The rise & rise of financial services regulation & its enforcement

This article originally appeared in Issue 24 of En Voyage and we are reproducing it here.

For many years there have been suspicions, typically misconceived, about the integrity of Guernsey and other offshore international financial centres, particularly by the governments of onshore jurisdictions such as the United States and continental Europe.  Together with the demand for increased transparency with respect to the financial affairs of the wealthy with a view of securing higher domestic tax revenues, especially post the global financial crisis, these suspicions have manifested in ever increasing layers of regulation upon the financial services Guernsey provides.

In response to the demands from the international community including the threat of economic sanctions by the G20 against non-cooperative jurisdictions, the States of Guernsey, the Guernsey Financial Services Commission, the Revenue Service and other domestic authorities have endeavoured to ensure implementation and compliance with a robust legislative framework now expected of Guernsey, including the requirements of the Organisation for Economic Co-operation and Development (OECD) with respect to the implementation of the internationally agreed tax standard.

Whilst those of us who work in or advise the financial services sector appreciate that it continues to be important for “Guernsey plc” (and indeed for the benefit of the wider local community) that the integrity of our financial services sector be stringently maintained, the counterweight is the acceptance of greater external scrutiny in the provision of our financial services by, for example, MONEYVAL (an expert committee of the Council of Europe concerning the evaluation of anti-money laundering measures and the financing of terrorism) and the implementation of appropriate domestic measures to satisfy onshore fiscal and political demands.

It is against this background that the sector has (and continues) to be subject to elevated expectations of compliance with new or enhanced legislation and rules.   Significantly, in parallel, the market has seen an increase in activity from local regulatory authorities by the exercise of their various supervisory and enforcement powers.  Additionally, and in part as a consequence of the implementation in Guernsey of the OECD’s Common Reporting Standard with respect to taxation, we have witnessed increased activity by foreign fiscal and regulatory bodies demanding the disclosure of information from local financial services business and financial institutions.

In the last 12 months (prior to the events in the Ukraine and implementation of waves of additional, international economic sanctions arising from such), we have witnessed increased activity by the Guernsey Financial Services Commission not only with respect to  the imposition of additional provisional restrictions on financial services licences and the imposition of far reaching risk mitigation programs but the commencement of a number of investigations and enforcement actions leading to more prohibition orders and financial penalties.   Combined with this local regulatory activity, the market continues to experience increases in the demand for the disclosure of otherwise confidential financial information particularly through the Guernsey Revenue Services at the behest of foreign fiscal authorities pursuant to international tax information exchange agreements

The highly experienced Disputes & Risk team at Babbé regularly advises financial services businesses and their directors and officers as to their rights and obligations in the financial regulatory space including with respect to:

  • The imposition of sanctions and risk mitigation programs by the Guernsey Financial Services Commission;
  • Advising on and appearing in Guernsey Financial Services Commission enforcement investigations and subsequent proceedings;
  • Advising on the minimum criteria for licensing and requirements for the licensing of prescribed and non-prescribed financial services business under the Fiduciaries Law and related legislation;
  • Notices for the disclosure of financial and other information served by the Guernsey Revenue Service including those arising from requests made by foreign tax authorities;
  • The scope of and obligations arising under the OECD’s Common Reporting Standard for the automatic exchange of financial information;
  • The suspicious reporting regime and the imposition of information production orders under the Proceeds of Crime legislation;
  • International economic sanctions and the requirement for licenses under the Sanctions Law;
  • Data subject access requests issued under the Data Protection Law and investigations by the Office of the Data Protection Commissioner;
  • Disclosure notices issued by Her Majesty’s Revenue and Customs;

It’s an increasingly complex regulatory world out there and there’s never a one size fits all approach.  As an independent law firm, Babbé offers expert legal advise, tailored to each specific business situation.



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