Knowledge

Overview of the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020

02 November 2020

The Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 (the "Law") is expected to come into force on 1 December 2020.

The Law is intended to address recommendation 24 of the International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation issued by the Financial Action Task Force.

Recommendation 24 requires jurisdictions to "ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities."

In addition to the Law, secondary legislation will be passed. This will take the form of regulations and an order:

  • The draft Financial Services (Disclosure and Provision of Information) (Jersey) Regulations 202- (the "Regulations") have been lodged with the Jersey legislative assembly for approval and are expected to be passed on 1 December 2020.
  • The Financial Services (Disclosure and Provision of Information) (Jersey) Order 202 - (the "Order") is also expected to be made on 1 December 2020. A draft of the Order has previously been issued for public consultation.

This briefing assumes that the Regulations are passed in their current form and that the Order will be made in the form circulated for public consultation.

Why is the Law important?

The Law will impact on the establishment and administration of a range of Jersey entities (including companies):

  • On incorporation or establishment, a Jersey entity will have to disclose to the Jersey Financial Services Commission (the "JFSC") details relating to its beneficial ownership. It is important to note that this information will not be made available to the public.
  • In addition, on incorporation or establishment, a Jersey entity will have to disclose to the JFSC details as to its significant persons. In relation to a company, this will include details as to its directors. This information will be made available to the public.
  • Further, on incorporation or establishment, a Jersey entity will have to disclose if it intends to issue shares to a nominee in circumstances where the nominee is not registered under the Financial Services (Jersey) Law 1998.
  • If there are any changes to the beneficial ownership information or significant person information, these changes have to be promptly notified to the JFSC.
  • Each entity will also have to submit an annual confirmation statement confirming details as to beneficial ownership and significant persons. As regards companies, companies will no longer need to complete an annual return (as the annual confirmation statement will replace the annual return).
  • Each entity will also have to appoint a nominated person. This is a person authorised by the entity to disclose the information required by the Law to the JFSC.
  • The Law does not just apply to newly incorporated or newly established Jersey entities. It applies to all Jersey entities which are already incorporated or established. The transitional provisions of the Law stipulate that existing entities must provide all required information within 3 months of the Law coming into force.

Who does the Law apply to?

The Law applies to the following entities:

  • Companies.
  • Foundations.
  • Incorporated limited partnerships.
  • Limited liability companies.
  • Limited liability partnerships.
  • Separate limited partnerships.

It does not apply to trusts (as these do not have legal personality) but the Law may apply to a trustee in its own capacity.

The Law does not apply to limited partnerships established under the Limited Partnerships (Jersey) Law 1994 (as such entities do not have legal personality). However, the Law may apply to a general partner of such a limited partnership in its own capacity.

Definition of beneficial owner

The Law defines beneficial owner as "an individual who ultimately owns or controls the entity, or the individual on whose behalf a transaction is being conducted by the entity, including an individual who exercises ultimate effective control over the entity."

The Law confirms that "ultimate effective control over an entity, includes ownership or control exercised through a chain of ownership or by means of control other than direct control."

Under the Law, the JFSC must publish guidance on how to identify beneficial owners.

The concept of beneficial ownership is already well understood in Jersey by virtue of Jersey's anti-money laundering regime. The Money Laundering (Jersey) Order 2008 contains a similar definition of beneficial owner. It is not expected that there will be any material departure from current market practice and understanding concerning the identification of beneficial owners.

For most Jersey entities, the Law will not change the information that is already provided to the JFSC on incorporation or establishment. The JFSC currently collects beneficial owner information using the Control of Borrowing (Jersey) Order 1958 (the "1958 Order"). The Law now provides a central modern framework for the disclosure of beneficial ownership information and it extends the requirements to foundations (which were previously not caught by the 1958 Order).

Information that must be disclosed

The Law requires certain information to be disclosed to the JFSC on the incorporation or establishment of an entity.

This information is as follows:

  • the entity's beneficial owner information;
  • the entity's significant person information; and
  • if the entity intends to issue shares to a nominee in circumstances where the nominee is not registered under the Financial Services (Jersey) Law 1998:
    • the identity of the nominee; and
    • the identity of the nominator.

What is beneficial owner information?

The Order provides that the following information has to be disclosed with respect to an individual who is the beneficial owner of an entity:

  • the name and any former name or other names by which the individual is or was known;
  • an address for correspondence to the individual;
  • the residential address of the individual;
  • the individual’s nationality;
  • the individual’s occupation;
  • the individual’s gender;
  • the individual’s date of birth; and
  • the individual’s place and country of birth.

Who is a significant person?

The Law defines a significant person by reference to the type of entity concerned.

Significant persons include:

  • in relation to a company, a director or secretary of the company, or any other officer purporting to act in a similar capacity;
  • in relation to an incorporated limited partnership or a separate limited partnership, a general partner of the partnership;
  • in relation to a limited liability partnership, a partner participating in the management of the partnership (being a person who is able to cause the partnership to take a particular action);
  • in relation to a limited liability company, a manager of the limited liability company or, if there is no manager, the members involved in the management of the limited liability company; and
  • in relation to a foundation, a member of the council of the foundation.

What is significant person information?

The Order specifies what constitutes significant person information.

