In April 2009, it was announced that Guernsey had launched the Island’s first legal resources website. The site is the result of a joint initiative between Guernsey’s Royal Court and the Law Officers of the Crown and provides access to a comprehensive collection and database of Guernsey’s legal material:

“The launch of this site is an extremely positive development for Guernsey as a leading international finance centre,” said Peter Niven, Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry – said at the time.

“Guernsey prides itself on having modern legislation, especially for financial services like the new Trusts Law and new Company Law that we introduced last year and we now have all this available in a user-friendly online resources centre."

“Having such a comprehensive ‘one stop shop’ will make accessing materials a much more streamlined process for anyone wanting information on Guernsey’s legal framework. The resources will be of particular benefit to lawyers and other intermediaries who now at the touch of a button will be able to see exactly what Guernsey can offer their clients.”

Guernsey features alongside the likes of the United Kingdom and the United States on the OECD’s ‘white list’ that was published at the conclusion of the G20 summit in London at the start of April and was ranked 12th in that year's Global Financial Centres Index (GFCI) which was published in March 2009.

Guernsey Money Laundering Law

Also see below under Banking.

In its Annual Report for 2003, the Guernsey Financial Services Commission (GFSC) drew attention to the publication during the year of the International Monetary Fund's (IMF) report on the Bailiwick's financial regulation and criminal justice framework, revealing that Guernsey was assessed by the IMF to have a high level of compliance with international standards of regulation in banking, insurance, securities, trust and company service provision, anti-money laundering and combating the financing of terrorism.

Additionally, the report announced that during 2003, the Commission was involved in a number of initiatives with industry, working to ensure that the Bailiwick maintains its competitive edge whilst adhering to recognised standards. Director general of the GFSC, Peter Neville observed that: "2003 was a very good year for the Commission. We received an excellent IMF report, which commended our high regulatory standards. These same standards were cited by Robert Finch, the Lord Mayor of the City of London, as good reason to do business with the Island and he acknowledged that we stand alongside the City in terms of our integrity, innovation and standards of service."

In March, 2004, the Financial Services Commission issued a statement on anti-money laundering standards for existing customers following the issue of revised Recommendations by the Financial Action Task Force in 2003. The statement requires financial services businesses to assess the risk of each business relationship and to make sure that they have customer due diligence information appropriate to the level of risk.

It allows businesses in the financial services sector to consider whether simplified or reduced information is appropriate for low risk businesses and lower risk customers. This could mean for example, locally resident retail customers who have a relationship which is understood by the financial services business.

"The Commission has worked with the Guernsey Joint Money Laundering Steering Group, which contains representatives from across the finance sector, in developing this new statement,” explained Peter Neville. “The statement extends the existing flexibility provided by the Commission's Guidance Notes on the Prevention of Money Laundering and emphasises that unnecessary demands on lower risk customers should be avoided," he added.

The Commission said that it was not issuing more detailed recommendations at that stage on how the FATF standard should be applied in practice. It further announced that it intended to consult with industry by way of observation during on-site visits and by way of discussions, to develop such recommendations for inclusion in the revised Guidance Notes. A revised version of the Guidance Notes was to be issued only after full consultation with industry and the other Crown Dependencies.

Following discussions between the IMF and the Commission at the end of 2008, it was agreed that the IMF would undertake its assessment of the Bailiwick of Guernsey late in 2009. This assessment was originally scheduled to take place in January 2009, but the IMF took into account the severe effects of the global crisis, including the problems experienced at Northern Rock Guernsey and Landsbanki Guernsey.

The areas to be covered by the assessment were unchanged. A significant aspect was to do with the stability of Guernsey’s financial sector. It was also to cover banking, insurance and investment sector supervisory legislation and practice, together with anti-money laundering and counter terrorist financing legislation and its implementation.

Peter Neville, Director General of the Commission said: “The Commission is eager to participate in the IMF’s assessment process and looks forward to the broader perspective a later assessment will bring. For substantially more than a year we have been presented with significant challenges in crisis management. We have met these challenges. The very positive findings of the inquiry by Michael Foot of the Promontory group into the role played by the Commission in the Landsbanki Guernsey case should stand Guernsey in good stead."

He added: "We hope that one of the outcomes of the IMF’s future assessments will be the pulling together of the lessons learned by supervisors around the world during the crisis. Here in Guernsey the response has already included the introduction of a depositor compensation scheme. The hard look that Guernsey will be taking at the nature of its banking sector and the relationship between the financial industry in Guernsey and its counterparts in the UK will also be relevant to the IMF’s assessment. The IMF will want to gauge the effects of the financial crisis and the global economic downturn on the shape of the finance industry and the products and services it offers.”

