Thematic Review on Source of Funds / Source of Wealth

Guernsey Commission [GFSC] issues Thematic Review on Source of Funds / Source of Wealth in the Private Wealth Management sector [7th July 2020]

The Commission issued [7 July 2020] its report on the thematic review of source of funds / source of wealth in Guernsey’s private wealth management sector.

OVERVIEW

Whilst the review focused on sectors identified in Bailiwick of Guernsey’s National Risk Assessment as being most exposed to the threat of laundering illicit funds, it is anticipated that the report will be useful to all regulated firms within the Bailiwick when seeking to assure themselves that their own controls are, and remain, effective and relevant to their business.  The Commission would encourage all firms to apply a risk-based approach to establishing source of funds and source of wealth which is calibrated to take account of risk factors associated with the customer, the customer’s economic activity, country connections and what and how the firm’s products and services are delivered.

CONCLUSIONS

This thematic reviewed the practices of the sectors most exposed to the threat of laundering illicit funds, where multiple high risk factors are likely to be present.  Whilst not all sectors share this risk profile, the Commission would encourage all firms to apply a risk-based approach to establishing SOW and SOF which is calibrated to take account of risk factors associated with the customer, the customer’s economic activity, country connections and what and how the firm’s products and services are delivered.  There are extensive examples of these factors in section 3.17 of the Handbook to assist firms.

If measures to establish and understand a high risk customer’s SOW and SOF are to be effective and meet the requirements in the Handbook, the Commission encourages all firms, regardless of their sector, to undertake the following steps at the commencement of the relationship and when significant new funds are received:

1- Ascertain at the outset how the customer generated his or her total net worth and that of the particular funds to be used in the business relationship or transaction;

2- Take into account the various risk factors present within the relationship (including customer, country, product/service and deliver channel risks, and their cumulative impact) in considering the extent to which this information should be corroborated by further information and official documentation from the customer, appropriate third parties and/or independent open source information,

3- Finally, consider if this make sense against what the firm knows about the customer and the intended purpose and rationale for the business relationship or occasional transaction.

REPORT

The review was undertaken during the second half of 2019.  A copy of the thematic review can be found by clicking here.

• https://www.gfsc.gg/sites/default/files/Source%20of%20Funds%20Source%20of%20Wealth%20in%20the%20Private%20Wealth%20Management%20sector%20-%20Thematic%20Review.pdf