ISLE OF MAN GOVERNMENT

National Risk Assessment of Money Laundering and the Financing of Terrorism

Cabinet Office Oik Coonceil ny Shirveishee NATIONAL RISK ASSESSMENT 2015

2

Disclaimer

This National Money Laundering and Terrorist Financing Risk Assessment of the Isle of Man has been conducted as a self-assessment by the Manx Authorities, using the National Money Laundering and Terrorist Financing Risk Assessment Tool that has been developed and provided by the World Bank. The World Bank team's role was limited to delivery of the tool; providing guidance on technical aspects of it and review and feedback to assist with the accurate use of it. The data, statistics, and information populated into National Money Laundering and Terrorist Financing Risk Assessment Tool templates, and any other finding, interpretation, and judgment under the scope of National Money Laundering and Terrorist Financing Risk Assessment process completely belong to the Isle of Man and do not reflect the views of World Bank.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

CONTENTS

Foreword by the Chief Minister 4-5 1. Isle of Man: The political, economic and international environment 6-7 2. Key Findings 8-10

3. Proposed Steps — National Level 11 4. Financial Sector 12-14 5. Non-Financial Sector 15-18

6. Proposed Steps – Sectoral Level 19 7. Terrorist Financing Risk 20

8. Overall assessment of national money laundering risk 21 9. International perspectives and perceptions 23-24 10. Domestic and international threat indicators and data 25-29 11. Challenges, deficiencies and gaps in data collection 30 3 12. Actions required to improve data/statistics on crime 31 s t n e

13. Overall assessment of national vulnerability to money laundering 32 t n o c

14. Identified priorities for improvement (1-6) 33-39 f o

15. Other national level issues 40-41 e n i l t u

16. Sector Reports O a) Banking 42-44 b) Securities 45-48 c) Insurance and Pensions 49-53 d) Other Financial Institutions 54-58 e) Moneylenders in the Isle of Man 59-61 f) Gambling 62-66 g) Trust and Corporate Service Providers (TCSPs) 67-69 h) Advocates 70-72 i) Accountants 73-75

Annex I National Risk Assessment Process Annex II Isle of Man Government AML/CFT Framework Annex III Isle of Man International Sanctions Policy and Practice Annex IV UK National Risk Assessment of Money Laundering and Terrorist Financing

Glossary of terms and acronyms

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Foreword by the Chief Minister

his is the first National Risk agency group which included law Assessment of money laundering and enforcement, regulators and Government T terrorist financing (NRA) conducted by officers, with significant input from the Isle of Man, reflecting the Island’s representatives of the private sector. continuing commitment to uphold the highest international standards in protecting The purpose of the exercise was to achieve a our economy against criminal abuse. clear understanding of the money laundering and terrorist financing risks faced by the Money laundering and terrorist financing Island, to assess the level of that risk and to present global threats, against which all identify measures that will help to provide countries have a responsibility to provide further protection. robust defences. This is a responsibility that the Isle of Man takes particularly seriously. The NRA is intended to inform Government policy making and to directly influence the As a recognised centre for international efficient allocation of resources. Its findings 4 business and finance, the Island is home to will also help industry, providing a national many successful companies which have a context within which businesses can carry significant presence around the world. We out their own risk based reviews. r e

t are determined to protect the reputation and s i

n Considerable further progress has been i integrity of our business community by M

made since this National Risk Assessment

f ensuring that the Isle of Man is not a place e

i was finalised in the summer of 2015.

h where criminals can find a welcome. C

e h

t Conducting a NRA is a requirement of the The introduction of the Designated

y Businesses (Registration and Oversight) Act b Financial Action Task Force which sets the

d

r international standards on anti-money in October 2015, which is anticipated in this o

w laundering and combating the financing of report, represents a major enhancement of e r the Island’s anti-money laundering and o terrorism. F combating the financing of terrorism regime. The Isle of Man’s NRA was led by a multi- “

We are determined to protect the reputation and integrity of our business community by ensuring that the Isle of Man is not a place where criminals “ can find a welcome. Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Concerns identified regarding the This may be the first NRA for the Isle of effectiveness of the Financial Crime Unit are Man, but it will not be the last. Evolving also being addressed. The Financial international standards, together with our Intelligence Unit Bill, which is expected to own need to ensure a robust national receive Royal Assent shortly, establishes the understanding of risk, requires regular re- FIU as a separate legal entity providing a examination and, periodically, a full review. structure which can appropriately prioritise intelligence gathering. I have been encouraged by the very high level of cooperation and engagement shown A further piece of legislation, the Terrorism by industry representatives in this initial and Financial Crime (Miscellaneous assessment process, and I look forward to a Amendments) Bill, is also due to receive continuation of this positive approach in the Royal Assent. As well as addressing a future. number of technical points, this legislation allows the Isle of Man to respond more quickly to international sanctions and will 5 also enable a swifter domestic legislative

response in respect of money laundering and r e t

terrorist financing. s i n i M

Another significant milestone was reached in f e i

November 2015 with the merger of the h C Financial Supervision Commission and the e h t

Insurance and Pensions Authority to form the y b

Financial Services Authority. This was a d planned merger which did not arise out of r o the NRA; nevertheless I expect that this new w e r regulatory body will provide a co-ordinated o F and strengthened and approach to anti- money laundering and combating the financing of terrorism and proliferation for the Isle of Man.

Significantly, the work that has taken place and the actions arising from it have now been translated into a National Strategy for Anti-Money Laundering and Combating the Financing of Terrorism. This Strategy, which will set the direction of travel for the Government, will also undoubtedly be informed by the forthcoming MONEYVAL 5th Hon. Allan Bell MHK Round assessment in April of this year. Chief Minister

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

1. Isle of Man: The political, economic and international environment

he Isle of Man is a self-governing customs and excise duty debts. The mutual British Crown Dependency with the HM assistance under EU law extends to where T Queen Elizabeth II as Head of State. It the EU has entered into mutual assistance has its own government and laws, and a agreements with third countries on customs parliament, Tynwald, recognised as the matters. oldest continuous parliament in the world. The Island has its own legal system and The United Kingdom Government, on behalf jurisprudence. English law is not directly of the Crown, is ultimately responsible for applicable in general, but the Manx legal the Island’s defence and international system is based on the principles of English relations. In recent years the Isle of Man has common law and is accordingly very similar – in agreement with the UK and its to English law in areas such as crime, international partners – represented its own contract, tort and family law. However, in interests internationally, notably by certain areas, although modelled on English 6 concluding a significant number of bilateral law, Manx law has adapted to meet the tax agreements. The Isle of Man is financially Island’s own special circumstances, t

n autonomous and receives no financial particularly with regard to direct taxation, e

m assistance from either the UK or the company law and financial supervision. The n

o European Union. The Isle of Man is not Island’s High Court judges hold the ancient r i v represented in the UK or European office of Deemster and have jurisdiction over n e

l Parliaments. all criminal and civil matters. a n o i t The relationship of the Isle of Man with the Notwithstanding the natural economic a n

r EU is set out in Protocol 3 to the UK’s Act of disadvantages associated with its small size, e t n

i Accession (1972), and allows for free trade in geographical location and lack of natural

d agricultural and manufactured products resources, the Island has used its legislative n a between the Isle of Man and the EU. In and fiscal autonomy to build a strong, stable c i

m essence, the Isle of Man is outside the EU economy and political system for the benefit o

n except for EU law and policy on customs of the Manx people. Traditional industries of o c

e matters and the free movement of goods. In farming, fishing and tourism have been

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a all other matters, including direct tax and joined by sectors such as financial services, c i t

i financial services, the Isle of Man is in the e-business, shipping, aviation and high-tech l o

p position of a “third country” or non-Member manufacturing to create a diverse economy

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h State. However, due to the existence of the with an international base centred in a highly T

: Customs and Excise Agreement with the UK, responsive and secure jurisdiction. n

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f part of the EU fiscal (VAT and excise duty) Under the auspices of the Organisation for o

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l territory. s I (OECD), the Island has been at the forefront In addition, due to its inclusion in the of the development by small jurisdictions of customs and fiscal territories of the EU, there a network of Tax Information Exchange exist extensive arrangements for mutual Agreements (TIEAs). assistance and mutual recovery of VAT and

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Isle of Man: The political, economic and international environment 7 NATIONAL RISK ASSESSMENT 2015

2. Key Findings

he Isle of Man is an international in the layering process. This raises specific business centre with a broad mixture challenges; whilst the Isle of Man has been T of mature financial sectors e.g. internationally recognised as a cooperative banking and insurance and newer businesses jurisdiction (e.g. by the OECD 2), in the fight e.g. online gambling. Each has its own against predicate crime there have been few Money Laundering (ML) risks and controls investigations into the potential role of Isle which are discussed in more detail in the of Man based individuals and companies in individual sector reports. The Isle of Man cases of cross-border ML. Government has a stated aim to grow the economy, but has aimed to achieve this goal Further work needs to be undertaken as a within a carefully managed and well- priority to identify specific ways in which the regulated environment. The application of Island’s authorities can follow up domestic recognised international standards is seen as involvement in international cases in a more vital for the reputation of the Island and for proactive and impactful manner. More work its continued economic success. is also required to ensure that 8 information/intelligence is being effectively The international nature of business in the shared between the police, the regulators and other competent authorities s Isle of Man means that much of the non- g

n domestically, with additional legal gateways i retail financial business is non-face-to-face d

n established where required as well as with

i via intermediaries; there is therefore a

F 3 off-Island partners e.g. via Egmont/Interpol . y higher than normal vulnerability to proceeds e

K of crime generated abroad being handled by such businesses. However, it is important to The sharing of intelligence which is

note that offences will also occur generated through international requests domestically. made under Tax Information Exchange Agreements (TIEAs) would also be valuable, Whilst due controls are in place when relying however there is a legal issue involved over on third parties, there remains a significant confidentiality as described in more detail residual risk facing the Isle of Man in that it later. “ may be involved inadvertently or otherwise

The Isle of Man Government has a stated aim to grow the economy, but has aimed to achieve this goal within a carefully managed and well-regulated environment.

2 Organis“ation for Economic Co-operation and Development 3 The Egmont Group is an international group comprising of over 150 FIUs which works to promote international co-operation in anti-money laundering and countering the financing of terrorism

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Overall the NRA indicates that the Isle of The model is unusual in that the FCU carries Man’s exposure to high risk jurisdictions is out all of the functions of Financial relatively small albeit that data has not been Intelligence Units (FIUs) but also has available for some of the Designated Non responsibility for the investigation of serious Financial Businesses and Professions and complex fraud, high level money (DNFBP 4) sectors. The vast majority of laundering, allegations of corruption and financial service activity takes place with low offences relating to the financing of risk, Financial Action Task Force (FATF) 5 terrorism. compliant jurisdictions, in particular with the UK. It should be acknowledged however that Deficiencies in the structure, operating the risk profile of business via the UK will model and performance of the FCU have inevitably be different from and higher than been identified. These include the need for the average UK domestic customers and that officers to perform a variety of roles, issues FATF compliance cannot be the defining regarding career structures, succession factor. planning and the impact of reduced budgets on staff development and training. 9 The Island has a strong legal and regulatory framework to enable action to be taken The absence of an online IT system for the s

receipt, management, analysis, investigation g against ML with which Regulators supervise n i

and dissemination of suspicious activity d the most significant areas of financial n i F services. The amalgamation of the Financial reports (SAR) has also had a considerable y

impact on the ability of the FCU to carry out e Supervision Commission (FSC) and the K Insurance and Pensions Authority (IPA) investigations. planned for 2015 offers further opportunities to streamline and strengthen financial Considerable and effective assistance is services regulation. However, this in itself given to other jurisdictions, both on a formal will create new challenges for some time to basis and also informally. However, feedback come, with a review of the systems, is sporadic in nature and limited in scope. functions and regulatory framework of the This, in turn, has some impact in terms of new body all being required. The capacity how best the FCU can instigate and direct and resources available for Financial Crime future investigations. Investigations and Financial Intelligence The gathering, processing, analysis and gathering and processing are two critical sharing of financial intelligence have also areas that have been identified as having raised areas of concern. Abstraction of staff deficiencies. and limited levels of experience have an The Isle of Man’s approach to financial impact upon the FCU’s ability to deal with intelligence, investigation and international intelligence and the limited nature of co-operation was set in 1999-2000, when specialist financial investigation training that the Financial Crime Unit (FCU) was has been given to FIU officers also limits its established. effectiveness.

4 Designated Non-Financial Businesses and Professions which include e.g. advocates, accountants, corporate service providers and gambling, 5 The FATF is an independent inter-governmental body which develops and promotes policies to protect the global financial system against money laundering, terrorist financing and proliferation

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The absence of convictions for complex high The introduction of the Designated volume international ML cases has made it Businesses (Registration and Oversight) Act difficult to identify prevalent typologies for (Designated Businesses Act) in October 2015 the Isle of Man and therefore to focus risk will address this issue and more complete mitigation more effectively. A regular review data will be available to update the NRA in of the content of Mutual Legal Assistance the future. Requests (MLARs) and International Letters of Request (ILORs) and a more formal and Border controls were considered in some regular sharing of intelligence between the detail, although it was recognised the relevant authorities domestically, would also measures that could be undertaken would be help to build a more informed picture of the limited owing to the Isle of Man’s particular typologies relevant for the Isle of Man position within the Common Travel Area and as part of a customs union with the UK. Work is now underway to ensure that this However the Isle of Man has a mature takes place including a review of information finance sector and placing illicit funds 10 sharing gateways. directly into banks or other institutions has become much more difficult in recent years, The robustness of this assessment into ML with institutions effectively acting as a virtual s

g threats has also been impacted by a lack of n border. The NRA established that the Isle of i

d key data which would better help to identify n Man does not have a significant cash courier i F sources of external threat. For example, risk; nevertheless a number of actions were y

e there is no annual balance of payments K identified which could further strengthen report for the Isle of Man and, of the four controls in this area. major economic sectors, detailed data was only available for two, (albeit the two The Isle of Man is a small jurisdiction and largest) which were the banking and the various agencies involved in combating insurance sectors. ML and Terrorist Financing (TF) work closely together. With comparatively few prosecutions taking place for ML, it is challenging to make a fully The NRA highlighted that overall there is a rounded assessment of the prosecutions or high level of domestic cooperation, although the court services, in respect of complex ML this can be further improved upon. In cases. addition, there are numerous formal and informal opportunities for representatives There were also data gaps concerning a from Government, Regulators and industry number of non-financial sectors, some of to meet together to discuss and develop which had not in the past been required to policy and strategy and to deliver operational register with a supervisory body. This meant actions as appropriate. In 2012 the that the risk assessment in some areas was Government published a policy statement 8 constrained as there was no comprehensive, on combating ML / TF and the completion of organised or historic data to call upon. this NRA with its accompanying Action Plan, will provide sufficient and substantial detail to enable a strategy to now be developed.