In December 2008, a new regulation was introduced in Guernsey to prevent money laundering, which restricts the sale or purchase in the course of certain businesses of precious metals, precious stones or jewellery, where the payment is made in cash and exceeds GBP10,000. These regulations were proposed by the Guernsey Financial Services Commission, which sought to extend the Bailiwick’s anti-money laundering regime in order for it to meet international standards.

The Regulations are made under Sections 49A and 54 of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 and are titled The Criminal Justice (Proceeds of Crime) (Restriction on Cash Transactions)(Bailiwick of Guernsey) Regulations, 2008 and were effective from December 1, 2008. Any person who contravenes the restriction commits an offence and is liable, for a first offence, to a fine of up to twice the value of the cash involved. The Guernsey government has asked that dealers in precious metals, precious stones or jewellery should report any attempted transactions in excess of GBP10,000 as suspicious to Guernsey’s Financial Intelligence Service.

In December 2009, the Guernsey Financial Services Commission proposed changes to its AML/CFT that will require postage stamp dealers, bullion dealers, firms of accountants which are currently not registered with the Commission, and firms (including sole practitioners) of insolvency practitioners, auditors and tax advisors to register with the Commission and to comply with the AML/CFT regulations, and with the rules in the Commission’s handbooks.

As the Commission is conscious that the requirements of the regulations may appear complex and onerous, especially to firms which have not previously been subject to any form of AML/CFT regulation or supervision, the guidance note provides information to assist such firms.

The guidance paper, available on the Commission’s website, provides a simplified overview of the requirements of the regulations and the rules in the Handbooks.

In April 2010, the Guernsey FSC announced the launch of a consultation on proposals to overhaul legislation that governs the prevention of money laundering and the financing of terrorism in the island.

The consultation paper proposes extensive amendments, namely to the following legislation:

The first part of the consultation discusses harmonizing the Commission’s on-site inspection powers throughout all governing legislation.

The definition of “regulatory laws” is also to be amended to provide a consistent definition across governing legislation. In particular this will improve the Commission’s checks when considering a license, by broadening the pool of relevant contraventions of regulatory laws that the Commission may take into account when considering an application.

It is also proposed that a textual amendment be made to legislation which governs penalties, namely harmonizing the texts of Section 88 of the Insurance Business Law, 2002 and Section 65 of the Insurance Managers and Insurance Intermediaries Law, 2002.

In addition, as part of a larger review of the definition of “FSB Regulations,” the Commission proposes inserting a new provision into the FSB Regulations which enables financial services businesses to disclose information to other financial services businesses and prescribed businesses, where it appears necessary for the purposes of forestalling, preventing or detecting money laundering and terrorist financing. This amendment is supported by the recommendation in recent IMF reports of other jurisdictions that they should consider including explicit provisions to provide for the sharing of information between financial services businesses.

The consultation paper is available on the Commission’s website, and interest parties were asked to submit comments by May 21, 2010.

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Guernsey Trust Law

The Trusts Law 1989 provides a modern statutory basis for trust management activity. The Edwards Report acknowledged that Guernsey ranks highly among IOFCs for the quality of its regulation. Unlike the banking sector, however, the Guernsey trusts industry has not been subject to any formal system of supervision.

Partly as a result of the Edwards Report, a law was prepared by the States' Advisory and Finance Committee under the name of The Regulation of Fiduciaries and Administration Businesses (Bailiwick of Guernsey) Bill 2000. The law - known as the Fiduciary Law - came into effect on April 1, 2001.

Anyone who, by way of business, carries on regulated fiduciary activities in or from within the Bailiwick of Guernsey requires a fiduciary licence granted by the Commission under the Fiduciary Law. Section 2 of the Fiduciary Law sets out the activities which are regulated, and section 3 provides for exemption in some circumstances. A licence is required by any company, wherever registered, providing fiduciary services in the Bailiwick and by Guernsey-registered companies providing fiduciary services anywhere in the world.

There are two categories of fiduciary licence:

The law contains a 'four eyes' rule, standards for capital adequacy and compulsory indemnity insurance. The offer or provision of fiduciary services without a licence incurs criminal sanctions. Prudential rules are also imposed; clients' funds need to be segregated from other trust assets; and new accounting safeguards have been installed.

The law provides extensive powers to the Guernsey Financial Services Committee in the granting, refusal, revocation, and application of conditions to fiduciary licences. It also has authority to control the names of, and advertising by, fiduciary businesses, rights to obtain information and documents, and powers to conduct investigations.

The Guernsey law of trusts was codified in 1989 along broadly Anglo-Saxon lines in the Trusts (Guernsey) Law 1989. This law does not apply directly in Alderney or Sark, but has a substantial influence on trusts in those jurisdictions.

