What is MONEYVAL?
MONEYVAL is a permanent monitoring body of the Council of Europe. It is a FATF-Style Regional Body (FSRB), and as such undertakes mutual evaluations in respect of countries' compliance with the FATF Recommendations on combating money laundering and the financing of terrorism and proliferation as well as assessing the effectiveness of their implementation.
What is FATF?
- FATF is the Financial Action Task Force, an intergovernmental policy-making body established to counter threats to the financial system, specifically from criminals and terrorists.
- The FATF has developed a series of recommendations that are recognised as the international standards for combating money laundering and the financing of terrorism and the proliferation of weapons of mass destruction.
What is the MONEYVAL assessment?
- The assessment will be conducted by a team of evaluators comprising experts from a number of MONEYVAL member jurisdictions. There are two key elements to the assessment, the Technical Compliance assessment, and the Effectiveness assessment. The assessment team will evaluate the Bailiwick's implementation of the specific requirements of the 40 FATF Recommendations which include the legal framework in place to combat financial crime, and the powers and procedures of the relevant agencies. This element of the evaluation process is referred to as the Technical Compliance assessment.
- When considering compliance against each of the 40 Recommendations, the assessors will allocate one of four levels of compliance as follows:
- Compliant (C) - No shortcomings have been identified
- Largely Compliant (LC) - Only minor shortcomings have been identified
- Partially Compliant (PC) - Moderate shortcomings have been identified
- Non-compliant (NC) - Major shortcomings have been identified
- If a requirement does not apply, due to the structural, legal or institutional features of a country, a rating of Not applicable will be given. However, this is rare, and will not arise in the context of Guernsey.
- Equally as important as the Technical Compliance assessment is the Effectiveness assessment, which looks at just how effective the measures the jurisdiction has put in place to meet the FATF standards are. The assessment team will consider Guernsey's effectiveness in delivering against 11 immediate outcomes, or IOs, as follows:
IO Subject matter IO1 National Risk understanding and coordination IO2 International Cooperation IO3 Supervision of the finance industry and other relevant sectors IO4 Preventative measures applied by the finance industry and other relevant sectors IO5 Legal persons and arrangements IO6 The use of Financial Intelligence IO7 Investigation and prosecution of money laundering IO8 Confiscation of criminal proceeds and instrumentalities IO9 Investigation and prosecution of terrorist financing IO10 Implementation of Targeted Financial Sanctions relating to terrorist financing and the prevention of abuse of the NPO sector for terrorist financing purposes IO11 Implementation of Targeted Financial Sanctions relating to proliferation financing
- With regards to the assessment of Effectiveness of the measures put in place, the assessment team will allocate one of four effectiveness ratings to each of the 11 IOs:
- High level of Effectiveness (HE) - The IO is achieved to a very large extent and minor improvements are required
- Substantial level of Effectiveness (LE) - The IO is achieved to a large extent and moderate improvements are required
- Moderate level of Effectiveness (ME) - The IO is achieved to some extent and major improvements are required; and
- Low level of Effectiveness (LE) - The IO is not achieved or is achieved to a negligible extent and fundamental improvements are required
- The MONEYVAL assessment comprises a number of different stages which include:
- The submission to MONEYVAL of questionnaires in respect of both the Bailiwick's Technical Compliance with the standards and the effectiveness of its measures
- Consideration by the assessment team of the information submitted
- A visit to Guernsey by the assessment team during which they will engage with both the Bailiwick's agencies and firms from the private sector, and potentially the Non-Profit Organisation sector
- A reporting process which involves a number of drafts of the Mutual Evaluation Report (MER) that will be produced by the assessment team and in which they set out their findings regarding Technical Compliance and Effectiveness and provide recommendations to the States of Guernsey with regards how it can improve its AML/CFT/CFP regime
- Consideration and discussion at the MONEYVAL Plenary of the MER and the establishment of follow up measures to be taken by Guernsey and the manner in which progress in implementing these will be reported to MONEYVAL
Why is Guernsey being assessed?
- The FATF Recommendations are applicable to all countries, and as such Guernsey is part of an ongoing cycle of Mutual Evaluations undertaken in order to test Technical Compliance and Effectiveness. In the case of countries that are members of an FSRB, these assessments are undertaken by that FSRB, which in Guernsey's case is MONEYVAL.
Why is it important for Guernsey?
- Meeting the principal international standards to counter money laundering, the financing of terrorism and proliferation is an important aspect of being a responsible and respected international finance centre. It is also important for Guernsey's reputation and economy and our ability to continue operating as a respected international finance centre.
- Under performance in the Mutual Evaluation can result in follow-up actions being required which can prove both costly and time consuming. If the Mutual Evaluation identifies strategic deficiencies in a jurisdiction's AML/CFT/CFP regime, the jurisdiction can be placed under increased monitoring, whereby the jurisdiction commits to swiftly resolving the identified shortcomings within agreed timeframes, and if it fails to meet those timeframes it will be added to FATF's so-called Grey List.