8 https://www.gov.im/media/1082460/amlcommitment.pdf

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

3. Next Steps — National Level

ecuring agreement to the actions effectiveness of information provided by the arising out of the NRA is the priority, Isle of Man in response to international Sfollowing which a national Anti-Money requests will be undertaken. Laundering / Combating the Financing of Terrorism (AML/CFT) strategy can be Actions have been identified which will considered and recommendations made improve co-ordination between Customs and accordingly. The coming into force of Excise, the Isle of Man Constabulary and the legislation to introduce oversight for the Department of Infrastructure and other DNFBP sector will be a significant step agencies in respect of border controls. forward in AML/CFT policy and strategy. The introduction of a new Anti-Money Laundering Customs and Excise has put in place an and Countering the Financing of Terrorism outreach and awareness-raising programme Code 2015 9 (AML/CFT Code) which pre-dates involving airport and ferry port operators, the NRA, will also help to strengthen the security personnel (including private security AML/CFT framework for the Isle of Man. company staff), express courier and freight businesses. 11 A number of actions aimed at addressing the The aim of this programme is to heighten identified deficiencies in respect of Financial l e Intelligence and Financial Investigations are awareness of the risk of undeclared cash, v e L

and the proper means of dealing with any included in an action plan developed by the l a

Serious Crime Strategic Board (SCSB). The detection. Other measures include reframing n o i enabling legislation to allow for targeted t critical issue however, which is also identified a in the SCSB plan, is the need to progress a action or controls on goods and cash N —

entering or leaving the Island. Work has also strategic review of the organisational s p

taken place in respect of outreach exercises e

structure of the FCU in order to move to a t S

with non-Government bodies to provide new model which more effectively meets the t x needs of the Isle of Man. Terms of reference education and improve import and export e N for this work have been drafted and rapid monitoring. progress is being made. From the analysis undertaken it is apparent The creation of an online reporting system that at this time priority work is required to for SARs will be accompanied by work with address issues at the national level for the industry to raise reporting standards; it combating ML. Nevertheless the sectoral will also necessitate a fundamental shift in analysis identified some commonalities and how the FIU deals with SARs. The also areas where actions could be taken to information technology that is currently reduce sector vulnerability and increase the available to the FIU, aside from that ability to combat ML. These are addressed in concerning SARs, will also need to be the following section. reviewed and upgraded.

A review of the approach to requesting feedback from jurisdictions concerning the

9 The Code came into operation on 1 April 2015

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

4. FINANCIAL SECTOR

he assessment of each sector took into clients (direct and introduced) as well as account known threats and inherent persons holding funds on behalf of others T vulnerabilities for each sector. It took (e.g. wealth management). into account how far these vulnerabilities were mitigated by the AML/CFT controls in A wide range of products and services are place. provided including savings, current accounts, private and premier banking, investments, The ML/TF assessment also took into lending, treasury services and foreign account a number of factors concerning the currency accounts. size of each sector in respect of the Island’s economy, since this also represents a risk The most vulnerable customer segments factor. The combination of threat and (also taking into account the size of those vulnerability produced a risk rating as segments in relation to banking) are follows; considered to be non-resident High Net Worth (HNW) clients, managed corporate / 12 • High trust clients (where complex structures could • Medium high be in place), and the use of the banking • Medium sector by large non-Isle of Man corporates. r o

t • Medium low This analysis reflects a range of risk factors c e

S • Low that could be more prevalent in these

l a

i segments including: non-face to face c

n tansactions, the handling of higher risk a n i Further information regarding the customer types (e.g. Politically Exposed F methodology can be found in Annex I. Persons or PEPs), the international nature of transactions, and typologies (for example tax evasion related typologies).

Financial Sector — Banking Banks in the Island also face a range of challenges and pressures that can relate to The overall ML risk for the Banking sector is AML / CFT including international and market assessed as medium. pressure, group de-risking / cross border risks, regulatory change and outsourcing. There is a generally strong AML / CFT Banking is a mature sector in the Isle of Man control framework counteracted by some with well-established customer due diligence inherent vulnerabilities in products, services, and supervisory controls; the vast majority delivery and customer type, although there of banks are part of wider international are mitigating controls in place. groups established in jurisdictions with equivalent AML regimes. It is considered to Banking currently represents approximately be broadly well controlled, but there are core 8.5% (£330m) of the Island’s GDP (source: inherent vulnerabilities prevalent, most national income accounts 2012/13). The notably arising from some customer Island’s banks service local and international segments to which products and services are personal customers, corporate and business offered.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Financial Sector — this is well understood by functionaries in the sector and their staff Entry controls in Securities to the sector (the steps that a functionary has to go through with a regulator before The overall ML risk for the Securities sector they can operate in this sector) are is assessed as medium. considered to be thorough and detailed. The majority of the investor base is UK resident There is a generally strong AML control and so concerns in relation to the framework but some of the inherent identification infrastructure of these investors vulnerabilities, notably in the client base, are are limited. reflected in the overall risk rating.

The securities sector forms a small part of the Isle of Man financial services sector overall, contributing approximately 1% to Financial Sector — the Gross Domestic Product of the Island. Insurance and Pensions 13 With the exception of Isle of Man Independent Financial Advisors, the client The overall ML risk for the Insurance and r o

base will be substantially non-resident clients Pensions sector is assessed as medium. t c with foreign business or personal interests. e S

There is a generally strong AML framework, l a i The client base of the majority of institutions however some characteristics of the products c n a

in the securities sector therefore presents a and services provided within the insurance n i higher risk of ML. and pensions sectors of the Island fall within F the range of categories suggested by the Other risk factors to be considered are a FATF as examples of potentially higher-risk client base which includes PEPs, HNW business. individuals, clients linked to higher risk jurisdictions and clients linked to higher risk The insurance and pensions sector is a well- activities. Non-retail funds and investment established and mature part of the industry business represent the most significant which, over the last six years has continued elements of the securities sector. Overseas its upward trend of contribution to the funds represent the element of the sector economy of the Isle of Man, overtaking that has seen a significant positive growth in banking as the largest single contributor to the relevant period. the Island’s GDP in 2009. Approximately 2,000 people (4.5% of the working The general AML controls which apply to the population 7) work in the Insurance and securities sector in the Isle of Man are Pensions sector, and a similar number off- assessed as strong. There is a mature legal Island in branch and supporting operations. framework which seeks to prevent ML and

7 Isle of Man Census 2011

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

There are also accounting, legal and other Other Financial professional service providers representing many well-known international firms. Institutions

In 2013 assets under management within The overall ML risk for Other Financial the Island’s insurance and pensions sector Institutions (OFIs) 8 is assessed as medium- continued recent trends increasing by just low. over 5% on the prior year’s position to just under £64 billion. The Island’s long term The quality of the AML control framework for insurance sector has £56.5 billion under OFIs varies between medium to medium management, general insurance has £4.7 high. Money Transmission Services are billion under management and pension subject to AML/CFT controls; however the scheme assets total £2.7 billion. Distribution quality of AML/CFT controls for Money is mainly through independent financial Lending is identified as being ‘Close to advisors. Nothing’ currently although a registration and oversight regime for AML/CFT will be 14 In recognition of the higher risk introduced when the Designated Businesses characteristics the IPA requires all insurers to Act comes into force in October 2015.

r identify the source of wealth for all new o

t OFIs represent a small sector compared to

c business in addition to the standard due e

S other groups on the Island, and present

diligence requirements set out in the l a i AML/CFT Code. The life sector, which medium to low vulnerability. This is based c

n upon current activity and knowledge and

a represents about 89% of the insurance and n i reflects the relatively small size of the sector, F pensions sector in terms of assets under management, has a medium vulnerability to a low average transaction size, the ML. The pension sector, which represents predominant customer base being local 4% of the overall sector, is assessed as resident individuals (face to face) and the having a higher vulnerability than that of life. AML / CFT and licensing regime in place, This reflects the earlier stages of other than for Money Lending. For those development life cycle of the industry as a firms which are already subject to full whole market and the need to develop supervision (and are required to be regulated further the compliance frameworks to by the FSC), only minor improvements are address the risks presented by the required to enhance the current regime and international, non-face to face business. ensure that the focus remains on the vulnerabilities present in these sectors The non-life sector, representing 7% of the (money service businesses). overall sector, has a medium low vulnerability to ML reflecting the lower risk profile of the products offered.

8 OFIs include Money Transmission Services and Money Lending as well as a number of other smaller activities such as safety deposit boxes. OFIs are also referred to as Money Service Businesses.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

5. NON-FINANCIAL SECTOR

Designated Non-Financial risks arise because the industry is by nature non-face-to-face, intrinsically cross-border, Businesses and Professions incorporates a form of agency, operates in (DNFBPs) jurisdictions with weaker scores on AML/CFT indices and innovates rapidly. Despite these he primary criteria for identifying those factors, credible typology reports for online DNFBPs to be assessed in detail gambling are relatively rare; high value cases Tconcerned the level of likely exposure that arise generally have gambling activity as to domestic or international criminal activity, the motivation for the crime (for example with priority being assigned to the possibility stealing money to fund play). The of organised, cross-border crime being able predominant typology is the use of stolen to exploit the service / products being credit card details to deposit and play in the offered and the capacity of a sector for hope the proceeds can be withdrawn without laundering (i.e. its size). Online gambling; detection. Mitigations exist to prevent this in Trust and Corporate Service Providers the AML Code. (TCSPs); Advocates and Accountants were 15 identified as the primary focus of the DNFBP There are a number of factors which mitigate

the risk of players laundering money through r assessment although high level consideration o t

the sector: c was also given to CVC, High Value Goods e S

Dealers and Estate Agents at the initial l a • the industry is almost exclusively IT based i stages of the project to see if they warranted c n

and detailed transaction records are kept on a detailed analysis. n i

all activity F - n o

• the industry has low thresholds before N verification of identity is required (currently DNFBPs — gambling EUR 3,000 in any rolling 30 day period)

The overall ML risk for the gambling sector is • players’ wallets are held online by the assessed as medium. operator so players must supply the required verification of identity before the operator The Isle of Man Gambling Supervision will release their money back to them. A Commission (GSC) licenses around 50 online failure to supply credentials (typically operators which offer online and mobile passport or driving licence, plus proof of device gambling to a worldwide player base. address) typically results in the account Customers are known as participants or being suspended, the money remaining with players. The player base is very large and the operator and a Suspicious Activity Report 100s of millions of players’ money is (SAR) being considered. deposited in online wallets held by licensees at any given time. The majority of the The threat that would be posed by criminal companies are privately owned and some of ownership of an online gambling licence is the ownership structures are complex. The highly significant and recent typologies have GSC has legislative powers to determine been observed in Europe. beneficial ownership and requires all owners to be identified and approved before assuming control or ownership. Inherent

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

DNFBPs — Trust and and how this is applied in practice across sampled files; the presence and quality of Company Service Providers CDD related to those files, and the frequency and quality of monitoring and risk The overall ML risk for Trust and Company assessment of ongoing business. Training Service Providers (TCSPs) is assessed as records and the procedures and records for medium high. SARs are also reviewed.

The TCSP industry comprises some 160 The FSC only licenses TCSPs which offer a licence holders. Firms range in size from full range of regulated activities; “registered international businesses with in excess of office only” business has been in long-term 100 employees, to small businesses which decline and “mixed boards” are rare. The Isle are in common ownership with the practices of Man has well-regarded aircraft and of accountants or advocates and often shipping registries. These sectors, together service a similar underlying client base. The with ancillary services to online gambling 16 industry provides services to some 30,000 companies feature in many TCSPs’ target client companies, of which approximately markets for new business. half are incorporated on the Island and half r o

t elsewhere, and to some 20,000 trusts. ML/TF risk can relate to misuse of TCSP c e

S services for the commission of the predicate

l

a From an AML/CFT viewpoint TCSPs are

i offence, or for layering or integration of c

n important as gatekeepers to the financial dishonestly obtained funds. The misuse of a n i system. The trusts and companies of which legal entities to evade tax features highly in F - they are trustees and directors have control n international experience of TCSP risk. o

N of assets, investments and bank accounts. Automatic exchange of information for direct Most business is international in nature with tax purposes under FATCA and the CRS is around 40% estimated to come from outside expected to reduce these risks. Closure of the UK and EU. TCSPs have the highest legal tax avoidance and planning vulnerability score across all sectors due to opportunities for middle earners has led the the high risk profile of beneficial owners (the industry to focus on wealthy clients and a clients) of TCSPs; the existing and significant more international client base of a higher typologies for the sector; the availability of standard. This is more likely to reduce the non-face-to-face transactions; the use of risks of receiving the proceeds of foreign professional intermediaries and the complex corruption or organised crime. nature of some of the structures involved. Where TCSPs supply services, including Awareness of AML/CFT risk indicators is corporate vehicles, for use in international assessed as high across the industry; TCSPs trade there is a risk that those vehicles could have been subject to licensing and be used to carry out trade-based ML. In supervisory visits since 2001 and a risk- recent years Customs and Excise has based approach to AML/CFT since 2008; undertaken an awareness-raising programme almost all visits to TCSPs include AML/CFT and provided specific guidance on the risk matters. A standard supervisory visit faced by TCSPs from not complying with includes a review of the TCSP’s AML/CFT risk “trade control” licensing requirements where assessment of its business as a whole; its involved in movement or brokering activities. method for risk assessing potential clients

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

DNFBPs — Advocates The very small size of the sector (36 firms / 226 advocates) and the resources assigned The overall ML risk for advocates is assessed by the Law Society Council to delivery of the as medium low. AML programme have secured what might be considered an unusual level of access to Only nine of the 27 Practices that conduct and oversight of a profession by its business in the regulated sector report supervisor. 100% of firms have been visited having an international client base; the and subject to AML review on two occasions remainder provides regulated services to the since 2010, with the 2013/2014 visit round local residents of the Isle of Man. The nine seeing 65% of firms visited on a risk basis. Practices delivering regulated legal services For the past two years an Annual Compliance to an international client base employ 112 of return has been required from each Practice the 226 advocates at the Bar. signed with an Advocates Undertaking. Each Practice has, since 2011, been required to For the Isle of Man, the inherent submit to the Law Society its Money vulnerabilities to the profession of legal Laundering Reporting Officer (MLRO) 17 services being used for ML are identified appointee information annually, with some

predominantly as the extent and the value of integrity based information requested (of a r o t international work provided to HNW clients. format largely adopted from FSC c e S

documentation), by way of a fit-and-proper

However, the primary risk remains deliberate l a i

connivance, collaboration or intent of an test. c n advocate to commit a legislative breach or a n i criminal offence. Balanced against the high Advocate involvement in TCSP business F -

forms part of the legal practice in only a n level of awareness and internal compliance o controls that have been demonstrated across small number of Practices. This key ML N the profession via supervisory inspection, vulnerability associated with the legal there are risk-based mitigating controls in profession is not part of the core delivery place to address this vulnerability. service of Isle of Man advocates. A number of Practices have established separately The type and manner in which legal services licensed entities providing TCSP services. are delivered by advocates in the Isle of Man These businesses are supervised by the FSC mitigates many of the vulnerability factors as TCSPs with their associated risks are which are often referred to in typology separately assessed. reports for this sector. Supervisory visits have confirmed that work is conducted for named and identified clients, or where non-face-to- face instruction is received it will be largely from Law Firms in England where the English law firm is the client and the Island requirement is a point of company law in a much larger deal.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

