It has completed and published a thematic review of the effectiveness of monitoring and compliance with the risks posed by PEPs.
On-site inspections were carried out at 30 businesses across the spectrum of finance in Guernsey.
Some 170 files were reviewed and the approach was generally satisfactory and effective. Three of the 30 firms needed risk mitigation programmes to remediate issues identified. It is mandatory for firms to treat relationships with foreign PEPs as high risk.
‘We noted many examples of good practice, and it was encouraging to note the strong performance by fiduciaries specifically in regard to the risk assessment of PEPs. This is likely due to the nature and complexity of fiduciary service offerings which allow for a deeper understanding of the risks present in a relationship.
‘Nevertheless, six areas for improvement were identified where firms could improve their policies, procedures and controls,’ said Nick Herquin, deputy director of the commission’s financial crime division.
Local firms have reported PEP relationships from a range of jurisdictions, but they total a very small proportion of the total business relationships within the island. More than three-quarters of PEPs are foreign PEPs.
Foreign PEPs can be a source of corruption cases, and it is noted that the harm that PEPs can do to their own countries, in terms of value of laundered corrupt funds, can be extremely high.
‘It is imperative that firms devote sufficient resources to understand the intended purpose and nature of the PEP business relationships and take reasonable measures to corroborate their source of funds and wealth in line with the assessed risk,’ the commission said.
‘Taking such measures will not only reduce financial crime risks, but will also assist firms in having a greater understanding of their customers’ investment objectives.’
The commission found that most of the firms reviewed had appropriate policies and procedures for the mitigation of PEP risk.
The quality of these controls was significantly higher where documented policies were tailored to the firm and where risk assessments considered the risk attached to the political position the individual held.
It also checked the beneficial ownership filings on six separate PEP relationships which included a Guernsey company in the structure.
In all but one case, accurate and up to date beneficial ownership information had been filed with the Guernsey Registry. The anomaly is being followed up as part of ongoing supervision.
n The commission is planning to stage an industry event later this year to discuss its findings.