How does the inspection align with the Bailiwick's position as an international finance centre?
- The Bailiwick of Guernsey is absolutely committed to playing its role in the global fight to combat money laundering, terrorist financing and the proliferation of weapons of mass destruction. In December 2023, the Bailiwick published its National Strategy for combatting financial crime. The Bailiwick also published a report on the findings of its second National Risk Assessment of the money laundering and terrorist financing risks presented by individual sectors and products within the jurisdiction, and the jurisdiction's first assessment of its risks in relation to the financing of proliferation of weapons of mass destruction. These reports can be found at gov.gg/financialcrime.
When is the Mutual Evaluation happening?
- The Mutual Evaluation process has already started, and from start to finish can take up to 18 months to complete.
- The assessment team will undertake its onsite visit to Guernsey in April 2024.
- Following the conclusion of the onsite visit by the assessment team, the process to produce the MER commences, and involves a number of discussions between the Bailiwick and the assessment team, as well several iterations of the report and reviews by independent parties within the MONEYVAL network prior to its finalisation and adoption some six to nine months later at the MONEYVAL Plenary.
- The below graphic sets out a typical timeline for the MONEYVAL process once the onsite element of the process has concluded.
- Key for graphic:
- MER = Mutual Evaluation Report
- ECG = Evaluations and Compliance Group
- P = Plenary
What information does the assessment team consider?
- To assist the assessment team in its evaluation, the Bailiwick is required to submit a large amount of documentation and responses to two separate questionnaires, one dealing with Technical Compliance against the FATF's 40 Recommendations and the other dealing with Guernsey's effectiveness in meeting the 11 IOs.
- In addition to the written submissions, the assessors will engage, during the course of their visit in April 2024, with all of the Bailiwick agencies involved in the fight against financial crime. These meetings will focus in on areas that the assessment team have a particular interest in or require further clarity on.
- An important element of the onsite visit is engagement between the assessment team and representatives of firms from Finance and Designated Non-Financial Businesses and Professions sectors and perhaps from the NPO sector. Some 60 firms are likely to be interviewed by the assessors as they seek to understand how well financial crime risk is understood in the Bailiwick, and how well businesses apply preventative measures.
Is it solely the interviews that determine the outcomes?
- No, the assessors will consider a large amount of information as part of their evaluation, and the industry interviews are just one component part of that information. In isolation the interviews will not determine how well Guernsey performs in the assessment, but it is important that those parties being interviewed demonstrate their understanding of National Risk and are able to describe to the assessment team the AML/CFT/CFP frameworks that are in place in their individual businesses.
What are the potential overall outcomes?
- There are a number of outcomes which can result from the Mutual Evaluation, and these are:
- Regular Follow-up - This is the default monitoring system where no material issues or deficiencies are identified in a jurisdiction's AML/CFT/CFP regime and involves regular reporting to the Plenary on progress of enhancements being made.
- Enhanced Follow-up - This is a much more intensive reporting process to the Plenary on progress to resolve significant deficiencies identified by the assessment team. Countries who have not made sufficient progress in their remediation can also go from Regular to Enhanced Follow-up.
- Grey-listing - Countries can be placed directly onto the Grey-list if the deficiencies identified are serious enough to warrant this. Alternatively, countries can be added if insufficient progress has been made within a year of the Plenary taking place to address significant deficiencies.
- Non-Equivalent jurisdiction - Deficiencies identified in a jurisdiction's regime can result in other jurisdictions no longer being able to rely on its regulatory framework and enhanced due diligence measures being required in respect of individuals and companies connected to that jurisdiction.
- No matter the outcome of the assessment, recommended actions are inevitable. The inspection is an opportunity for Guernsey to showcase what it has done in the AML/CFT/CFP space, to ensure it is meeting international standards as they evolve, and to further strengthen its AML/CFT/CFP regime.
What is being done to prepare for the assessment and support industry?
- Work in respect of the Mutual Evaluation process has been ongoing for some time, in fact since the last time that Guernsey was assessed by MONEYVAL in 2014 the Bailiwick has been working continuously to enhance its AML/CFT/CFP Framework.
- With the Technical Compliance assessment in mind, all relevant agencies have been working to ensure that the island has the appropriate legislation in place in order to meet the FATF Recommendations. A significant amount of legislation has been approved by the States of Deliberation.
- The States of Guernsey will be engaging directly with the finance industry in the lead up to the MONEYVAL assessment with the intention of raising awareness about important financial crime risk matters and the MONEYVAL process itself. Events will be run for industry before the assessment, focusing on a range of issues including the National Risk Assessment and sanctions.
Will it be the same as the last inspection?