DNFBPs — Accountants The professional bodies will continue to provide guidance and collect data on AML The overall ML risk for accountants is and other regulatory purposes for and from assessed as medium. its Members; much of which will likely remain relevant to the overall assessment. In 2013 the Department of Home Affairs Co-ordination between the FSC (which will (DHA) identified approximately 234 firms or have oversight responsibility for individuals active in the ‘accountancy’ field. Accountants) and the Professional Bodies as There is no requirement currently for the self-regulatory bodies will be imperative, accountants to provide information for the with the Bill making provision for supervisory NRA although support for, and responses to duties to be ‘delegated’ to the professional requests for information during this process bodies. from the professional bodies (ICAEW / ACCA 10 ) to which over 80% of accountants are attached and supervised were excellent. 18 Data was generally limited however with information provided largely anecdotally and

r evidence limited to the professional conduct o t

c standards of the professions. e S

l a i

c The Designated Businesses Act, which comes n

a into force in October 2015, will ensure that n i

F all registered Firms of Accountants and those - n

o representing themselves as Accountants are

N obliged to submit an AML specific annual return to the FSC. As this Bill is not enacted

at the time of this report, it is noted but not considered a mitigating factor in further reporting. The Designated Businesses (Registration and “ Oversight) Bill when in force will ensure that all registered Firms of Accountants and those representing themselves as Accountants are obliged to submit an AML specific annual “ return to the FSC. 10 Institute of Chartered Accountants in England and Wales / Association of Chartered Certified Accountants

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

6. Next Steps – Sectoral Level

here are a number of common themes improved; whether more specific guidance is across the sectors which, if addressed, required for industry as to when and in what Twould serve to help manage sector circumstances administrative sanctions will vulnerability to ML further. These are be applied. Also, further consideration as to summarised below. whether more specific guidance is required on where serious administrative failings A focus on SARs is needed to ensure that become a criminal matter and whether, in there is a high level of awareness of what is respect of criminal sanctions, Government required, to reduce defensive reporting and needs to restate its commitment to to ensure that SARs are completed in a enforcement. manner that enables them to be effectively reviewed and where required, analysed by Supervision, compliance functions and the FCU. The introduction of an online SAR corporate due diligence generally were reporting system at national level will be a variously identified by certain sectors as significant step forwards and should assist requiring consideration, and will be a the sectors in respect of improving SAR particular area of focus for those DNFBPs 19 reporting. who will shortly come under the Designated

Businesses Act 2015. Actions on each of l e

Improved data collection for AML / CFT v

these areas vary somewhat dependent upon e L purposes is required generally. All sectors which sector they relate to. The DNFBP Bill l a r reported that much of the data that would itself, which will come into force later in o t c enable better consideration of threats was 2015, represents a significant milestone and e S

not available or not in a manner that made it will both enable and require the progression : s accessible for risk assessment purposes. n

of further work for the non-financial sector in o i t

respect of training, guidance and supervision c 11 A Evidence that administrative and criminal for ML purposes. d e sanctions were being applied was generally s o lacking across all sectors. Sanctions are p o r intended to act as a deterrent as well as P addressing unacceptable or criminal behaviour. Therefore consideration will be given as to how the level of transparency in respect of administrative sanctions can be

11 Administrative sanctions are sanctions available to regulators who can impose them for breaches of the regulations. Sanctions can include issuing warnings, directions, imposing fines or in the final instance removing a licence and thereby closing a business.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

7. Terrorist Financing operation with effect from 1 January 2015. In addition, all relevant UN and EU sanctions Risk relating to terrorism financing, as well as relevant UK measures, have also been fully F risk was considered by a working imposed; and there has been information group consisting of representatives and guidance provided to businesses Tfrom law enforcement (FCU), the specifically about TF sanctions and the risk Customs and Excise Division, HM Attorney of proliferation funding. The lists of those General’s Chambers, the Financial designated persons, businesses and entities Supervision Commission and the Cabinet subject to sanctions are maintained so that Office using the TF module provided. Annex they match those in the UK. III sets out the policy of the Isle of Man Government in respect of complying with Customs and Excise is concerned with international sanctions against terrorism and sanctions and export and trade control the financing of terrorism and the way in measures, and has a close working 20 which this is achieved for the Island. relationship with the HM Treasury, Foreign and Commonwealth Office, UK Export There is little evidence of the Island having Control Organisation, as well as with HM k s i been at risk from TF in recent years, with Revenue and Customs, Border Force and the R

g few SARs relating to TF being submitted to National Crime Agency. Thus there is n i

c the FCU. Whilst however there is no generally a good level of awareness locally of n

a indication of TF taking place domestically,

n the related risks in the local law enforcement i F

the use in particular of the Isle of Man’s

t and regulators. s i

r sophisticated financial services sectors by a o r

r terrorist group or a terrorist financier The NRA has also highlighted the need to e T elsewhere than in the Isle of Man remains a continue to work with Not for Profit threat. Organisations (NPOs) to raise awareness of the risks connected with TF. A number of Where appropriate, law enforcement and charities based in the Isle of Man do fund, regulators on the Island have and will either directly or indirectly, charitable continue to co-operate fully with agencies of projects in regions of the world where the other jurisdictions, and examples can be risk of monies being appropriated for TF are provided of such co-operation with, for high. Amongst these groups is the example, agencies from the UK and the USA. Government’s own International Development Committee, which disburses The Island has ensured that its legislation is grants, some of which are of significant adequate to enforce any sanctions or other amounts, to small NPOs. restrictions necessary, including the Terrorism and Other Crime (Financial Restrictions) Act 2014, which came into

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

8. Overall assessment Of natiOnal mOney laundering risk

Domestic money A survey of over 50 governmental, law enforcement and industry representatives in laundering threat November 2014 captured the perception of ML from individuals with a close involvement he main crimes that generate the with AML work of the domestic ML risk in the proceeds of crime domestically in the Isle of Man. The results reflected the view TIsle of Man are local drug dealing and that the risk of ML does exist; that the size local theft. Manx residents are however on of the proceeds of crime in the Island is seen occasion involved in ML and criminal activity as medium low and that non-resident tax with links that are both domestic and outside evasion and fraud were believed to be the of the Island (see also under International primary predicate offences. Predicate Threats below) and such cases can be offences were considered to take place off- significant. Island and the risks to the Island concerned layering, which is the stage of the ML It is the case that where persons resident in process designed to disguise the origin of 21 the Island are found to be involved in ML illicit funds. Business from the UK was internationally, and potentially the related considered to present the greatest source of k s predicate offences, then the impact of such a i threat, in particular because of the volumes r

case is significantly greater both in respect of g

concerned. Research and analysis n i the call upon law enforcement resources to r undertaken later as part of the NRA process e d

address such offending and the potential n

largely supports these perceptions. u a impact upon the international reputation of l

y

the Island. Overall the NRA group considered that the e n Manx population is predominantly law o m

Nevertheless, of the ten cases that resulted l

abiding and that there was evidence for this a in convictions related to ML in 2013, all were n o

both in respect of the consistently low crime i domestic in nature and four of them were t statistics and also from other sources. For a n

drug related. Currently, estimates for the f

example, domestically there is evidence that o

volume of undetected ML occurring t

there is a high level of tax compliance as n domestically and the value of the proceeds e

seen in relation to indirect tax. m s

of crime in circulation in the Island do not s “ e exist. s s a

l l a r e v O

The NRA group considered that the Manx population is predominantly law abiding and that there was evidence for this both in respect of the consistently low crime statistics “ and also from other sources. Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

International money Domestically, the number of trials and convictions of individuals who have taken laundering threat part in the ML of illicit proceeds from abroad is very low, with the 2009 case concerning The Island’s economy is primarily financial Trevor Baines remaining the most notable services based, and financial flows into and (and currently most recent) case. In out of the Isle of Man each year are summary, during October 2009 husband and numbered in the billions of pounds. These wife Trevor and Wendy Baines, Isle of Man are significant financial flows and they residents, were convicted of laundering US represent a very real potential for illicit $175 million of proceeds from a securities money to enter and to flow through the Isle fraud in the USA in addition to false of Man, in particular as part of a layering accounting. Mr Baines was sentenced to a process. Furthermore, the Isle of Man’s term of 6 years’ imprisonment for the financial services are characterised by non- offences. He appealed but the sentence was face-to-face business relationships which upheld by the Appeal Court 12 . 22 require rigorous customer due diligence (CDD) systems. Outside of the Baines’s case, the assessment

t process concluded that tax evasion and fraud a

e The largest financial sectors in the Isle of are the most likely external threats to the r h

t Man are banking and insurance. These

Isle of Man. g

n sectors are well established, comprising i r

e substantially branches and subsidiaries of d

n large multinational firms that are familiar u a l

with operating within international AML y

e frameworks. The Island’s small population n o and the comparatively small size of the m

l

a domestic economy, allied to the fact that the n o

i vast majority of financial services clients are t

a resident outside the Island, suggests that n r e

t most predicate offences take place outside of n I the Isle of Man.

12 Link to the Appeal Court judgment: http://www.judgments.im/content/J1106.htm

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

9. International established in jurisdictions. During this research, by Australia’s Griffin University, the perspectives and Isle of Man was identified as one of the more perceptions difficult countries in which to establish a shell company 14 . nternational perceptions of the Isle of Man in respect of its efforts to combat However more recently, in May 2014, the UK IML are known to vary. Organisations National Crime Agency (NCA) published its monitoring global standards recognise that “National Strategic Assessment of Serious the Island has taken a leading role and has a and Organised Crime” (“the Strategic 15 strong record of compliance. However, Assessment”) which states in the Executive notwithstanding this recognition, it remains Summary (page 4) that; the case that the stereotype of a “tax haven” “Proceeds of corruption and bribery is often perpetuated when the media and amounting to millions of pounds from some certain lobbying groups refer to the Island. international politically exposed persons Furthermore, complex financial issues are 23 (PEPs) have been laundered through UK often cited in oversimplified and generalised financial systems including banks and terms for added impact. s investment property. […] The UK and its n o i t

dependent territories are believed to have p

This position has remained largely e c

been the destination for billions of pounds of r unchanged over recent years and in e p

European criminal proceeds.”

particular following the financial crash. It is d n recognised that in lobbying campaigns by a

The Strategic Assessment goes on to identify s some international Non-Government e v that a large proportion of the profits from i t

Organisations (NGOs) and advocacy groups c

serious and organised crime, laundered e against tax avoidance activities, the Isle of p s

through UK banks, wire transfer companies r Man is often generically included among the e p

and other regulated businesses, is sent l

world’s “tax havens”, regardless of the a

abroad and invested in real estate. Whilst n o

Island’s demonstrable record of compliance. i the Isle of Man is not specifically identified in t a n

the report, clearly as the UK is the Island’s r

In respect of published data, research by e t

largest financial services trading partner, n groups which have assessed transparency I against a number of criteria, positions the such statements highlight the need for Isle of Man in the middle regions of league vigilance. tables. Other published information is also available, including a study to ascertain the ease with which shell companies 13 can be

13 A shell company is a company without active business operations or significant assets 14 http://www.gfintegrity.org/wp-content/uploads/2014/05/Global-Shell-Games-2012.pdf 15 http://nationalcrimeagency.gov.uk/publications/207-nca-strategic-assessment-of-serious-and-organised-crime/file

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

A further key document which is relevant to “The role of the Isle of Man incorporated the Isle of Man’s NRA is the UK National Risk companies is disproportionately large in Assessment of Money Laundering and criminal cases of grand corruption in the UK.” Terrorist Financing 16 . This report was published in October 2015, some months The Corruption Report concedes that it is after the Isle of Man’s own National Risk hard to draw accurate conclusions from the Assessment was finalised. The Island did not evidence as the outcome may be the result have sight of the UK assessment prior to of Isle of Man authorities working more publication. However given that the UK is by collaboratively than others with the far the Island’s largest trading partner in Metropolitan Police. From the viewpoint of financial (and other) services this UK TCSP regulation and AML/CFT prevention the assessment is relevant to the Isle of Man and report is a useful reminder of the importance would have formed a part of the evidence of source of wealth in considering higher base for this NRA had it been available at the value transactions. time. Consequently, an Annex IV has been 24 included with this report which seeks briefly The Corruption Report also draws attention to address a number of relevant issues to the importance of effective AML/CFT precautions in DNFBPs 18 . At the time of

s identified within the UK NRA. n writing, a review is being conducted by the o i t

p The purchase of real estate using the UK’s NCA and the Isle of Man’s authorities e c

r proceeds of corruption is the subject of a with the aim of identifying companies cited e p

report by UK Transparency International in the report. It is anticipated that the review d

n (March 2015) “Corruption on your Doorstep: will produce information for regulators and a

s How Corrupt Capital is used to Buy Property possibly typology information for industry. e v

i 17 t in the UK”. (the Corruption Report) . c e p s r The Corruption Report identifies that 8.5% e p

l (or 3,472) of London properties held by a

n foreign companies are incorporated in the o i t Isle of Man and suggests, but does not a n r substantiate, that those types of e t

n arrangements may be used for ML. The I report further suggests that;

16 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/468210/UK_NRA_October_2015_final_web.pdf 17 http://www.transparency.org.uk/publications/corruption-on-your-doorstep/ 18 In August 2015 the NCA was able to confirm that all bar one of their investigations into entities in the Isle of Man are complete without recourse to restraint and confiscation in the Island. The final investigation is into a complex structure with one company in the Isle of Man, and whilst convictions have been obtained and confiscation hearings are ongoing, none are on the Isle of Man.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

10. Domestic and potential threat in respect of business undertaken at a jurisdictional level. Figure 1 international threat shows the level of SARs received by the FCU indicators and data from each sector for the year 2013.

here are a number of indicators Whilst SARs are a key data source for available which can help to assess the financial intelligence, it is acknowledged that Tlevel of the ML threat facing the Isle of they are indicators only and that many SARs Man. One of these indicators is the types and are filed on a defensive basis. Quality also volumes of SARs received by the Isle of varies with a significant minority of SARs not Man’s FIU. Industry’s compliance with the fully completed and missing key information. requirement under law for individuals/firms The issues concerning the production of to file SARs with the FCU provides a key SARs, the transmission of the information to source of information from which intelligence the FCU and the levels of analysis which they can be drawn. The data available from SARs then receive are discussed in more detail helps to provide an overall picture of later in this section. 25 a t a d

d n a

Figure 1. Originator sector breakdown of Suspicious Action Reports received by s r o the Financial Crime Unit (2013) t a c i d n i

t a e r h

Trust/Corporate t

l

Service Providers a n o 14% i t a n

Post Office r e t

1% n i

Advocates d n a 2% Auditors and c i t

Accountants s e

1% m o

eGaming D 6%

Insurance 8% Banking 66%

Securities 2%

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Figure 2. Suspicious Action Report originator contribution to GDP (2012 -13)

