Twelve months have now passed since the Guernsey Financial Services Commission (“GFSC”) introduced Appendices H and I to its Handbook on Countering Financial Crime and Terrorist Financing (“the Handbook”), aimed at providing further information to businesses on those countries considered to pose an increased risk of money laundering and terrorism financing.
In this article, we look at what’s happened since this update was made, the information that firms need to capture and share how we can help firms with their jurisdictional assessments.
Appendices H and I
The Handbook’s new appendices are split into two separate lists, similar to their multi-sectioned predecessor the Business from Sensitive Sources Notices (“BFSSNs”), with Appendix H capturing mandatory high-risk jurisdictions, namely Iran and North Korea. Unlike the BFSSNs though, the content from which was sourced primarily from the Financial Action Task Force’s public statements, Appendix I captures a broad range of sources covering several areas, including tax matters, bribery indicators and terrorism statistics published by entities from governments and supranational organisations, through to non-governmental organisations and think tanks.
Another key difference between the BFSSNs and Appendix H is the need for businesses to digest the now reasonably lengthy content of the Appendix and feed this into their own country risk assessment process. As paragraphs 78 and 79 of Chapter 3 note, a relationship with a connection to a country listed in Appendix I is not automatically high risk, and firms should consider the particular factors associated with a jurisdiction in making their conclusions as to the overall risk.
How Firms Can Capture and Analyse Information
In light of the above, over the course of the twelve months since its introduction, questions have surfaced about Appendix I and how best to capture the information contained therein within firms’ own AML/CFT frameworks.
While the Appendix captures data from eleven different sources, in most cases the Commission has only identified those countries considered to pose the greatest risk within each (for example, those in the top 40 of the Fragile States Index or those that score 30 or less in Transparency International’s Corruption Perception Index). It is therefore difficult to assess all countries in a consistent way using the Appendix, as it does not readily enable the differentiation between those countries that score well within each source, and those that regularly fall just under the GFSC’s threshold for inclusion.
A second weakness of Appendix I, a list of ‘countries and territories’, is the inclusion of broader geographical regions. This therefore mandates the need for all businesses to understand the countries falling within these areas (for example, Niger, Nigeria, Chad and Cameroon in the Lake Chad Region) to ensure those sources are also captured within firms’ jurisdictional assessments.
To assist businesses, BDO has compiled a full Country Risk Matrix, capturing the complete data sets from each of the sources included within Appendix I and providing a common analysis of this data for each jurisdiction. This analysis provides both a money laundering and terrorist financing risk rating for each country (where sufficient data exists), as well as an overall risk rating.
If you’d like a copy of this assessment, please get in touch with Paul Robinson.