Changes to Rules and Guidance on Pooled accounts
We are pleased to share this article written by Alice Joy, Commission Secretary at the GFSC.
The Guernsey Financial Services Commission seeks to engage with industry associations, including the Chamber of Commerce.
As part of this engagement and from other feedback, during the Summer of 2023, the Commission learned of difficulties encountered by some local businesses such as property managers, and payroll services to access banking services to hold client money in pooled accounts.
The Commission was keen to understand what regulatory barriers, whether real or perceived, there could be to Bailiwick businesses accessing these accounts and whether there was anything it could do to assist.
We recognised that the provision of banking services is an issue faced by many jurisdictions and that there are number of factors which influence banks as they complete the necessary due diligence requirements for operating accounts.
Nevertheless, we pressed on with this work as it is important for the economic wellbeing of the Bailiwick that local businesses and non-profit organisations can obtain services from banks located within the Bailiwick.
We continued to liaise with the banks that we supervise to try to understand more about what was driving particular decisions around offering certain types of bank account. We encouraged banks to bring to our attention whether there were particular provisions in the Bailiwick’s Financial Crime Handbook that were influencing them to discontinue certain account types so that we could discuss whether the bank might be over-interpreting the text or whether it might be reworded without damaging anti-financial crime measures.
Our review showed that the difficulties experienced in the Summer of 2023 were not the result of increased regulation by the Commission. The Commission’s requirements with regard to pooled bank accounts are no more stringent now than they have been for several years.
Banks in the Bailiwick have to follow requirements set by their group or parent if these are considered to be more stringent than the regulatory requirements in the Bailiwick. We thought this could be one of the reasons why challenges were being encountered with pooled bank accounts. We liaised with regulators in other jurisdictions to understand whether there were any features of their rules that could be causing the issue.
Taking into account our conversations and engagement with local businesses, banks, industry associations and other regulators, in January 2024, we consulted on proposals to amend the rules and guidance in the Financial Crime Handbook on pooled accounts. In February 2024, the amended rules and guidance came into effect.
Whilst there was not an existing local regulatory impediment, we extended the definition of who a bank can treat as a customer in a pooled bank account arrangement, providing the bank has assessed the proposed relationship as low risk, to include businesses such as Bailiwick-based non-financial professional businesses servicing the local economy such as property management, auction sales and payroll. In making this change we paid close regard to the findings from the Bailiwick’s latest National Risk Assessment that the risk of money laundering from domestic proceeds generating crime was low and where laundering from domestic criminality did occur proceeds were likely to be cash-based and relatively small.
The decision as to whether to provide banking services to any person or firm is a matter for each bank but the intention of the change is to allow a bank, which has determined that the risk of money laundering through a pooled client account for a local non-financial professional services business to conduct customer due diligence on the property management or auction sales or payroll business rather than each underlying customer of those businesses. It is hoped that our regulatory changes reduce the administrative burden on the bank as well as the local business and thereby encourage the continued operation of pooled bank accounts for these sectors, who, generally present lower money laundering, terrorist financing and proliferation financing risks.
As our work on pooled bank accounts reinforces, we are committed to engaging with industry and Bailiwick businesses on the application of our rules and guidance.
If you’re keen to learn more please contact the GFSC