Trust/Corporate Banking Service Providers 20% 8%

Post Office Advocates, 0% Auditors and Accountants 5% Securities 1% 26 a t a d

d n

a Online gambling

s

r Insurance 31% o t 35% a c i d n i

t a e r h t

l a n o i t

a Figure 2 illustrates the proportional size of the sectors generating SARs measured against n r

e each other (based upon GDP calculated for the financial year). Banking, online gambling t n i

and insurance are all significant contributors to GDP and it can be seen in Table 1 that they, d

n along with the TCSPs, contribute the largest numbers of SARs. a

c i t s e m o D

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Table 1. Number of SARs to FCU

SECTOR 2011 2012 2013

Banking 1162 711 995 Securities 35 22 23 Insurance 168 129 125 Online gambling 992* 59 91 Auditors and Accountants 9 17 12 Advocates 60 46 37 27 Post Office 3614 a

Trust/Corporate Service Providers 216 196 216 t a d

d n a

*The sharp decline in SARs from the online gambling sector from 2012 onwards is attributed to a s change in approach from one large online gambling firm following clarification from the FCU concern - r o t

ing criteria for making SARs. a c i d n i

t a e r h t

l

Table 1 above provides a breakdown of transaction. The level of financial a n o i

SARs received by the FCU by sector, exposure to jurisdictions with t a with banking providing the majority. recognised high threat levels of ML was n r e This reflects in part the high level of also considered. t n i

understanding, awareness and d n compliance with the technical aspects of In 2013 79% of SARs received (459) a

c i the AML Code by the banking sector as was in relation to the UK. This was not t s well as the very high volume of assets surprising; there are close economic, e m and liabilities within the sector. geographic and historic links between o the Isle of Man and the UK and as a D The threat assessment also considered consequence a significant amount of a number of other factors including the financial activity takes place, in number of international cooperation particular between the Island and the requests received by jurisdiction and City of London. As the largest financial assets and liabilities from financial partner for the Isle of Man the UK is by sectors measured against SARs, where far the most frequently reported there was information relating to the jurisdiction in terms of SARs. residence of the client attempting the

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The levels of exposure to jurisdictions which At sectoral level, banking dominates threat have a recognised high threat of ML must be indicators in terms of both the SARs received considered relative to the Island’s exposure and the requests for mutual legal assistance to the UK which has been recognised as (MLAR) concerning ML sent to the AGC from having a very high level of financial integrity other jurisdictions. The number of MLARs per and formalisation. Yet the UK represents sector falls generally in line with the number almost a third of the Isle of Man’s total SARs of SARs per sector, except in the case of to the FCU and over 50% of the mutual legal insurance, where only one MLAR concerning assistance requests handled via HM Attorney the sector was made during a six year period General’s Chambers (AGC). although 8% of SARs received by the FCU were from the insurance sector in 2013. If the UK, with its high compliance and low ML ranking is used as a benchmark, then one point of view might be the Isle of Man is not exposed to severe ML threats 28 internationally. However it is very important

to consider that the business being transacted from the UK to the Isle of Man is a t

a not typically standard retail financial services d

d and corresponding low risk individuals. n

a

s r o t a c i d n i

t a “ e r h t

l a n o i t a n r e t n i

d n a

c i t As the largest financial partner for the Isle of s e

m Man the UK is by far the most frequently o D “ reported jurisdiction in terms of SARs.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Figure 3. Breakdown of Mutual Legal Assistance Requests by sector since 2009

13, 2% 1, 0% 17, 3% 10, 1% 3, 0% Non-ML 80% 18, 3% Banking only 11%

73, 11% TCSP only 3%

Banking and TCSP 1%

Requests for Income Tax Division information 0% 29 Online gambling 2% a t a d Insurance 0% d n a

s Other 3% r o

545, 80% t a c i d n i

t a e r h t

l a n o Figure 3 above illustrates the % breakdown than as criminal tax evasion. i t a

of MLARs per sector between 2009 and n r e

Spring 2015. MLARs in respect of the The Isle of Man’s crime per capita is shown t n i banking sector comprised the largest in Figure 5 below, giving an indication of the d n element in over 50% of ML related MLARs. relatively low rates of crime recorded in the a

c Island in recent years. Overall, convictions i t s

Indirect evidence indicates that the level of for ML offences domestically have been rare. e m informal economic activity taking place in the In 2013 only ten convictions took place o Island is, as with most countries, relating to ML, in comparison to 37 D predominantly cash based and therefore at a convictions in 2012 and 45 in 2012. None of relatively low level. With a top rate tax of the cases represented high volume ML. 20% higher rate of income tax, the levels of tax recovered from individual tax investigations is such that cases are settled by way of civil monetary penalties rather

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Crimes per 1000 population per year England & Wales figure for 2013-14 not yet known Estimates used where annual changes to population published

Population size (K: 1000s, M millions) Isle of Man 85K Guernsey 62-63K Jersey 98-99K England & England/Wales Isle of Man Guernsey Jersey 56.2M-56.6M Wales

30 n o i t c e l l

o *Source: IOM Chief Constable’s Annual Report 2013/14 c

a t a d

n i

s p a g

d financial sectors) via the relevant regulators. n 11. Challenges, a

s e i deficiencies and gaps in There were further challenges in respect of c n

e data collection. For example, financial data i data collection c i

f by jurisdiction for the securities and TCSPs is e d

only collected on a broad geographic basis, , The threat assessment process has s

e so a more detailed breakdown is not

g highlighted that there is a need to obtain

n possible. e

l improved data in order to undertake a more l a

h detailed analysis. In some key areas the data

C Online gambling is another area that that would better inform the risk assessment represents a significant portion of the export process does not exist. economy yet data on financial flows is not The absence of a Central Bank and a lack of routinely collected. The online gambling any institutional requirement to collate sector and the GSC are now undertaking central trade statistics prior to the NRA has some work in this area but the data resulted in the need to use the financial collection could not be finalised in time for information that is currently available. In this NRA report. This has effectively limited particular, aggregated data that was the available NRA sector financial data to predominantly obtained from the banking banking and insurance. and insurance sectors (by far the largest

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Banking data was made available but further 12. Actions required to analysis is currently ongoing which has meant that cash flow for banking by improve data/statistics on jurisdiction has not been available, although crime this is expected to be resolved shortly. Assets and liabilities by jurisdiction have been used A framework for collating and updating instead during the threat assessment. threat assessment data for future NRAs will need to be agreed. Financial flow data, SAR More effective data collection in respect of data, details and typologies from ML-related individual ML convictions in the Isle of Man is convictions in the Isle of Man, numbers of also required. For example, while the MLARs received by the AGC, cash number and names of convictions relating to declarations and cash seizure data from ML in 2013 are known, the acquisition of Customs and Excise are amongst the data specific details from each case (i.e. which requires collation into a standardised determining the sectors involved; predicate format; some at least of this data should also offences etc.) is a labour intensive task as be held centrally. A review of precisely what 31 this information has not previously been data should be provided for NRA and in what captured in an accessible manner. manner is one of the key actions that will e m i

flow from this process. Further work will be r c

Information from other jurisdictions following

required to assess which data that is not n o

responses from the Island to requests for

currently available should be collected in the s c information (e.g. successful convictions i t

future, in order to improve the NRA process. s i derived from shared information; amount of t a

These actions, implemented properly, should t assets seized etc.) would also be helpful in s allow for much greater efficiency and level of / a determining how often and in what manner t analysis for future NRA. a d financial services in the Isle of Man may be e v

used to launder money. However, it is o r acknowledged that currently there is little p m i feedback, and the National Risk Assessment o t working group has identified the need for the d e r

Isle of Man to acquire more. The issue of i u international cooperation is dealt with later in q e r

this NRA. s n o i t c A

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Implications 13. OvERALL ASSESSMENT OF The Isle of Man’s exposure to recognised high risk jurisdictions is relatively small; the NATIONAL vast majority of financial services activity vULNERABILITy TO takes place with low risk and FATF compliant jurisdictions (albeit that the type of business MONEy LAUNDERING undertaken with the UK is higher risk, as stated earlier). There is no reason to suppose however that the Isle of Man is immune to the typologies identified by the National combating ability FATF and other international bodies as he term ‘combating’ refers to the prevalent in particular sectors. However, the ability to defend against attempts at data deficiencies highlighted above limit the ML by using a range of protective and messages that can be given concerning ML T proactive measures, the nature of which can 32 threat for this first NRA. vary depending upon whether it is at national or sector level. The national picture g Further planning is required to allow for n i is explored in this section which looks at, for r more thorough and accurate threat e

d example, the strategic approach of

n assessments in the near future. It is

u Government and the work of the FCU. a

l recognised that a focus on key data sets is

y

e required in addition to the organised and n

o sustainable collection of data; the provision m of adequate data collection resources; and a o t

National priorities for improvement

y granularity of detail and an understanding of t i l i the typologies used by money launderers to b

a 1. Capacity and Resources for r target the Isle of Man. e

n Financial Crime Investigations l u

v 2. Quality of AML Policy and Strategy

It is acknowledged that until an improved l

a 3. Quality of FIU Intelligence

n level of data collection is achieved, it is very o i

t important to maintain continued awareness Gathering and Processing a

n 4. Effectiveness of International of the risks faced by all the “gatekeeper” f o

Cooperation

t institutions in the Island. n 5. Effectiveness of Customs Controls e m

s Consideration will need to be given to how on Cash and Similar Instruments s

e 6. Quality of Border Controls

s information identified from the threat s a

assessment could best be shared more l l a

r widely within Government and with industry e

v to inform measures which help to identify O and combat ML. This will gather more For reasons that are explained later, priorities importance as actions to improve the 5 and 6 are considered to be of less collation and analysis of data are developed importance than otherwise indicated. and more intelligence on potential threats Additional issues were also identified, becomes available. although not as priorities, and actions developed as a result.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

14. Identified priorities for It is important to note that the current backlog of cases is low but this may be more improvement (1-6) a reflection on the inability to spend time on detailed analysis and investigation of cases Improvement priority 1 — Capacity and where the Isle of Man may be a nexus to resources for financial crime international based cases. Further, it is investigations possible that a more expert system of analysis of SARs and reports would guide he capacity for financial crime officer investigations better to identify and investigations is restricted by the assist a more proactive approach with T current resources available, limited industry where professional firms are access to specialist support (e.g. analysts) repeatedly involved in suspicious cases and and a need for training as Accredited where the proportion of reports received Investigators and Financial Crime Officers. from a sector or business area are This results in a lack of specialisation disproportionately low. amongst the current staff. Financial Crime 33 Investigation sits within a broader FCU Actions have been identified to resolve issues which, whilst it has the requisite autonomy concerning training, which will assist in ) 6 and political independence, also creates bringing the investigative functions up to - 1 ( difficulties through competing demands for

standard. The progression of a wholesale t n time and resources in other (domestic) review of the internal structure and staffing e m policing areas. Broader strategic and levels available within the FCU is required e v resource issues that affect the Constabulary o and, overarching this, a broader strategic r impact directly upon the FCU with officers p review of the organisational structure of the m i

abstracted to other casework and indeed r

FCU. Again, this is now underway with the o f

operational duties. appointment by the Chief Secretary of a s e i t body to lead this review work. In the i r o

Recent planned police retirements from the i

meantime, measures need to be put in place r p

FCU, coupled with the broader strategic and

to address the current need for more d e resource issues affecting the Constabulary i f

financial crime investigators, specialist i has resulted in a decrease of experienced t support and alternative resourcing models n e officers in the FCU with the required AML d explored to help to cope with the current I specialist skills. The situation is compounded demand. due to the absence of any formal AML training specifically targeted to meet local The Serious Crime Strategic Board (“SCSB") conditions. The FCU is also staffed by a senior multi-agency body which oversees Customs and Excise officers seconded for the FCU, has an Action Plan in place which is periods of two to three years although no being progressed that addresses issues such Customs officers have been appointed as as role profiles and job descriptions, Officers in Charge of financial crime succession planning, a Service Delivery Plan, investigations. It is acknowledged that whilst performance monitoring and other these are short term issues, the longer term improvements which need to be need for succession planning and training implemented. needs to form part of the modus operandi.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Improvement priority 2 — Quality of Completing both the NRA process and AML policy and strategy securing agreement to the Action Plan arising out of the NRA will be key milestones. The national cooperation and coordination of The Strategic Group will need to consider the AML/CFT policies in the Isle of Man is led by contents of a strategy for the Isle of Man the AML/CFT Strategic Group. The Strategic informed by the NRA process and make Group does not have political representation, recommendations to the Council of Ministers nor is it established in law or regulation, but accordingly. it is however a body designated by the Council of Ministers. The Strategic Group Subject to Council’s agreement, a review reports directly to Council via the Chief should be undertaken into whether the Secretary, who is the most senior civil reporting framework for AML/CFT is servant in the Island and is Chair of the appropriate and whether all bodies with an Strategic Group. This model is considered to AML/CFT remit are working effectively be effective in a small jurisdiction such as together and advice taken on the 34 the Isle of Man. There are a number of implications and advisability of legally Government and consultative groups now establishing the Strategic Group. The coming

) established which have remits that into force of the legislation to introduce 6 - encompass aspects of AML/CFT and which regulation for the DNFBP sector will also be a 1 (

t report to the Strategic Group either directly significant step forward in AML/CFT policy n

e or via the AML/CFT Technical Group. and strategy. Annex II includes a diagram m

e setting out the current relationships between v o

r In June 2012 the Isle of Man Government the relevant AML/CFT bodies and a brief p

m published its policy on “Commitment to explanation concerning their roles. i

r Tackling Money Laundering and the o f

s Financing of Terrorism and Proliferation”. e i t

i Although the Government has not yet r o i published its strategy to achieve these aims r p it will be better placed to consider the d e i

f content of such a strategy once this formal i t

n and comprehensive NRA process is finalised. e d I The adoption and implementation of a risk- based assessment from the perspective of regulators, financial institutions and DNFBPs, as well as Government will in some areas be challenging and will represent a culture change for many. It is recognised that the Isle of Man is currently at the early stages of this process. Furthermore, working with DNFBPs at a national level will be facilitated by the Designated Businesses Act when it comes into force in October 2015.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Improvement priority 3 — Quality of There is an established SAR reporting system FIU intelligence gathering and in place which is considered to be reasonably processing effective. Accuracy and completeness of SARs remains an issue however and the The main issues identified in the quality of proper use of SARs varies amongst sectors, FIU intelligence gathering and processing are in that the more established and limited resources, limited specialised training, institutionalised insurance and banking frequent abstracting of officers to work on sectors have higher reporting standards and non-financial crimes and a lack of meaningful reporting frequencies than sectors which are data recovery from SARs. As staff are not characterised by many small firms and ring fenced, they are at times extracted to partnerships. This potentially heightens assist with other investigations and vulnerability in the smaller sectors, though it operational duties to meet broader agency should be remembered that they are either demands. Constrained financial resources much smaller in economic size or are have had an impact on the headcount, skills substantially less effective for ML. and training of officers, and in their capacity 35 to investigate all SARs. A risk based The NRA process has identified that more

approach has therefore, been deployed work is required to streamline the process ) 6 based on the resources available. A more and to improve the content and therefore the - 1 (

advanced management information system amount of meaningful data within SARs. t n and in particular the automated filing of Incomplete SARs for example are a regular e m

SARs to the FIU would help mitigate some of occurrence as is ‘defensive’ reporting. The e v o the resourcing issues. processing, analysing and dissemination of r p m

SARs is largely performed manually, as there i

The FIU is staffed with experienced and r is not currently an automated reporting o f

committed law enforcement officers, but system. There is however a project which is s e i t training as Accredited Investigators or i

well advanced which will see an online r o i

Financial Intelligence Officers is required. reporting system introduced which is r p This is important not just for effectiveness expected to become fully operational in d e i but also so that there is a recognised level of f 2015. i t expertise in court as part of any prosecution n e d process. A further identified deficiency was I highlighted in the 2009 IMF report 19 of 2009 (Recommendation 26) in that there was no formal power of access to information for FIU analytical purposes. The lack of powers to request further information in support of ongoing investigations in order to improve the quality of investigation is also a noticeable absence in the Island’s AML/CTF arsenal.

