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Table of
Statutes
This
is a non-exhaustive list of the main Jersey statutes affecting
offshore and non-resident business. The statutes are listed
in alphabetical order – click on the statute for a fuller
description of the statute or the legal regime it forms part
of.
Banking
Business (Jersey) Law 1991
Banking Business (General Provisions) (Jersey)
Order 1991
Collective Investment Funds
Law 1988
Companies (Jersey) Law 1991
Companies (Amendment No.6)
(Jersey) Law 2000
Companies (Amendment No.8) (Jersey) Law 2006
The
Financial Services (Extension) (Jersey) Law
2000
Income Tax (Jersey) Law 1961
Insurance Business (Jersey)
Law 1996
Insurance Business
Law (General Provisions) (Jersey) Order 1996
Limited
Partnerships (Jersey) Law 1994
Trusts (Jersey) Law 1984
Trusts (Jersey) Amendment No. 4 Law
2006
Terrorist Financing Order 2001
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In
June, 2004, the Jersey Financial Services Commission unveiled
a restructuring programme that has seen the island’s regulator
organised more along industry lines.
Under the changes, the previous divisions, Compliance, Authorisation
and Insurance, were replaced by four new divisions: Banking;
Securities (including Funds and Investment Business); Trust
Companies; and Insurance.
Each of the Divisions is headed by an Executive Director who
is responsible for regulatory and supervisory oversight of
their respective industry sectors. The Directors are responsible
for delivering regulatory and supervisory policies for those
sectors and they are assisted in this by a Research and Development
Unit.
The four Directors report to the Deputy Director General who
has overall responsibility for co-ordinating their activities,
including policy development.
Other Divisions of the Commission, including Enforcement and
the Registry report directly to the Director General. This
includes a new Risk Unit which is be responsible for risk
management, quality assurance and internal audit.
The new structure created two new Director posts. But this
has been offset by the deletion of the current Director, Authorisation
post and of other vacant posts. The changes have been self-financing
and have not resulted in an increase in headcount with the
exception of a junior post in the Registry.
Commenting at the time that the changes were announces, David
Carse, Director General of the Commission noted: "The new
structure will provide a greater industry focus to the Commission's
work, promote greater industry expertise within the Commission
and lead to greater cohesiveness in its policy-making."
Trust Law
Jersey
trusts are governed by The Trust (Jersey) Law 1984, which
codified trust law largely along the lines of English-based
common law, and the Trusts (Amendment) (Jersey) Law 1989.
'Purpose' trusts were recognized in 1996.
The Trusts (Jersey) Amendment No. 4 Law 2006 introduced settlor-reserved
powers to provide greater statutory certainty regarding the
level of control and influence a settlor may exercise over
the ongoing administration of assets placed into trust. Appeal
against judgements of the Royal Court of Jersey lie to the
Jersey Court of Appeal and finally to the English Privy Council.
There is no registration
requirement for trusts and no fees are payable. The trustees
of a non-resident trust (ie one whose beneficiaries are non-resident)
are not required to submit returns or provide accounts of
the trust to the Comptroller of income tax. Trust accounts
must be maintained but audit is not required. Trust documents
are normally in English.
Jersey has ratified
the Hague Convention on the Law Applicable to Trusts. Jersey
permits migration of trusts: trusts may be 'imported' or 'exported'
by the simple replacement of trustees and by changing the
proper law of the trust.
Jersey
has not implemented legislation for Asset Protection Trusts.
However, Jersey trust law specifically excludes foreign inheritance
laws and provides for non-recognition of foreign judgements.
In
November 2000 The Financial Services (Extension) (Jersey)
Law came into effect. It is designed to protect consumers
by imposing strict new rules on companies specialising in
setting up trusts and offshore companies.
The law extends
the remit of the Financial Services Commission (FSC) under
the Investment Business (Jersey) Law 1998 over banking, investment
funds and insurance activities into trust and company management,
if the underlying activity is connected with financial services.
Under the law
trust companies will need to be licensed to continue in business.
The Codes of Practice reinforce the existing requirements
for a business to know its customers, to establish the source
of their wealth and to report any suspicions. They must also
adhere to high standards of integrity, solvency and competence
including strong protections for customer money with additional
requirements for high levels of qualifications and experience.
Futhermore, the FSC will be able to visit businesses to check
that they abide by the regulations.
Whilst the Financial
Services (Extension) Law came into effect in November 2000,
conducting business without a licence became illegal as from
February 2001. As from May 27 2001, all legal provisions (except
professional requirements) applied and from November 2 2005,
professional requirements must be met in full.
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Investment
Funds
Collective
Investment Funds are supervised by the Financial Services
Commission under the Collective Investment Funds (Jersey)
Law 1988, and if 'recognised' are allowed to be marketed in
the UK. This has been a stimulus for the growth of a substantial
managed funds sector on the island. Other types of fund, both
public and private, are also licensed and supervised by the
Financial Services Commission, and are usually directed at
professional investors since public marketing would not be
allowed in most countries, particularly not in the EU. Indeed
the ability of Ireland and Luxembourg as EU members to host
funds for public distribution in the member states of the
EU has created strong competition for Jersey.
In
February, 2004, the Jersey Financial Services Commission launched
the ‘Expert Funds’ regime in the jurisdiction, which aims
to streamline the authorization process for new funds whilst
maintaining rigorous compliance criteria.
