Feedback on the Compliance function: Key Persons regime green paper

1 Executive summary

1.1 Background

1.1.1 On 11 October 2024, we issued a green paper on the Compliance function: Key Persons Regime. The green paper was issued in response to industry concerns that they were facing challenges in resourcing Key Person roles and sought feedback on a range of possible solutions.

1.1.2 Key Person roles for the purposes of the green paper include: the Money Laundering Reporting Officer (MLRO), the Money Laundering Compliance Officer (MLCO) and the Compliance Officer (CO).

1.1.3 The green paper explored three options:

• Option 1 - Status quo – retain employment and residency requirements for Key Persons with enhancements.
• Option 2 - Retain the employment connection of Key Persons and remove the Jersey residency requirement.
• Option 3 - Retain the Jersey residency requirement for Key Persons and remove the Key Person employment requirement.

1.1.4 We sought views on the options and respondents were requested to:

• rank the above options in order of preference
• provide commentary for each option on:
  • how the proposed option would address the challenge in recruiting and retaining Key Persons
  • how the proposed option would benefit the financial services industry in Jersey
  • the effect the proposed option would have on Jersey’s compliance with FATF standards
  • the risks associated with this option, and how they might be mitigated

1.1.5 We also explored how regulatory technology (RegTech) could address the objectives of the green paper.

1.1.6 We acknowledge and appreciate the contributions of compliance professionals and all that they bring to the stability and prosperity of the Jersey financial services industry. We are committed to collaborating with Key Persons to emphasise the importance of their role. 

1.2 Feedback received

1.2.1 The consultation period for the green paper closed on 6 December 2024, with a total of 47 responses received. We appreciate all respondents for taking the time to consider and comment on the proposals. We also value the support provided by the technical working group coordinated by Jersey Finance Limited (JFL), who assisted us before and after the consultation with understanding the Key Persons landscape.

1.2.2 Within this total we received four submissions from sector groups: Jersey Compliance Officers Association (JCOA), Jersey Funds Association (JFA), Jersey Society of Chartered and Certified Accountants (JSCCA), and Jersey Association of Trust Companies (JATCo).

1.2.3 55% of the respondents who indicated a preference, ranked Option 1 – Status quo, as their favoured option.

1.2.4 The lack of a clear consensus, although leaning towards retaining the status quo, suggests that no single transformative change to the framework is available or desirable. Different parts of industry have varying requirements. More recent feedback from industry indicates that the resourcing pressures for compliance roles, which were the primary driver for commencing this work, have subsided. Overall, this indicates that wholesale reform of the current regime, which would require legislative change and is not entirely within our remit, is not desirable at present.

1.2.5 We acknowledge that, as part of the Government of Jersey's (GoJ) financial services competitiveness programme, work is underway to consider changes that would improve the business environment for financial services firms. Our focus will be to implement those changes that we, GoJ and industry collectively agree will make the most significant positive difference.

1.2.6 In the green paper, we clarified the position of outsourcing Key Person tasks in line with our Outsourcing Policy. We also offered starting point suggestions for potential enhancements to Option 1; these included the use of RegTech, suggestion of a defined career path for compliance professionals and the use of a corporate governance code to help shape a firm’s compliance culture. These starting points were generally acknowledged as possible enhancements to the current regime.

1.3 Next steps: Key Persons priority enhancements

1.3.1 As stated above, we do not believe it is appropriate at this time to undertake any large-scale reforms to the Key Persons regime. However, respondents have identified several priority enhancements to the Key Persons framework that merit further exploration. These recommended enhancements were observed in direct feedback, independent of that respondent’s preference and are as follows:

Outsourcing Policy

1.3.2 We will review our Outsourcing Policy to assess whether the interaction between the policy and the Key Persons regime can be simplified and clarified to enhance industry's understanding of the policy's application.

Derogation and variance guidance

1.3.3 We will develop and provide guidance to assist firms who wish to make applications for time-limited derogations and variances concerning Key Persons.

Key Person liability

1.3.4 We will engage with industry regarding the application of liability for Key Persons in enforcement actions.

RegTech guidance

1.3.5 We will share the RegTech feedback with other relevant stakeholders and will review our existing guidance on this subject. We recognise adoption of RegTech is a cornerstone in supporting Jersey’s efforts to keep pace with international competitors.

Read our feedback on the Compliance function: Key Persons regime green paper.