19 ‘Isle of Man; Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism’ IMF 2009

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Improvement priority 4 — International on international cooperation and is a cooperation member of Egmont 20 . Furthermore, the Island co-operates fully with international As an international business centre, the enforcement organisations such as Interpol composition of the Isle of Man’s economy is and Europol. The Isle of Man has a strong heavily dependent on export-based financial record of international cooperation which is services. The majority of the Financial evidenced by the effectiveness with which Services’ client base is therefore not resident MLAR are dealt with. locally. It is of paramount importance therefore that the Isle of Man demonstrates Mutual Legal Assistance/International Letters efficient, effective and proactive cooperation of Request and Asset Recovery Requests for and assistance to other countries in Mutual Legal Assistance, made by way of obtaining and providing information in ILOR are submitted to and dealt with via the relation to investigations into financial and Attorney General’s Chambers (AGC). other crimes. 36 The response time and effectiveness of the The major international cooperation treaties Attorney General’s Chambers to MLA is set extend to the Isle of Man and the Island is out in Table 2. Over 50% of requests are ) 6

- compliant with the FATF recommendations resolved within a 6 month time frame. 1 (

t n e Table 2. International letters of request m e v o r

p ILORs 2014 2013 2012 m

i (to 03.12)

r o f

s Received 58 85 80 e i t i r

o Refused 010 i r p

d Executed within 4 months or less 24 39 60 e i f i t n

e Executed within 4 to 6 months 8 15 1 d I Executed within 6 to 12 months 144

Unable to assist 21 6 16 10 Ongoing 18 32 Trust/Corporate Service Providers 173

20 Egmont is an international group of Financial Intelligence Units which meets regularly to meet regularly to find ways to promote the de - velopment of FIUs and to cooperate, especially in the areas of information exchange, training and the sharing of expertise. 21 Since the introduction of the Proceeds of Crime Act in 2008 there have been no instances of the IOM being unable to assist because the legislation prevented it, other than in relation to 1 ILOR shown on the above table as refused. Where the IOM has been unable to assist this is because of practical rather than legal barriers. For example it is not uncommon to discover that a bank account referred to in the MLAR is held in the UK or the Jersey branch and not in the IOM. Over the past few years there have been a number of ILORs from Ger - many where a false IOM address has been given. In respect of the refusal, a request for assistance was received issued by a private firm of solicitors on behalf of their client wishing to bring a private prosecution. The IOM’s international cooperation regime is specific to public investigating or prosecuting authorities.

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Identified priorities for improvement (1-6) 7 NATIONAL RISK ASSESSMENT 2015

The application of EU customs law to the It has been recognised during the NRA Island has also enabled Customs and Excise process that this seeking of international to take advantage of mutual assistance feedback on the value of information agreements between the EU and third provided, needs to be re-energised and countries to provide information and requests by the Island for feedback on the assistance. value/use made of information provided, will in future be included when a mutual legal The standard of international cooperation assistance request is dealt with. provided is considered to be high, but it could be improved further in certain areas by In relation to tax information exchange, improved resource management and better whilst feedback is proactively sought and the evidence of cooperation by maintaining more level of feedback is reasonable there remains comprehensive statistical data. On the latter, room for improvement. This matter has been the preparation of the National Risk raised at the level of the Global Forum. The Assessment has identified key areas which confidentiality provisions of the Island’s 38 have impacted upon the Island’s ability to international taxation agreements have also provide the necessary level of supporting proved problematic in obtaining key data for

) statistical data. the NRA as they preclude the Assessor of 6 - Income Tax providing statistical data. For 1 (

t example even details of the number of tax n

e requests received annually from other m • Obtaining feedback e jurisdictions (broken down by country of v o

r origin) were not capable of being shared for p The first area identified for improvement is

m National Risk Assessment, or for other i

r feedback. Whilst the Island has historically

o domestic intelligence purposes. Partner f

sought feedback from countries requesting s jurisdictions are particularly sensitive to e i

t assistance concerning the value of i disclosure of such information, and so while r

o information provided by way of mutual legal i

r the NRA project could consider the data in p

assistance, the general low levels of

d aggregate, country specific information had e

i response over time have led to this no longer f

i to be precluded, otherwise a breach of treaty t being pro-actively requested by many of the n would occur. e

d competent authorities. I Whilst disclosure has in one or two instances been agreed on a bilateral basis, the absence of unilateral agreement renders this of very limited value. The importance of access to tax information exchange data for other purposes is however becoming more widely recognised and continues to be raised at an international level.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

• ILORs However, this in part reflects the application of the model that was used to larger, A further area which was identified concerns sovereign states with a full suite of border the domestic response to MLAR/ILOR. The controls and a lower level of financialisation potential intelligence available from MLARs of the economy. While the scope for has not been harvested systematically in the smuggling cash into the Isle of Man does past. This would enable a more focused exist, placing it within the financial system in scrutiny of entities and/or individuals based the Isle of Man is particularly difficult, due to in the Isle of Man to be undertaken. Further the low tolerance for large sums of cash in clarity has been obtained during the NRA Isle of Man’s financial services and the AML process concerning the ability to use controls in place. information as a catalyst for domestic Isle of Man financial investigations and progress in The main potential sources of threat are illicit this area is now expected. Collating the data cash, criminal property and drugs. There are to review effectiveness in international no customs barriers between the Isle of Man cooperation for the NRA has also highlighted and its closest neighbours or any fixed 39 the need for such statistics to be kept border controls to check the movement of centrally and updated regularly, so that the people. This is a consequence of the Island’s ) 6 numbers received and the effectiveness of constitutional nature as a Crown Dependency - 1 ( the Isle of Man’s response can be monitored of the British Crown, the establishment in t n

at a national level. law of the Common Travel Area (CTA) which e m

protects free movement between the UK, the e v

• Demands upon resources o

Republic of Ireland and the Crown r Dependencies and the customs union p m i

In the medium term, as the reporting between the Island and the UK under the r o f obligations in (FATCA and the Common

Customs and Excise Agreement 1979. s e

Reporting Standard (CRS) agreements take i t i r

full effect, there is likely to be an increase in o

The Isle of Man is also part of the customs i r international requests for information to the p territory of the EU under Protocol 3 to the UK d

Isle of Man Tax authorities and to the e Act of Accession. As a result there is a free i f i Attorney General’s Chambers. This will need t

movement of passengers and freight n e to be closely monitored to ensure that there between the UK and the Isle of Man. d are sufficient resources available to meet any I increased demand in this area.

Improvement priorities 5 & 6 — Effectiveness of customs controls on cash and similar instruments and quality of border controls

The effectiveness of customs controls on cash and similar instruments as both a source of vulnerability and a priority for improvement was identified by the NRA.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

There is no requirement for persons entering 15. Other national level or leaving the Isle of Man to make any declaration or present themselves to customs issues or immigration officials except in specific circumstances (e.g. when passengers arrive wo additional national level issues directly from outside the CTA or when have been identified during the NRA persons are carrying cash amounting to over T process. These issues are de-risking €10,000). Although passengers need to and convertible virtual currency: both of declare movements of cash over €10,000, which are summarised below. there is no enforcement of disclosure requirements. Occasionally Isle of Man • De-risking Constabulary and Customs and Excise De-risking is the phenomenon of financial undertake exercises including stops and firms terminating or restricting business questioning. If good intelligence is provided relationships with clients that they consider to either the Police or Customs and Exercise to present an unacceptable level of risk to 40 then it is acted upon. the institution. Cross-border banking relationships (particularly with banks in

) “Cash controls” on persons entering or 6 - leaving the Island do exist with seizures of developing countries), money or value 1 (

transfer services and non-profit organisations t cash regularly taking place at both the ferry n are thought to be particularly affected. e port and airport. In addition, Customs and m

e Excise has put in place an outreach and v

o The drivers of de-risking may include r awareness-raising programme involving port p perceived or real weaknesses in the AML/CFT m

i and airport operators, security personnel

r framework in counterpart countries;

o (including private security staff), express f

assessment of the risks of categories to s courier and freight businesses. The aim of e i which clients belong; cost/benefit t i

r this programme is to heighten awareness of

o considerations, or regulatory concerns i

r the risk of undeclared cash, and the proper p

following high visibility enforcement action.

d means of dealing with any detection. . e

i The consequence of de-risking is that both f i t smaller institutions and particular economic n There have been a number of seizures based e

d segments may not be able to find alternative I on these existing procedures. A number of actions have been identified which the Isle of channels for financial transactions and as a Man can undertake in order to raise its result they must use informal channels, national combating ability in this area. In which can increase the threat of ML. particular and as a result of the NRA there has been improved co-ordination between Customs and Excise, the Police, the Department of Infrastructure (responsible for ports/airports and their security), the Port Security and the private sector.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

De-risking is not currently fully understood community of users. Schedule 4 to the Isle and has yet to receive comprehensive of Man’s Proceeds of Crime Act 2008 research, analysis and recommended actions (POCA) 22 , defines the CVC sector as a at the international level. Within the Isle of regulated business for AML/CFT purposes. Man, anecdotal information suggests that de- risking by some banks has taken place. The international CVC sector has experienced De-risking has the potential to force local significant publicity due to both its innovative businesses to bank in other jurisdictions, nature and due to several high profile which means that the Island’s authorities criminal activities and the use of CVC as a may have no powers to freeze or arrest means to buy and sell contraband suspected proceeds of crime as the Isle of anonymously. Man’s POCA 2008 does not have extra- territorial effect. In some cases, businesses The Island is moving to recognise CVC as which are having problems establishing property rather than currency and to apply banking relationships may also seek to use appropriate AML controls. Furthermore, the alternative providers such as payment Government considers that ignoring the 41 service companies. problem of potential criminal activity is to be negligent of the risks. The local CVC industry ) 6

The Isle of Man Government has not yet has existed since 2014, and is currently - 1 (

believed to include approximately 12 firms

undertaken a full domestic analysis of de- t n risking, and as a result it has not been which are in some way involved actively in e m considered as a factor in the NRA project. the sector. It is noted that around 22 e v

individuals are estimated to work within the o However, it is expected to be a matter for r sector. p fuller consideration in future NRA projects. m i

r o f

Due to the very small size of the CVC sector s e i

in the Isle of Man, and the current lack of t i r o

• Convertible virtual Currency data surrounding it, CVC has not formed part i r p

of the detailed analysis undertaken by the d

The Isle of Man is one of the leading e DNFBP sector, although some consideration i f i jurisdictions in terms of recognising t

has been undertaken in that report. Should n e convertible virtual currency (CVC which the sector continue to develop locally, it will d I includes crypto currency). CVC is defined in receive greater scrutiny if and when the the Isle of Man as the digital representation Government decides to consider a full of value that can be traded and which regulatory regime, which would be reflected functions as a medium of exchange, store of in a future NRA process. value or unit of account but does not have legal tender status. Importantly, it is not issued by any jurisdiction but fulfils the above criteria by its recognition by the

22 Schedule 4 of POCA refers to “the business of issuing, transmitting, transferring, providing safe custody or storage of, administering, managing, lending, buying, selling, exchanging or otherwise trading or intermediating convertible virtual currencies, including crypto-currencies or similar concepts where the concept is accepted by persons as a means of payment for goods or services, a unit of account, a store of value or a commodity”.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

16. SECTOR Financial Sectors and Designated REPORTS Non-Financial Businesses and Professions

Banking medium, which took into account the AML controls in place, and the vulnerabilities of anks in the Island provide services to customers, products and services. local and international personal Assessment of the AML controls found that Bcustomers, corporate and business the quality of these controls for the sector clients (direct and introduced) and persons was medium/high and that no critical or holding funds on behalf of others (e.g. urgent attention was required. wealth management). A wide range of An assessment of vulnerabilities relating to products and services are provided including identified customer segments was also savings, current accounts, private and undertaken. From a ML/terrorist financing premier banking, investments, lending, perspective, the three most vulnerable treasury services and foreign currency segments (taking into account their accounts. estimated size) were assessed as non- 42 The banking sector in the Isle of Man is a resident individuals (HNW); corporate and fully regulated and supervised sector with trust entities managed by Isle of Man based

s t regulated TCSPs; and international large r prudential and conduct supervision in place,

o

p corporations. This reflects a range of risk

e including AML / CFT. The assessment

R

factors that are prevalent in these sectors,

r recognised that banks are also generally

o

t notwithstanding that banks do mitigate some

c subject to wider group consolidated e of the increased inherent vulnerability S supervision and need to take into account not only local AML / CFT legislation in through additional AML controls. devising policies and procedures, but also The NRA also identified that the FSC does that of their wider groups, which are mainly not obtain information at present from each in jurisdictions considered to be equivalent bank individually that would enable it to for AML / CFT purposes. The assessment undertake a similar assessment of customer also took into account the impact of strong and product vulnerability at individual bank entry controls for the sector and level. requirements around internal audit functions. Banking sector threats The NRA took into consideration the size of the sector in the Isle of Man, including the The ML threat to banks was assessed as importance of banking to the economy — medium; the assessment noted that there is banking currently represents approximately a lower domestic threat, but a medium 23 8.5% (£330m) of the Island’s GDP — and international threat arising from persons / the fact that certain banks are also important entities who wish to abuse the system to for the domestic economy due to the launder the proceeds of crime. It was services they provide. generally considered that the ML threats are greater than the TF threats in the Isle of Banking sector vulnerabilities Man. The overall vulnerability was assessed as

23 Taken from the Isle of Man National Income Accounts 2012/13

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The main sources of ML which are • Specific jurisdictional aspects as an recognized at a global level are relevant to international finance centre – e.g. non- the Isle of Man banking sector because of its resident and non-face to face business is status as an international finance centre. The accepted, criminals may view the country as assessment concluded that the domestic safe and secure with easy access to the threat of ML is mainly confined to self- financial markets (cross border risks), laundering in relation to lower level drug interconnectedness with other professionals related crime, petty theft and potentially who are gatekeepers. more complex fraud / fiscal related matters. For the first two, the laundering of illicitly However, evidence shows that the banking obtained cash is a core threat. sector is well aware of the threats and how its services and products may be abused Where predicate offences occur off-island but such that it can mitigate the risks and reduce the proceeds of criminal activity may flow the potential for harm to the Island. 43 through Isle of Man banks, the core threats arise from the following: white collar crimes The main sources of information available to

s such as fraud; drug related (usually consider threats for this first NRA were t

r

Suspicious Activity Reports (SARs) and high o domestically based); taxation and excise p

e

level Mutual Legal Assistance Requests R

evasion and corruption and bribery (including

r

(MLARs). In relation to MLARs, since 1 o embezzlement of public funds). Criminals t

c may seek to target the Isle of Man to abuse January 2009 just under 11% of the e

S the services and products provided by banks. requests received by the Isle of Man authorities relating to ML requested banking Most notable features include: information only.