By way of example, where the significant person is an individual, the Order requires the following information to be disclosed:

  • the name and any former name or other names by which the individual is or was known;
  • an address for correspondence to the individual;
  • the residential address of the individual;
  • the individual’s nationality;
  • the individual’s occupation;
  • the individual’s gender;
  • the individual’s date of birth; and
  • the individual’s place and country of birth.

What happens if the information changes?

If there is any change in beneficial owner information or significant person information, this has to be notified by the entity not later than 21 days after the entity becomes aware of it.

Annual confirmation statements

Every entity must file an annual confirmation statement with the JFSC.

This replaces the annual return for companies so companies will no longer need to file an annual return.

The annual confirmation statement must be filed between the 1st January and the end of February in each year.

It will verify that the beneficial owner information and significant person information remains accurate.

Nominated persons

Every entity must appoint a nominated person.

The Law regulates who may be a nominated person.

A nominated person may be:

  • a trust company regulated by the JFSC;
  • a significant person of the entity who is ordinarily resident in Jersey;
  • a lawyer or accountant who is ordinarily resident in Jersey (and who is regulated by the Proceeds of Crime (Jersey) Law 1999); and
  • a fund services business regulated by the JFSC.

As regards companies who are administered by a Jersey trust company, it is expected that the Jersey trust company will simply be appointed to act as the nominated person.

A nominated person acts as the main interface with the JFSC for the purposes of the Law. The nominated person is authorised by the particular entity to provide the information required under the Law to the JFSC (including annual confirmation statements).

The nominated person is also authorised to provide other information to the JFSC or the Companies registrar under the relevant entity legislation (being, in the case of a company, the Companies (Jersey) Law 1991).

Existing entities – transitional provisions

Under the transitional arrangements, all existing entities will need to do the following:

  • notify the JFSC of the appointment of a nominated person;
  • notify the JFSC of the information that will be contained in the annual confirmation statement (i.e. the entity's beneficial owner information and significant person information); and
  • notify the JFSC if it has issued shares to a nominee in circumstances where the nominee is not registered under the Financial Services (Jersey) Law 1998.

This has to be done not later than 3 months after the Law coming into force.

Given the number of entities that are already incorporated or established in Jersey, this is clearly a significant administrative task.

The register

The JFSC will keep a register of information provided under the Law.

Some information on the register will not be made publicly available.

Other information on the register will be made publicly available.

Beneficial owner information: private information

Jersey has committed as a jurisdiction to adhere to international standards on the disclosure of beneficial ownership information. Pending international standards being settled, there are no proposals to make any beneficial ownership information publicly available.

Permitted disclosure

Beneficial owner information and other information may be disclosed to combat money laundering and terrorism.

Under the Law, a local competent authority may at the request of a foreign competent authority:

  • facilitate access by the foreign competent authority to information held by the local competent authority;
  • exchange information with the foreign competent authority on shareholders, including nominee shareholders; and
  • obtain beneficial owner information on behalf of the foreign competent authority.

A “local competent authority” includes the JFSC, the Joint Financial Crimes Unit of the States of Jersey Police Force, the Attorney General and the Minister for External Relations.

A "foreign competent authority" is a public authority exercising functions or having responsibility for anti-money laundering and counter terrorism measures in a jurisdiction outside Jersey.

The Law also allows disclosure of information in other situations. These include disclosure to a law enforcement agency for the purpose of the investigation or prosecution of an offence.

Significant person information: public information

As regards a significant person who is an individual, it is envisaged that the following details will be made publicly available:

  • the name of the person;
  • the month and year of the person’s date of birth;
  • an address for correspondence to the person;
  • the person’s nationality, and
  • the person’s occupation.

It should be noted that for security purposes, the full date of birth of a significant person will not be made publicly available. In addition, the address for correspondence may be different from the significant person's residential address.

It should also be noted that information about a corporate secretary will not be made publicly available.

Under the Law, a nominated person may apply to the JFSC for information about a particular person (the "subject") to be kept private. The grounds for the application are as follows:

  • if the subject considers that there is a serious risk that the subject, or a person who lives with or is related to the subject, will be subjected to violence, intimidation or physical or mental harm as a result of the information being made available for public inspection;
  • if the subject considers that there is a serious risk of damage or threat to property as a result of the information being made available for public inspection;
  • if the information relates to a subject who lacks capacity to manage their own affairs; or
  • if there are exceptional circumstances that justify the making of the application.

Nominee directors

It is expected that further legislation will be passed involving the disclosure of information relating to nominee directors.

Sanctions

The Law imposes significant criminal sanctions if there is a breach of the Law.

Certain breaches of the Law may also lead to an entity being struck off.

What do you need to do?

If you are an existing entity that will be regulated by the Law, you will need to take the following steps:

  • make arrangements to appoint a nominated person (with the appointment being effective when the Law comes into force or at any other time within 3 months of the Law coming into force);
  • ensure that such appointment is notified to the JFSC within 3 months of the Law coming into force; and
  • liaise with the nominated person to ensure that the nominated person is able to file all required information within 3 months of the Law coming into force.

In relation to foundations, the Law also requires foundations to file abridged regulations and please see our separate briefing on this matter.

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