Trust documents are in English. There are no registration requirements for trusts, no fees are payable on formation, and there are no annual reporting requirements other than for resident trusts (ie those with resident beneficiaries). Trust accounts must be kept but there is no audit requirement.

The maximum perpetuity for Guernsey trusts is 100 years. The law provides for non-recognition of foreign judgements, and forced heirship provisions in foreign law can be over-ridden. The Hague Convention has been incorporated into Manx Law.

In September 2005, the Guernsey FSC launched a consultation with trust professionals, lawyers, accountants and regulators to: investigate the requirement for changes to enable new trust products and services to be available to the Fiduciary Sector in Guernsey; to consider the availability of competitor trust products and services from other jurisdictions; to consider marketing requirement for the Fiduciary Sector; and to make recommendations for the desired changes.

New trust legislation (the Trusts (Guernsey) Law, 2007), which was approved in July 2007, came into force on March 17th, 2008. The changes overall are designed to create a more flexible framework for the local trust industry, and to ensure that Guernsey, as a jurisdiction for the establishment and administration of fiduciary structures, remains well placed and competitive.

Some of the most significant changes to the Island’s trust legislation include:

For the taxation of trusts in Guernsey see Offshore Legal and Tax Regimes.

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Guernsey Banking Law

Banks are registered in Guernsey under the Banking Supervision (Guernsey) Law 1994 as amended in 2003, which is administered by the Guernsey Financial Services Commission. Applications from new banks are carefully vetted both from a prudential point of view and commercially.

The Banking Law has three main objectives:

It contains capital adequacy rules which are stiffer than the Basle requirements.

In November 2001 the Financial Services Commission announced that it would be applying customer 'due diligence' standards according to the Basel Committee on Banking Supervision's "Customer Due Diligence for Banks" paper (4 October 2001, "the CDD paper").

Section 2.2.3 of the CDD paper sets out what the Commission now regards as best practice for banks on introduced business. The criteria listed under paragraph 36 include the recommendation that "all relevant identification data and other documentation pertaining to the customer's identity should be immediately submitted by the introducer to the bank, who must carefully review the documentation provided. Such information must be available for review by the supervisor and the Financial Intelligence Service or equivalent enforcement agency, where appropriate legal authority has been obtained."

Under Regulation 1(4)(a) of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Regulations, 1999, in determining whether a person carrying on any financial service businesses in the Bailiwick of Guernsey is in compliance with the regulations, a court may take account of "the Guidance Notes on the Prevention of Money Laundering issued from time to time by the Guernsey Financial Services Commission and any other guidance issued, adopted or approved by the said Commission."

The Commission said its announcement represented guidance issued by the Commission for the purposes of Regulation 1(4)(a) mentioned above.

In early 2002 the Guernsey FSC, along with its peers in Jersey and the Isle of Man announced new measures to tighten anti-money laundering regimes.

The new measures included three main features:

In December, 2003, the FSC responded to concerns raised by the jurisdiction’s financial services sector by clarifying kyc rules for 'introduced business' following the introduction of the FATF's revised 'Forty Recommendations' which included rules comparable to the Basle rules but administratively somewhat simpler.

The FSC said: "Accordingly, from the date of this statement, the Commission will adopt the standard embodied in FATF Recommendation 9 (see below) with regard to the provision of information to financial services businesses in respect of introduced business. As a minimum, financial services businesses should receive written confirmation from the introducer, by way of a certificate or summary sheet(s), detailing the necessary information and the documentation held by the introducer and also take adequate steps to satisfy themselves that copies of the necessary information specified in FATF Recommendation 9, will be made available upon request without delay."

"The Commission expects that financial services businesses should have a programme of testing to ensure that introducers are able to fulfil the requirement that relevant documentation can be made available upon request without delay. This will involve financial services businesses adopting ongoing procedures to ensure they have the means to obtain that information and documentation."

"In order to determine that the new standard is being applied, the Commission, during its on-site visits, will seek to verify that financial services businesses have obtained the necessary information by way of a certificate or summary sheet(s) and that the requirement for copies of such identification data and other relevant documentation to be made available upon request without delay has been tested."

"It should be noted that, ultimately, the responsibility for customer identification and verification will remain, as always, with the financial services business relying on the introducer."

In August 2008, the GFSC issued a consultation paper to members of the Association of Guernsey Banks to seek their views on proposals to amend several key areas of regulatory policy and to introduce a range of measures aimed at safeguarding retail depositors.

The proposals, contained in the paper 'Consultation on Parental Upstreaming and the Introduction of Depositor Protection and Ombudsman Schemes,' aim to reinforce Guernsey’s reputation as a mature and well regulated finance centre. The consultation closed on September 15, 2008.