"Expert
Funds are a significant new business opportunity for Jersey,”
commented David Carse, Director General of the Commission.
"To protect less experienced investors, we have laid down
strict criteria so that these funds will only be offered to
investors with the expertise and resources to accept any extra
degree of risk involved as a result of the nature of the investment."
Expert Funds are designed as flexible investment vehicles
that can take any form recognised under the laws of Jersey.
They may be open-ended or closed-ended, there are no investment
or gearing restrictions, and for the majority of Expert Funds
there are flexible requirements in respect of custody or prime
brokerage arrangements.
The JFSC notes that the new funds regime are particularly
suited to hedge funds and other more sophisticated investment
products aimed at the more experienced investor.
Investors in the funds must certify that they qualify as 'expert'
- meeting strict criteria laid down by the Commission - and
sign their agreement to an investment warning before investing,
explains the Commission.
According to the JFSC, it is possible to establish Expert
Funds in a matter of days. The Commission's proposals enable
'authorised functionaries' on the Island - for example, administrators,
fund managers and trustees- to self-certify Expert Funds which
meet criteria set down by the Commission in its Expert Fund
Guide.
Every Expert Fund must appoint a functionary, who must be
part of a Jersey regulated entity, and whose duties include
taking steps to satisfy themselves that the actions of the
Expert Fund's investment manager are in accordance with the
investment and borrowing restrictions set out in the prospectus.
In addition, such functionaries are also required to maintain
adequate records in the Island should they be needed for regulatory
purposes. Licensed functionaries are also subject to visits
by the Compliance Division of the Financial Services Commission.
The
first fund authorised under the Expert Fund regime was launched
in March 2004 and as of June 30, 2006, there were 214 Expert
Funds established in Jersey.
In
June 2004, the JFSC unveiled the Non-Domiciled Fund Guide,
which streamlines the approval process for Jersey functionaries
acting for non-Jersey funds.
According
to the Financial Services Commission, the streamlined approval
process for non-domiciled funds can be applied to funds materially
equivalent to Jersey Expert Funds, Jersey Recognised Funds
or those compliant with the latest EU UCITS Directive.
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Terrorist Financing
Order
Jersey moved
quickly after the September 11, 2001, terrorist attacks in
the United States to implement new legislation to counter
terrorist funding threats, including the implementation of
a Terrorist Financing Order and will adopt the UN Convention
for the Suppression of Terrorist Financing as soon as its
domestic law has been amended. This means that Jersey will
be able to try an individual for terrorist crimes, in particular
for terrorist financing crimes, committed outside Jersey.
The Island will then be fully compliant with the terms of
the Convention.
The Terrorist
Financing Order came into force on 10 October and is virtually
identical to the legislation introduced in the City of London
in late September 2001. The Order enables Jersey to freeze
any assets held by suspects named by President Bush in the
Executive Orders.
During
2004 there was discussion in Jersey about whether to adopt
the UK's new money-laundering law. The UK Proceeds of Crime
Act became law on 1 March and although Jersey's 1998 law has
the same name, there are significant differences.
The
UK legislation, for instance, covers all crimes but the law
in Jersey only applies to crimes that have a minimum sentence
of a year or more in prison. Also the UK act introduces an
objective test for suspicious activity. The new objective
test is based on whether a person had reasonable grounds to
suspect that another was engaged in money laundering, so simply
failing to be suspicious is no longer a defence. The existing
Jersey law on the other hand is based on the subjective test
- ie was anyone suspicious?
In
May 2006, the Jersey Financial Services Commission published
a consultation paper on a proposed new Money Laundering (Jersey)
Order and accompanying Handbook for the Prevention and Detection
of Money Laundering and Terrorist Financing, to replace the
existing Guidance Notes for the Finance Sector.
The
purpose of the consultation paper was to convey proposals
to update Jersey’s measures to combat money laundering
and terrorist financing so that these are consistent with
certain key elements of the revised Financial Action Task
Force (“FATF”) Recommendations on Money Laundering
and Terrorist Financing.
The
draft Money Laundering Order and Handbook propose a number
of important changes. In particular:
- A
risk-based approach to customer due diligence is set out,
that permits reduced or simplified measures in the case
of lower risk relationships, and requires enhanced customer
due diligence in the case of higher risk relationships.
- Much
more emphasis is placed on customer due diligence measures
other than identification and verification of identity,
and, in particular, on ongoing monitoring of unusual, complex,
and higher risk activity and transactions.
- More
customer friendly ways of verifying the identity of applicants
for business or customers, including scope for greater reliance
on a single document to verify identity in lower risk circumstances,
for example, a passport.
- Measures
to guard against the financial exclusion of Jersey residents
have been clarified. In particular, in the case of a lower
risk minor, whose parent or guardian is unable to provide
standard documentation to verify the minor’s identity,
identity may be verified through use of the minor’s
birth certificate.
- The
responsibilities of senior management in preventing and
detecting money laundering are also emphasised as part of
a section addressing corporate governance.
In
addition, the consultation paper highlighted that the FATF
Recommendations require the extension of measures to combat
money laundering and terrorist financing to non-financial
businesses and professions, and to include certain activities
conducted by lawyers, accountants and estate agents, and the
sale of high value goods for cash. The paper considers how
Jersey might address this requirement.
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