• Acceptance of cash (some international The information from SARs highlighted that customers can make cash deposits) the threat of international ML is far greater than the domestic threat; that nearly a third • International transfers which are secure and of domestic SARs related to cash activity and fast that the highest number of SARs relate to the UK which is consistent with the fact that • Assets and stores of value (e.g. deposit the UK is a core market. Nearly 40% of all savings, cash as security for loans, SARs were made due to fiscal concerns. This involvement in real estate transactions) highlights that the abuse of the Isle of Man for tax related offences remains a threat. • Provision of services to “gatekeepers” who may abuse the system, for example foreign The assessment recognised that, in addition PEPs and professional intermediaries. to the number of SARs recorded by the FCU, there will be many internal disclosures made by staff of banks that do not result in SARs being submitted to the FCU. It is proposed that data on internal disclosures will be captured in the future by the FSC.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Summary and proposed actions

Taking into account the assessments of vulnerability and threat, the overall ML risk for the banking sector arising out of the NRA is considered to be medium.

There were no critical issues emerging for banking out of the NRA; nevertheless a number of possible improvements were identified and will be the subject of further discussion between the FSC and the banking sector. The main points are:-

• An enhanced feedback and reporting mechanism between the FCU, other government agencies, banks and FSC.

• The FSC to capture AML / CFT information 24 on an individual bank basis through standard reporting (e.g. annual returns, other data sources, utilize banks’ returns to home regulators 44 or group). • Development of more sector specific guidance covering screening, and reviews of higher s t

r risk customers. Banks will be expected to make changes to move to the best practice o

p seen in these areas. e R

r o

t • Introduction of a wider civil penalty regime to deter poor behaviour and weak controls c

e (which enhances administrative sanctions). This action is already broadly completed as S the wider regime was introduced on 1 August 2015

Conclusions also face a range of challenges and pressures that can relate to AML / CFT. The banking sector is a mature segment of Some areas for improvement have been the financial services industry in the Isle of identified; these are not considered to be Man and is subject to rigorous AML / CFT critical nor would they particularly impact on legislation and oversight. The assessment the overall level of vulnerability for the concluded that it is broadly well controlled, sector. However if they are acted upon they but that there are core inherent will help to focus the resources of banks and vulnerabilities, which arise mainly from some the supervisor (FSC) in the areas perceived of the customer segments to which products to be of higher risk / vulnerability. and services are offered. Banks in the Island

24 This may include information on payment flows, cash activity or controls, products and services, customer types, transaction monitoring techniques, internal and external disclosures, customer screening and monitoring, staff training

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Securities Non-regulated funds with innovative assets, complex structures and little controls The securities sector 25 in the Isle of Man is a increase the risk of these funds being fully regulated and supervised sector with established for ML or criminal purposes. prudential and conduct supervision in place, Overseas funds represent the element of the including AML / CFT. The securities sector sector that saw a significant positive growth forms a small part of the Isle of Man in the 12 months to 30 June 2014 which was financial services sector contributing the data reference point for the analysis; this approximately 1% to the Gross Domestic was also taken into account. Product of the Island (2014).

The NRA took into account the size of the Securities sector vulnerabilities sector in the Isle of Man and the client base. With the exception of Isle of Man The overall vulnerability was assessed as Independent Financial Advisors and to a medium, which took into account the AML 45 lesser extent stockbrokers and investment controls in place, and the vulnerabilities of managers, the client base will be customers, products and services. The

substantially non-resident clients with foreign s securities sector encompasses various small t

r

business or personal interests. As such the o

to medium sized functionaries as well as a p client base of the majority of institutions in e

R

range of products and services from retail the securities sector presents a higher risk of r

o

focused investments to those product types t ML. c which are aimed at institutional investors. e

S

In the context of the funds element of the Assessment of AML controls found that the securities sector, however, it is recognised quality of the controls for the sector was that this risk is substantially mitigated where between medium and high and that no investors are institutional in nature. Other critical or urgent attention was required. risk factors that the NRA considered were There is a mature legal framework which that the client base potentially includes PEPs, seeks to prevent ML and this is well HNW individuals, clients linked to higher risk understood by functionaries in the sector and jurisdictions and clients linked to higher risk their staff. Entry controls in respect of activities either at investor or fund level. functionaries in to the sector are considered to be thorough and detailed. Non-retail funds and investment business represent the most significant elements of Anonymous investors do not have the ability the securities sector and this was taken into to access the securities sector. There are account in the risk assessment. definitive requirements to which functionaries are subject to identify the ultimate beneficial owner of an investment.

25 For the purposes of the NRA, the securities sector comprises of firms which hold either or both of Class 2 or 3 licences issued by the Isle of Man Financial Services Authority

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

A feature of the sector can be investment by As noted, the last typology report issued for an institution on a pooled basis, where there the sector by the FATF was in 2009. The are a number of underlying clients in the FATF report comments that new products pool. AML regulation and legislation only and services are developed constantly, in allows reliance to be placed on the reaction to investor demand, market institutional investor in relation to those conditions, and advances in technology. It underlying clients if the institutional investor states that product offerings are vast, and is a regulated entity in an equivalent many are complex, with some devised for jurisdiction and, therefore, subject to similar sale to the general public and others tailored AML requirements. The assessment noted to the needs of a single purchaser. Many that from a competitive standpoint, reliance transactions are effected electronically and on institutional investors investing on behalf across international borders. The NRA has of others appeared to be a common feature identified that the securities sector in the Isle of the securities industry across peer of Man generally does not share all these jurisdictions. features. 46 The FATF consider that some of the features that have long characterised the securities s t

r Securities sector threats

o industry, including its speed in executing p

e transactions, its global reach, and its R

The ML threat to the securities sector was

r adaptability, can make it attractive to those o

t assessed as medium low. This reflects the

c who would abuse it for illicit purposes, e small size of the sector in the Island and the S including ML and TF. Moreover, the securities fact that there is a strong and mature AML sector is perhaps unique among industries in framework which appears to act as a that it can be used both to launder illicit deterrent to those wishing to launder funds obtained elsewhere, and to generate criminal proceeds through the sector. There illicit funds within the industry itself through have been no typology reports issued in fraudulent activities. These typologies have respect of the sector since 2009; this would been taken into account in the risk seem to indicate that the securities sector is assessment. not of significant concern to key international bodies such as the FATF. The main sources of ML which are recognized at a global level are relevant to the Isle of Man securities sector because of the Island’s status as an international finance centre.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Summary and proposed actions

Taking into account the assessments of vulnerability and threat, the overall ML risk for the securities sector arising out of the NRA is considered to be medium. There were no critical issues emerging for securities out of the NRA; nevertheless a number of possible improvements were identified and these will be the subject of further discussion between the FSA and the securities sector. The main points concern actions by the regulator and the FCU; the issues identified concerning use of sanctions were identified across most sectors.

• Little evidence of the use of administrative sanctions. This may be because the regulator engages in an initial dialogue with the licence holder to rectify deficiencies through remedial action programmes, the completion of which is monitored by the FSA. The assessment noted that an extended civil penalties regime was anticipated and since the NRA took place the new regime has been introduced, providing a wider suite of powers to the regulator. 47 A need for greater transparency from the FSA about the type of matters considered for

administrative sanction and the decisions reached was also identified. s

t

r

o

p

• Compliance systems may not always be as formalized as appropriate in the sector. This e

R

is due to the fact that, in some smaller licence holders, there may be a tendency for r

o

t monitoring to be less formal. It was considered that there was also a risk concerning the c

e lack of prescribed internal and external audit focus on AML procedures and controls. The S assessment found that internal audit is only a formal requirement for a small part of the sector and external audits are not required, by way of AML/CFT regulation, to specifically review compliance with AML/CFT requirements.

• There are appropriate criminal sanctions in force for non-compliance with AML/CFT obligations and financial economic crimes. There is however little evidence of enforcement. It was noted that this is the case generally. The process by which criminal referrals were made to (and determined by) the Attorney General’s Chambers was identified as an area which would benefit from an increased awareness and understanding.

• In respect of criminal investigations into ML offences, the assessment noted concerns expressed by the sector in respect of ‘tipping off’ and the impact that this might have on the quality of disclosures made to the FCU. The assessment concluded that an improvement in the quality of disclosures would help the FCU to focus investigative resources more effectively and that it would be helpful for there to be a regular forum where the FCU might meet with the sector and discuss issues around SARs.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Conclusions The assessment of the functionaries and the products was undertaken based on the views The general AML controls which apply to the and opinions of experienced representatives securities sector in the Isle of Man are very from the regulator, from industry and from strong. There is a mature legal framework the FCU who participated in the working which seeks to prevent ML and this is well group. There was limited data collection understood by functionaries in the sector and directly from industry due to the time their staff. Entry controls in to the sector are constraints; the analysis and the conclusions thorough and detailed and there is a high reached are considered to be valid, it is level of confidence in the supervision recognized that the next iteration of the NRA procedures and practices applied to licence would benefit from more input from the holders. The assessment concluded that staff functionaries themselves. The FSA will also in the sector demonstrate a good awareness look to work with the sector to improve the of the detailed AML requirements and this data available for future assessments.

leads to a high standard of monitoring for 48 and reporting of suspicious activity. s t

r o p e R

r o t c e S “

The securities sector in the Isle of Man is a fully regulated and supervised sector with prudential and conduct supervision in place, “ including AML / CFT.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Insurance and Pensions The insurance and pensions sector has over the last six years continued its upward trend The Island has 16 authorised long term of contribution to the economy of the Island, insurers, 122 authorised general insurers and overtaking banking as the largest single 19 permitted insurers 26 (The Insurance and contributor to the Island’s gross domestic Pensions Authority (IPA) also regulates 22 product in 2009. The sector is regulated by insurance managers (which typically provide the IPA, a statutory board established in 27 outsourced management services to captive 1986 . The following activities are regulated insurers) and 29 general insurance activities under the Insurance Act 2008 and intermediaries. are subject to the supervision of the IPA:

The pensions sector consist of 60 retirement a) carrying on or holding out as carrying on benefits scheme administrators, insurance business within the meaning of the administering 933 schemes. The Island’s IA 2008; long term insurance sector has £56.5 billion b) acting or holding out as acting as an under management and general insurance 49 insurance manager, within the meaning of the has £4.7 billion under management. Pension IA 2008, for or in relation to an insurer; or

s

scheme assets total £2.7 billion. Distribution t

r is mainly through Independent Financial o c) acting or holding out as acting as an p

e

Advisors (IFAs). R

insurance intermediary within the meaning of r

o the IA 2008 in respect of effecting or carrying t c

Approximately 2,000 people work in the e

out contracts of insurance which are not S Island in its insurance sector (which investments within the meaning of the represents 4.5% of the working population Regulated Activities Order 2011; according to the 2011 census) and a similar number work off-Island in branch and Acting or holding out as acting as a supporting operations. In addition there are retirement benefits schemes administrator accounting, legal and other professional within the meaning of the Retirement service providers representing many well- Benefits Schemes Act 2000 (RBSA 2000) is known international firms. also a regulated activity. Under section 1 of that Act it is an offence for a person to The Island’s market itself is represented by a market a retirement benefit scheme (a number of industry and professional bodies ‘scheme’) or to receive contributions into a (e.g. bodies acting on behalf of long term scheme or to act by way of business as a insurers, captive managers, insurance trustee to a scheme unless that scheme is an brokers and pension providers; and others authorised or recognised scheme within the on behalf of accountants, legal professionals meaning of the RBSA 2000. and actuaries).

26 Permitted insurers represent branches on the Island of insurers licensed in a jurisdiction other than the Island 27 In November 2015 the IPA will merge with the Financial Services Commission to form the IOM Financial Services Authority.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Insurance and pensions vulnerabilities Insurance and pensions threats

The life sector represents 88% of the Some characteristics of the products and insurance and pensions sector in terms of services provided within the insurance and assets under management. This significant pensions sectors of the Island fall within the sub-sector has been assessed as having a range of categories suggested by the FATF medium vulnerability to ML. as examples of potentially higher-risk business, including: The medium level of vulnerability is based upon consideration of the most vulnerable • a large proportion of the business products which factors include international, proposition is conducted on a non-face-to- non-face to face business together with the face, cross border basis; reliance on introducers to collate AML documentation and the underlying • in many cases the business relationship is investment nature of the products. Each of established through introducers in 50 these qualities is indicative of potential high international jurisdictions that are subject to risk factors when considering the risk of ML. varying levels of regulation and oversight for AML/CFT purposes; s t

r The pensions sector, representing 4% of the o

p overall sector is assessed as medium. • the use of legal persons and arrangements e R Pensions are at an earlier stage of the such as trusts is commonplace, both as r o t development life cycle in comparison to the asset-holding vehicles and as part of more c e

S wider market and there is a need to develop complex structures. further the compliance frameworks to address the risks presented by the international, non-face to face business.

The non-life sector which represents 7% of the overall sector is assessed as having a medium low vulnerability to ML. This reflects the lower risk profile of the products offered by this sector.