Peter Neville, Director General of the Commission explained:

“The review has its origins in the 'credit crunch' and more specifically in the problems experienced by the Guernsey subsidiary of Northern Rock plc prior to its transfer into public ownership.

"That episode led us to consider the vulnerabilities inherent in a banking model that is widely used in Guernsey, which involves gathering retail deposits and then lending a large proportion of those funds to the parent bank – what we call 'upstreaming'. The Northern Rock case also highlighted the fact that we do not have a deposit protection scheme to protect people who put their money with banks based here."

In order to provide greater protection for retail depositors the GSFC proposes to reduce parental upstreaming to a maximum of 85% of total assets. The Commission may also impose further restrictions based on the level of perceived risk associated with the parent bank.

The regulator also wants to discourage the use of branch structures for new licensed banks, unless they are perceived to be systemically important at least in their home jurisdiction or are highly specialised in nature, and introduce a deposit protection scheme limited to a maximum of GBP35,000 per individual depositor and to retail depositors only.

The GFSC says its proposals would strengthen the banking sector by requiring greater transparency through disclosure by individual banks to their depositors of: the existence (or otherwise) in the jurisdiction of a deposit protection scheme; the existence or possibility of parental upstreaming; and the status and nature of support extended by the parent to the local bank.

Other proposals would:

The consultation paper sets out the benefits that would flow to Guernsey from having a deposit protection scheme and addresses the costs associated with a scheme which would be funded by the banking sector.

The views of the banking sector are also being sought on the possible establishment of an ombudsman scheme to resolve complaints from members of the public who have suffered losses or have other grievances.

"The way forward which is being suggested would involve limiting the costs by having the Commission provide resources to support an ombudsman in a way which did not conflict with our supervisory and regulatory responsibilities," Neville added.

"Once we have received the responses to the paper on the proposed ombudsman scheme, we will consider extending the consultation process to the other parts of the finance sector," he concluded.

A Guidance Note providing additional Guidance on certain sections of the Banking Supervision (Bailiwick of Guernsey) (Amendment Law), 2003 with regards up streaming was published by the Guernsey FSC in January 2010 and is available on the Commission's website.

In April 2010, the Guernsey Financial Services Commission published the final draft of new Capital Adequacy Rules, mandatory for all entities licensed under the Protection of Investors (Bailiwick of Guernsey) Law 1987. The release of the Rules in the their final form is the culmination of a November 2009 consultation.

The Capital Adequacy Rules became effective on April 16, 2010, but contain transitional rules that allow licensees until June 30, 2010, to meet the requirements.

The Guernsey FSC has released details on the following rule changes:

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Guernsey Insurance Companies

Insurance companies are regulated by the Financial Services Commission under the Insurance Business (Guernsey) Law 1986, updated by the Insurance Business (Bailiwick of Guernsey) Law, 2002, the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002, the Insurance Business (Bailiwick of Guernsey) (Amendment) Ordinance, 2008, and the Protected Cell Companies Ordinance 1997.

The minimum capital requirement of a licensed insurance manager or a licensed insurance intermediary is GBP25,000 or 125% of the licensee’s professional indemnity insurance deductible or excess, if higher; a fee of GBP4,070 is payable on registration and GBP3,860 annually thereafter (for a 'Pure' insurance manager. Commercial insurance managers pay an annual fee of GBP6,460. These fees are effective as of January 1, 2010.

Annual audits are needed, and there are substantial annual information requirements, including business plans, solvency calculations, reports on claims, banking and investment schedules, and, for life companies, actuarial certification.

In March 2010, it was announced that Heritage Insurance Management in Guernsey had achieved a worldwide first by amalgamating two Protected Cell Companies (PCCs).

The companies, Harlequin Insurance PCC Limited and Friary Court Insurance PCC Limited, are both insurance PCCs with 17 independently owned cells between them.

The companies were used by Heritage and Heath Lambert Insurance Management (Guernsey) Limited (now merged) to provide cell captive insurance facilities to their clients. It was decided that amalgamating the two PCC companies into one would create a more efficient structure which ultimately will save money for the clients involved in the cells.

Speaking about the amalgamation, Martin Le Pelley, Compliance Officer for Heritage, said at the time that: “The amalgamation of two PCCs is not straightforward as each cell represents a separate class of share, which in turn means that all cell shareholders must vote in favour of the amalgamation in order for it to take place. Nevertheless, having achieved this milestone, we consider that the combined company will provide a more secure and efficient platform for our cell captive clients going forward.”

The combined company has retained the name Harlequin Insurance PCC Ltd.

Insurance companies can choose between various bases of taxation, see Offshore Legal and Tax Regimes and Offshore Business Sectors.

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Guernsey Investment Funds

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