discussions with the industry about adopting the directive late this year or early next year.
"I think Guernsey will end up complying with the Third Money Laundering Directive. At the moment we meet most elements of it and we had an eye on it when the handbook was being prepared. At present the European Union goes slightly further in its coverage," he said.
Walker added that the regulator was aiming to extend the ambit of its money laundering regulations to cover all dealers of high value goods to bring it into line with Europe. At present, the island's legislation covers jewellery shops and imposes a £10,000 limit of transactions.