The composite score of the three sub-sectors mirrors that of the life sector (medium) as the life sub-sector dominates the sector both in terms of size of the sector and those products that represent a higher vulnerability.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

In recognition of these higher risk Since the placement has already occurred characteristics the IPA requires all insurers to and the link between the illegal activity identify the source of wealth for all new originating the proceeds being laundered and business in addition to the standard due the proceeds themselves has been diligence requirements set out in the Anti- weakened, if not severed altogether, it is Money Laundering and Terrorist Financing recognised that it is generally more difficult Code 2015. This additional requirement is set to detect ML at these advanced stages and out in regulation 24(1) of the Insurance (Anti so indicators of risk are more difficult to Money Laundering) Regulations 2008 (IAMLR identify. 2008) which states: Distribution channels “An insurer must make enquiries as to how an applicant has acquired the monies to be The nature of the business undertaken by used as premium for, or contribution to, a the insurance and pensions sectors in the policy”. Island is predominantly through IFAs on a cross border, non-face-to-face basis. 51 The assessment considered the STR data Historically the life sector has targeted received by the FCU compared to the data of through IFAs the British expatriates working

s

t insurers in respect of internal and external overseas. This model has expanded to r

o

p

reports. The reporting rate of 8% as incorporate expatriates of other jurisdictions. e

R

compared to other sectors is lower than Because they often also market other r

o

t

would be anticipated given the relative size financial products such as investment c

e of the sector in comparison to banking and products and mortgages and have a face-to- S other sectors. However when compared to face contact with clients, intermediaries have other jurisdictions as detailed in the 2004 the best opportunity in the insurance FATF Typologies report 28 the level of SAR industry to collate CDD on behalf of the reporting by the insurance sector is generally insurer. higher than that experienced within other jurisdictions.

An explanation for this may be that it is during the placement stage of the ML cycle that funds of illegal origin are introduced into the financial services industry. With the notable exception of cash premium and contribution payments, insurance and pension products by their nature are usually deployed at the layering and integration stages of the ML process.

28 http://www.fatf-gafi.org/media/fatf/documents/reports/2004_2005_ML_Typologies_ENG.pdf

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

One of the most important findings emerging Given that the source of the indicators of risk from typology reports issued by FATF and is publically available, it is reasonable to MONEYVAL is an insufficient degree of conclude that this information may have also compliance with AML requirements by been available to the intermediaries who intermediaries with respect to life insurance. introduced the business supporting the A possible reason for low compliance could conclusion that over reliance on be that intermediaries —especially if intermediaries introduces further vulnerability independent from the insurer – perceive the to the Island’s proposition. risk of ML as low and are focusing more on sales figures as the driver for their In consideration of this the Island should commission. continue to ensure that reliance on intermediaries is only permitted where the MONEYVAL and FATF go on to state that business is not high risk and appropriate insurers, on the other hand, might be compensating controls are in place. reluctant to push for more compliance by 52 intermediaries because of their dependency It is not difficult to see similarities between on these organisations for new business. these findings of FATF and MONEYVAL in the application to the pensions’ distribution

s Whatever the reason it is clear that money t r channels. As a result similar vulnerabilities o launderers have recognised that using p

e intermediaries is a successful way of attributable to the distribution network are R

r accessing insurance products. considered to exist in the pensions sector. o t c e

S The conclusion of MONEYVAL and FATF is perhaps supported by the STR information filed with the FCU, with 29% of all SARs filed in 2013 in respect of the insurance and pensions sector arising as a result of knowledge or suspicion arising from information that is in the public domain.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Summary and proposed actions

The composite ML risk to the insurance and pensions sector has been assessed overall as medium, with a medium threat level and a medium vulnerability. AML controls for the sector were assessed as strong.

A number of possible improvements were identified during the assessment process, including the need for more sector specific guidance for the non-life and pension sectors; enhanced regular reporting of AML statistical information by regulated entities; more transparency in respect of sanctions and enforcement actions; encouragement of cross- sectoral forums; specialised training (for the non-life and pension sectors) and strengthening awareness of sanctions vetting.

The work with the greatest potential impact on the vulnerability of the individual sub sectors and overall composite score is: 53

• the issue of sector specific binding guidance for the pensions sector;

s

t

r

o

p

• through appropriate regulation and supervisory visits, the enhancement of existing e

R

compliance functions (or implementation of new dedicated compliance functions) where r

o

t

the standard is not that required to address the risks apparent for the products sold; and c

e

S • the implementation of outreach programmes to raise the overall AML awareness of the pensions and non-life sectors.

Conclusions face to face nature of the business and the use of intermediaries. The insurance and pensions sector is a Some areas for improvement have been mature segment of the financial services identified; the projected vulnerability for the industry in the Isle of Man and is subject to pensions sub-sector is anticipated to reduce, rigorous AML / CFT legislation and oversight. on completion of a recommended work plan, The assessment concluded that it is broadly making a significant contribution to reducing well controlled, but that there are core the vulnerability of the sector overall. inherent vulnerabilities in parts of the sector, which arise mainly from the international non

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Other Financial These businesses mainly provide services to local residents (including temporary or Institutions migrant workers who use agency services to send money home) and tourists (most Other Financial Services (OFIs) in the Isle of notably bureau de change) on a face to face Man (also referred to as Money Service basis. The majority of transactions are Businesses) comprise Money Transmission occasional (no business relationships are Services and Money Lenders. There are also formed), of low value and can include cash. a number of smaller OFIs dealing with e.g. It is not considered that this sector is deposit boxes, which were considered but domestically important from an economic assessed as too small to be relevant to the point of view, although the availability of NRA. some services such as money exchange outside of banking (and non-Isle of Man Money Transmission Service providers (MTS) internet providers) is an important social in the Isle of Man are licensed by the FSC. facility. 54 There are effectively two distinct groups:- • MTS Group 1 — those that only offer s t r services such as bureau de change, cheque MTS Group 2 o 29 p cashing, bill payments and agency for e R payment services (e.g. for MoneyGram or This group is a fully regulated and r o t Western Union), supervised sector with prudential and c e

S conduct supervision in place, including AML / • MTS Group 2 — those that provide CFT. There are only 2 licensed providers (for payment services directly and e-money payment services directly) and there are issuers. currently no e-money providers who are conducting regulated activity. These firms mainly provide services to other businesses (not the public) including regulated firms MTS Group 1 such as e-gaming, insurance, trust and This group is a fully regulated and company service providers, and foreign supervised sector for conduct supervision, exchange firms. Business is often conducted with the main focus being AML / CFT. There non-face to face and does not include cash are currently only 3 licensed providers plus activity. They are also permitted to use the Isle of Man Post Office (which is exempt agents subject to agreement with the FSC as from being licensed but the FSC still retains the regulator, but none are currently in use. significant powers over its MTS activity They must also operate segregated payment including the power to inspect and issue accounts held with banks (in or outside the directions). Isle of Man). It is not considered that this sector is domestically important from an economic point of view.

29 Any Bill Payment activity that is relevant business under the Proceeds of Crime Act (POCA) would also be regulated activity under the Financial Services legislation, and firms would have to be licensed and regulated by the FSC. The type of Bill Payment services that the Isle of Man Post Office provides does not constitute money transmission services and therefore that service is not regulated activity and is not subject to POCA.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

MTS sector vulnerabilities From a ML/TF perspective, the main vulnerabilities are: MTS Group 1 • Cash activity (customers): exchange low The overall vulnerability was assessed as value notes from criminal activity for higher medium low on a combined basis which value currency, potential tax evasion (using reflects the relatively small size of the sector, cash from business proceeds for own a low average transaction size, the expenses or other transactions without predominant customer base being local declaration), use of counterfeit or stolen notes, resident individuals (face to face) and the moving money internationally outside of the AML / CFT and licensing regime in place. banking system (agency activity), splitting Within this overall assessment it was money under reportable thresholds. considered that agency services were the • Using the perceived legitimate business most vulnerable, and cheque cashing the (bureau de change, cheque casher) as a least. “front” (laundering illicit cash with cash from 55 Assessment of the AML controls found that bona fide business).

the quality of controls for the sector was s

t

The assessment also identified that the FSC r medium and that no critical or urgent o does not obtain information at present from p attention was required. This assessment was e

R each MTS business individually that would

r

performed noting there had been a o enable it to undertake a similar assessment t

c

substantial outreach supervisory program e

of customer and product vulnerability at S undertaken since 2012, complemented by individual licenceholder level. sector specific guidance. Supervisory visit work by the FSC will continue on a risk based approach. An assessment of inherent vulnerabilities relating to each core activity (bureau de change, cheque cashing and agency) was also undertaken.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

MTS Group 2 It was noted that this is still a relatively new sector and a set of higher risk factors, The overall vulnerability was assessed as vulnerabilities and typologies had not at that medium low which reflects the medium / low time been included in sector guidance issued size of the sector (from a money flow by the FSC; this was rectified during May perspective), the AML / CFT and licensing 2015. The assessment also identified that regime in place, and the limited nature of the the FSC does not obtain information at activity undertaken (business to business, present from each MTS business individually and for specific markets). Assessment of that would enable it to undertake a similar the AML controls found that the quality of assessment of customer and product controls for the sector was medium / high vulnerability at individual licenceholder level. and that no critical or urgent attention was required. An assessment of inherent vulnerabilities was also undertaken (rated as medium). From a ML/TF perspective, the 56 main vulnerabilities and typologies are:

• Non face to face activity (possibly anonymity s t r

o in e-money) and substantial reliance on p

e systems / technology for payment services. R

r o t

c • Relatively new industry and therefore could e

S attract criminals; risks may not be fully understood.

• Payment processing can attract bogus applicants (if internet based) and ID fraud (however, the business in the Isle of Man is currently mostly with companies, not individuals).

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

MTS sector threats MTS Group 2 The ML and TF threat was assessed as being MTS Group 1 medium low, taking into account the size and The ML and TF threat was assessed as being bespoke nature of the sector and the level of medium low, taking into account the small regulation and supervision in place. size and domestic nature of the sector (the During the NRA it was noted that this is still Isle of Man is a highly banked jurisdiction), a relatively new sector and this in itself can and the level of regulation and supervision in make it attractive to money launderers / place (including for agency business, which criminals. However, there were no can be abused for TF). The main threat was significant threat indicators prevalent specific considered to be from low level domestic to the Isle of Man as the current providers laundering, using cash. have relatively bespoke and closed business The main sources of information available to models. It is however recognized that some consider threats for this first NRA were core international threats which can be 57 Suspicious Activity Reports (SARs) and high prevalent in the banking sector can also be relevant to payment services. level Mutual Legal Assistance Requests s

t

r

(MLARs). Only low levels of SARs have been o The main sources of information available to p submitted, and in relation to MLARs (since 1 e

R consider threats for this first NRA were

r

January 2009) there have been no requests o Suspicious Activity Reports (SARs) and high t

c

received by the Isle of Man authorities e

level Mutual Legal Assistance Requests S relating to ML that requested MTS Group 1 (MLARs). Only low levels of SARs have been information only. submitted, and in relation to MLARs (since 1 The assessment recognized that, in addition January 2009) there have been no requests to the number of SARs recorded by the FCU, received by the Isle of Man authorities there will also be internal disclosures made relating to ML that requested MTS Group 2 by staff that do not result in SARs being information only. submitted to the FCU. In this respect, the The assessment recognized that, in addition regulator (FSC) is looking at how it can to the number of SARs recorded by the FCU, improve its collection data on ML/TF threats, there will also be internal disclosures made vulnerabilities and mitigation. by staff that do not result in SARs being submitted to the FCU. In this respect, the regulator (FSC) is looking at how it can improve its collection data on ML/TF threats, vulnerabilities and mitigation. NATIONAL RISK ASSESSMENT 2015

Summary and proposed actions

Taking into account the assessments of vulnerability and threat, the overall ML risk for the MTS sector (Group 1 and Group 2) arising out of the NRA is considered to be medium low. There were no critical issues emerging; nevertheless a number of possible improvements were identified and will be the subject of further discussion between the FSC and the industry. The main points are:-

• The FSC to capture AML / CFT information 30 on an individual licenceholder basis (including the Post Office) through standard reporting (e.g. annual returns or similar).

• Provide sector specific guidance for payment services directly and e-money (MTS Group 2) including typologies. This was completed in May 2015 and any further guidance updates will be developed as part of ongoing work. 58 • Introduction of a wider civil penalty regime to deter poor behaviour and weak controls

s (which enhances administrative sanctions). This action is already broadly completed as t r

o the wider regime was introduced on 1 August 2015. p e R

r o t c e S

Conclusions The improvements are not considered to be critical nor would they particularly impact on The OFI sector, inclusive of MTS business, is the overall level of vulnerability for the MTS a small sector compared to other groups on sector; however, if they are acted upon they the Island, and is generally assessed as will help to focus the resources of the medium low risk based on current activity businesses and the supervisor (FSC) in the and knowledge. MTS businesses are already areas perceived to be of higher risk / subject to full supervision (and are regulated vulnerability. by the FSC), and only minor improvements are required to enhance the current regime and make sure the Island remains focused on the threats and vulnerabilities present.

30 This may include information on cash activity, products and services, customer types, monitoring techniques and transaction limits, internal and external disclosures, staff training

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Moneylenders in the Isle of Business (Registration and Oversight) Act 2015 (the Designated Businesses Act), which Man comes into force on 26 October 2015. The Designated Businesses Act places Persons who lend money to individuals in or responsibility on the FSC 31 for the oversight from the Isle of Man are required to be of the adherence of certain businesses, registered with the OFT, under the provisions including moneylenders, to the Island’s AML of the Moneylenders Act 1991. Some of the / CFT legislation. persons who are registered with the OFT also provide lending to companies. Banks in Moneylenders conducting relevant business the Isle of Man that undertake customer are required to register with the FSC; the lending are not required to be registered FSC’s oversight role is in relation to AML / with the OFT. CFT compliance only; relevant Moneylenders will still retain their current status with the In respect of moneylending and AML / CFT, OFT 32 . Schedule 4 of the Proceeds of Crime Act 59 states that relevant business is (subject to At the time of the assessment there were 57 some intragroup exclusions):- moneylenders registered with the OFT, of

s

t

which 33 are administered by Isle of Man r

o

• The business of lending including but not Trust & Company Service Providers (TCSPs), p

e

R limited to consumer credit, mortgage credit, and 10 are former banks or related to

r

o factoring, and the financing of commercial banking groups. The remainder are t

c transactions in respect of products other e standalone businesses or individuals. The S than consumer products for and on behalf of number of companies only undertaking customers; corporate lending (and therefore are not required to be registered under the • The business of providing financial leasing Moneylenders Act 1991) is not known; arrangements in respect of products other however any such companies will need to than consumer products for and on behalf of register with the FSC under the DB Act. For customers; and the purpose of the assessment Moneylenders were broadly split into 2 sub sectors: • The business of providing financial personal lending and non-personal lending. guarantees and commitments in respect of Information was only obtained from products other than consumer products for businesses registered with the OFT. an on behalf of customers. It is not considered that this sector is Although the AML / CFT legislation in the Isle domestically important from an economic of Man has applied to Moneylenders for a point of view in terms of employment or the number of years, these persons have not provision of lending to the local economy; been subject to any form of oversight from a although some lenders may provide a service designated body, to help make sure that the for local residents or businesses who cannot sector is in compliance. However, the Isle of obtain finance from banks. Man has now passed the Designated

31 The FSC will be replaced by the Isle of Man Financial Services Authority with effect from 1 November 2015. 32 This is the current position but is subject to wider review as outlined in the letter sent by the OFT to all moneylenders dated 9 September 2015

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Moneylender sector vulnerabilities Moneylender sector threats

The overall vulnerability was assessed as The ML and TF threat was assessed as being medium low on a combined basis. Although medium low, taking into account the small there are weaknesses in AML controls the size of the sector (the Isle of Man is a highly overall vulnerability rating reflects the banked jurisdiction), a significant domestic relatively small size of the sector (especially element for personal lending, and the compared to lending undertaken by banks), suspected low level of cash activity. However, a low average transaction size (outside of there is an international element which bespoke lending arrangements), the needs to be better understood. predominant customer base being face to face (including through brokers) and the The main sources of information available to assumption that cash activity is not consider threats for this first NRA were prevalent. An assessment of inherent Suspicious Activity Reports (SARs) and high vulnerabilities relating to each core activity level Mutual Legal Assistance Requests 60 (personal lending and non-personal lending) (MLARs). Only low levels of SARs have been was also undertaken. From a ML/TF submitted, and in relation to MLARs (since 1 perspective, the main vulnerabilities are: January 2009) there have been no requests s t r received by the Isle of Man authorities o p

e • Lack of information on the sector as a whole, relating to ML that requested information R

r limited entry controls, no registration or from moneylenders only. o t

c oversight regime for AML / CFT; and e

S More information on typologies (threats) • Potential lack of AML / CFT knowledge within relevant to the Isle of Man will need to be the sector. developed in sector guidance, but it is acknowledged that moneylending can often More information will be sought from the be related to wider typologies also covering sector under the Designated Businesses Act banks, estate agents, TCSPs and lawyers. registration and ongoing monitoring process that will commence from November 2015.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Summary and proposed actions

Taking into account the assessments of vulnerability and threat, the overall ML risk for the Moneylenders sector arising out of the NRA is considered to be medium low.