- No, this time the assessment is more complex and is based against a different methodology.
- The last evaluation of Guernsey undertaken by MONEYVAL was in 2014 and showed that Guernsey had made good progress against the evolving international standards in these areas - and had surpassed the equivalent International Monetary Fund report that assessed Guernsey in these areas back in 2010. Having said that, expectations and assessments by international bodies normally become stricter rather than weaker with the passage of time, and we are expecting this to be the case when MONEYVAL inspect us next, in April 2024.
- In any case, we will be evaluated against stronger international standards than was the case in 2014 and it is the effectiveness of our compliance with those stronger standards rather than technical compliance which will be key. This inspection will be significant for our finance industry and wider community.
Is it just financial services that is inspected? If not, who else and why?
- No, the Mutual Evaluation considers Financial Institutions such as Banks, Investment and Fund Managers and Insurers, as well as Designated Non-Financial Businesses and Professions such as Trust and Company Services Providers, Accountants, Casinos, Lawyers, Lenders and Real Estate Agents. There is also an increased focus internationally on Virtual Asset Service Providers, so Guernsey's regime will also be the subject of consideration.
- It also assesses how the various agencies, regulators and government involved in these areas exercise their responsibilities in relation to the FATF requirements and the immediate outcomes.
Which industry stakeholders are involved in preparing for the inspection?
- The States of Guernsey has the overall responsibility for ensuring that the Bailiwick's AML/CFT/CFP Framework complies with international standards in an effective manner. A number of different agencies are involved in ensuring that the Guernsey is best placed to prevent and detect financial crime and to deprive criminals of their ill-gotten gains. The primary stakeholders involved in the fight against financial crime in the Bailiwick are:
- States of Guernsey
- Financial Intelligence Unit
- Economic and Financial Crime Bureau
- The Law Officers of the Crown
- Guernsey Police
- Guernsey Border Agency
- Guernsey Registry
- The Guernsey Financial Services Commission
- The Alderney Gambling Control Commission
- The Alderney Company Registry
- Revenue Service
What can companies and business leaders do to help in the process?
- Ensure that they and their businesses have a sound understanding of the financial crime risks facing the Bailiwick, the national risk appetite and strategy to combat financial crime and the legislative and regulatory frameworks in place in Guernsey in this regard.
- Ensure that they and their businesses have a clear understanding of financial crime risks facing them and the manner in which those risks are managed.
- Ensure a sound understanding of the AML/CFT/CFP obligations that are applicable to them and their businesses, and the internal AML/CFT/CFP frameworks that are in place to ensure that they continue to meet those obligations, including the prevention and detection of financial crime and the reporting of suspicions.
- Stand ready to help the Bailiwick agencies with the collection and sharing of relevant information and data both in the lead up to, and during, the onsite visit by the assessment team in April 2024.
- Take note and promote awareness of any events and publications involving the relevant island agencies in the lead up to the MONEYVAL visit.
Where can I get more information?
- More information is available at gov.gg/financialcrime.
What can I tell my staff about the process?
- We would encourage you to share these FAQs with staff, as well as reminding them of their own obligations in respect of AML/CFT/CFP matters and providing them with relevant training in this regard.
What can I tell my clients if they ask?
- We believe that these FAQs would serve your staff and your clients equally well.
When will we know the result and what result is the government expecting?
- It is not the intention of the States of Guernsey to publish its expectations with regard to the outcome of the MONEYVAL Mutual Evaluation, instead efforts are focused on ensuring that the Bailiwick is as best placed as it can be for the assessment.
- With regards to when the public might know the result of the assessment, the final report is due to be formally considered and adopted at the MONEYVAL Plenary which is due to take place in December 2024. The final outcome will only be known when the Mutual Evaluation Report is adopted at the Plenary.
What is a good outcome?
- Recommended actions are inevitable for all jurisdictions, regardless of how well prepared they are, and how well they perform in the assessment. Guernsey will be no different. The evaluation is in effect part of a continuing assessment, and the recommended actions are critical for ensuring that the Bailiwick continues to fight financial crime effectively with its international partners.
- The best outcome would be to be placed into Regular Follow-up which is described earlier in these FAQs.
- Ultimately the evaluation is an opportunity for Guernsey to showcase the efforts it has made towards the prevention and detection of financial crime, and to ensure it is meeting international standards as they evolve.
What happens in the event of a negative outcome?
- The various stakeholders involved in preparing Guernsey for its MONEYVAL inspection have been working hard to ensure that Guernsey is as best placed as it can be for the assessment.
- The assessment could result in one of the outcomes set out earlier in these FAQS. Whatever the outcome, the States of Guernsey and all relevant island agencies will work together to ensure that any recommendations arising out of the Mutual Evaluation are prioritised and addressed as soon as possible after the adoption of the final report by the MONEYVAL Plenary.