The main action is to make sure all relevant Moneylenders are registered with the FSC under the Designated Businesses Act and will then be subject to an oversight regime. All the identified actions are as follows:-

• Introduce and complete the registration process for Moneylenders under the DB Act. Registration commences from 9 November 2015, and documents must be submitted by 26 April 2016 at the latest.

• The FSC to undertake visits to all registered entities and obtain annual information from those entities. The intention is that all entities will receive a visit in the first 3 years of 61 the regime being in operation; thereafter the regime will move to a 6 year cycle 33 .

s

t

• Provide sector specific guidance for Moneylenders including typologies. This was r

o

p

completed in May 2015 (contained in the FSC’s AML / CFT Handbook) and any further e

R

guidance updates will be developed as part of ongoing work. r

o

t

c

e

S

Conclusions Act and supervisory oversight programme will help to better protect the Island and The OFI sector, inclusive of Moneylenders, is manage and mitigate ML and TF threats. It a small sector compared to other groups on will also help make sure that better the Island, and is generally assessed as information and data is available from the medium low risk based on current activity sector and that firms comply with the AML / and knowledge. For Moneylenders, the CFT legislation. introduction of the Designated Businesses

33 Information gained from this process will help formulate views for future iterations of the NRA

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Gambling over time of circa 85-95% About 250 machines serve the Island’s population of There are five different categories of licensed 85,000. While they are permitted, there is gambling in the Isle of Man: currently no machine arcade operating in the Island. Machine suppliers are currently • High street betting shops; bound by the obligations of the Proceeds of Crime Act 2008. • Terrestrial casinos; The GSC controlled machines sellers and • Gambling machines; suppliers currently pose a low ML risk because of the strict constraints on the types • Charity lotteries; and of machines that can be deployed, but the GSC’s plans to undertake a complete review • Online gambling. in this area is expected to create significant opportunities for innovation in the sector, at The Island has a number of small domestic 62 which stage ML risks may increase. (high street) betting shops for those who wish to place bets on sporting events or play There is currently no national lottery; the s t r on a limited type of gambling machine. The UK’s National Lottery is permitted to operate o

p Island licenses three organisations which

e in the Isle of Man and tickets and scratch- R

between them operate approximately nine r cards can be obtained in a number of retail o

t outlets. There is also one domestic casino

c outlets including supermarkets, convenience e

S whose customer base is predominantly stores and newsagents. domestic although during the tourist season, it experiences uplift from the visitor There are around 50 online gambling economy. The number of gaming machines operators based in the Island which offer and tables in the casino for card and dice online and mobile device gambling to a games is small compared to typical UK worldwide player base. The player base is counterparts. very large and hundreds of millions pounds worth of players’ money is deposited with Sellers and suppliers of gambling and certain the sector at any given time. The business gaming machines (controlled machines) are operates cross-border services and innovates required to hold a GSC licence and premises rapidly in response to changes in technology. must be approved to have controlled machines located in them. Controlled machines are typically slot machines consisting of mechanical or electronic reels which produce prizes on a return-to-player

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Online gambling sector vulnerabilities • As the industry typically uses a deposit- before-play mechanism, players’ wallets are The NRA made a preliminary analysis of the held online by the operator and players must five sectors to identify which ones should be supply the required identification before the subject to more detailed scrutiny. On account operator will release their money. of their very small scale, all but the online gambling sector were excluded from the • Operators screen customers’ withdrawal detailed assessment. requests for indicators of commercial fraud to protect their own revenue and payment The overall vulnerability of online gambling service relationships (for example, detecting to ML was assessed as medium. The quality the abuse of bonus offers or credit cards with of AML controls (the systems and procedures a history of charge-backs). This screening used by licensees) were rated as medium process for commercial risk shares common high. functionality with AML/CFT controls.

The client base (the customers of the The AML / CFT knowledge of staff and 63 industry are referred to as participants or entities varies within the sector. Large multi- more commonly players) was classed a national operators invariably have well

s medium risk; while the overwhelming t resourced, dedicated compliance functions r

o majority of players are recreational and and expensive, automated systems to p

e

R deposit small sums in response to manage AML/CFT risk. However, smaller

r

o promotions and offers of bonuses (i.e. lower operators may not have the resources to t

c risk), there are also some very significant e

operate dedicated AML/CFT units and S players whose betting and gaming are the subsequently performance relies on the basis of livelihoods and whose activity professionalism, qualifications and represent large sums of money in the experiences of the appointed Money system. There are a number of factors which Laundering Reporting Office (MLRO). mitigate the risk of players laundering money through the sector: The online gambling sector’s AML/CFT framework is mature; it has existed for • The industry is almost exclusively IT based almost as long as the sector itself. While a and detailed transaction records are routinely supervisory regime for AML/CFT can be kept and easily mined for information; demonstrated for a number of years, this has and continues to be an evolving area. One of • The industry has low thresholds before the key recommendations of the NRA has evidence of ID is required; been to refine the quality of the AML/CFT supervision and this process is now underway. This will include adopting a risk based approach to the supervision of licensees.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Online gambling sector threats • Match fixers using sites to place legitimate bets on rigged events; Inherent risk arises within the online gambling sector because the business is: • Thieves who embezzle their companies, employers or families and gamble the money • Non face-to-face online, subsequently offering gambling addiction as an explanation. • Intrinsically cross-border Predicate offences (criminal offences that • Incorporates a form of agency in some generate proceeds) committed through models gambling include:

• Operates in markets whose jurisdictions • Breach of local law using the internet to have weaker scores on AML/CFT indices, and; access forbidden websites;

• Innovates rapidly (for example, gambling • Failure to pay taxes that are due in respect 64 has heavily exploited the growth in popularity of winnings; of mobile computing.) s

t • Cheating and collusion in peer to peer games r

o A common typology reported by licensees

p to unfairly win money from others; e with respect to ML is credit card fraud and R

r

o related identity theft. In such a scheme, a • Manipulation of software to cheat games into t c

e fraudster uses stolen credit card details to offering better odds or payouts. S gamble without risk and then seeks to remove the funds before the fraud is The threat that would be posed by criminal detected. A related fraud occurs when a ownership of an online gambling licence is player plays and loses money using a credit highly significant and recent typologies have card and then challenges the payment of been observed in Europe. funds by requesting a charge-back from the credit card company. These threats are To counter this threat the GSC uses a mitigated by requirements on the return of number of measures. Firstly it publishes its cash through the depositing instrument but expectations including its requirement to the threat exists nonetheless. positively identify beneficial ownership. Secondly, the GSC requires beneficial Auxiliary typologies that have been noted in ownership to be disclosed and tests the the public domain include: credibility of ownership during a face to face meeting where the licence is considered. The • Criminals using online gambling as a leisure GSC reserves the right to commission private activity using the proceeds of crime; agencies to supply enhanced diligence reports applicants as part of the approvals process. Finally, all key personnel are perpetually monitored on a database supplied by a 3rd party which in turn monitors sanctions, politically exposed person (PEP) status and adverse publicity.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Summary and proposed actions

Although no areas relating to online gambling were assessed as being critical, a number of possible improvements were identified:

• GSC to improve its statistics and data

• FCU to conduct a detailed analysis of SARs/STRs submitted by the sector and provide feedback to the sector regarding the quality and quantity of submissions

• GSC to improve guidance and outreach

• GSC to review policy on sanctions for non-compliance with AML/CFT requirements to ensure that reflects national priorities. 65 • GSC to review the nature of CDD resources in key markets to ensure that CDD is conducted to the required standard.

s

t

r

• GSC to review the strength of Beneficial Ownership checks in the sector. o

p

e

R

r

• GSC to create a framework that can be used for NRA to classify the size of a sector. o

t

c

e The online gambling industry in the Isle of Man is not represented by a unifying body of S any description. Other sectors such as banking and TCSPs do have representative bodies which have efficient mechanisms for obtaining information and disseminating information to members.

During the 2015 AML/CFT summer visits to licensees the formation of a dedicated online gambling forum for MLROs was suggested and was universally supported by every MLRO canvassed. It is proposed that this will be set up to operate on a quarterly basis and will serve as a conduit for data in future NRAs.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Conclusions The World Bank’s model places a significant emphasis on the size of a given sector; The gambling sector in the Isle of Man is money launderers prefer a system which is becoming a significant economic force and large enough to render their money continued changes in international standards insignificant, and in some cases money mean that the focus on AML/CFT will be launderers need higher capacity because of sustained. the volumes of money that need to be laundered. For this reason, the GSC will be In addition to the actions identified by the approaching industry with a proposed model NRA, the GSC will be implementing a new for establishing the “size” variable. approach to AML/CFT inspections with an emphasis on ensuring all licensees Finally, it is necessary for the GSC to understand and meet their obligations. consider improvements to strengthen the Revised guidance is planned to cover gaps in regulatory sanctions regime providing a understanding that have resulted from wider number of options to encourage or, 66 insufficient detail in the earlier guidance. where it may be necessary, to require compliance from the sector. It is intended that the policy relating to these will be s The GSC will also be considering how to t r

o streamline the capture of NRA data from consulted upon. The consultation is currently p e licensees so that the data is comprehensive, planned for 2016. R

r

o fits into the parameters expected by the t c

e World Bank’s model and is easily supplied S without creating a burden on the industry. Most of the relevant data can be acquired through existing regulatory activity (quarterly returns, inspections, etc.) but one key variable remains outstanding – size of sector.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Trust and Corporate TCSP sector vulnerabilities Service Providers (TCSPs) The overall vulnerability for TCSPs was assessed as medium; this took into account The TCSP industry comprises some 160 the AML controls in place, and the licenceholders. Firms range in size from vulnerabilities of customers, products and international businesses with in excess of services. The assessment found that the 100 employees, to small businesses which quality of AML controls for the sector was are in common ownership with the practices between medium and high and that no of accountants or advocates and often critical or urgent attention was required. The service a similar underlying client base. key vulnerabilities arise from the client profile, the existing and significant typologies The industry provides services to some for the sector, the availability of non-face-to- 30,000 client companies of which face transactions, the use of professional approximately half are incorporated on the intermediaries and the complex nature of Island and half elsewhere, and to some some of the structures involved. The types of 67 20,000 trusts. Most of the business is corporate form available on the Island were international in nature. Estimates indicate not considered to be a major component in

s

t that some 40% is from the Isle of Man and the AML/CFT risk of the sector. r

o the UK, 20% from the rest of the EU and p

e

R about 40% from the rest of the world. The The assessment recognised that most

r

o Isle of Man also has aircraft and shipping business in the Isle of Man is on a “fully t

c

e

registries which are well-regarded managed” basis with TCSP staff being S internationally; these sectors, together with directors or trustees. The FSC only licences ancillary services to online gambling TCSPs which are able to offer a full range of companies feature in many TCSPs’ target regulated activities; “registered office only” markets for new business. business has been in long-term decline and “mixed boards” are rare. TCSPs do provide From an AML/CFT perspective TCSPs are nominee shareholders however FSC visits important as gatekeepers to the financial test that declarations of trust are in place system. The trusts and companies of which and that CDD is present on the beneficial they are trustees and directors have control owner. of assets, investments and bank accounts. The NRA identified that the FSC does not The NRA assessment recognised that the collect information on the number of trusts TCSP sector in the Isle of Man is a mature, governed by Isle of Man law, as there is no regulated and supervised sector with general register of trusts. conduct supervision in place, including AML/CFT. The regulation of the TCSP sector parallels the regulation applied to the banking sector, and is administered by a common organisation, currently the FSC and from 1 November 2015 the new Isle of Man Financial Services Authority (IOMFSA).

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The misuse of vehicles to evade tax features Missing trader VAT fraud also remains a highly in international experience of TCSP financial crime threat; where TCSPs supply risk. The Isle of Man has a longstanding services, including corporate vehicles are policy of compliance with international used in international trade there is a risk that standards on tax including signing those vehicles could be abused. In recent agreements on FATCA and the Multilateral years Customs and Excise has undertaken an Competent Authority Agreement on awareness-raising programme and provided Automatic Exchange of Financial specific guidance on these risks. Information. The assessment recognised that this should help to make the Island an The NRA concluded that there was a high unattractive destination for tax evasion and awareness of threats within the sector and that the information gathering required the potential for abuse. should reinforce AML/CFT standards. Other than typologies, the main sources of information available to consider threats for 68 this first NRA were Suspicious Activity TCSP sector threats Reports (SARs) and Mutual Legal Assistance Requests (MLARs). The information from s t r The ML threat facing TCSPs was assessed as SARs highlighted that the threat of o

p medium high; the threat is international in e international ML is far greater than the R nature and arises from persons / entities r domestic threat; that nearly a third of o t who wish to abuse the system to launder the c domestic SARs related to cash activity and e

S proceeds of crime. The main sources of ML that the highest number of SARs relate to identified at a global level are relevant to the the UK which is consistent with the fact that Isle of Man TCSP sector because of its status the UK is a core market. Nearly 40% of all as an international finance centre. SARs were made due to fiscal concerns. This highlights that the abuse of the Isle of Where predicate offences occur off-island but Man for tax related offences remains a the proceeds of criminal activity may flow threat. through the Isle of Man, the core threats arise from white collar crimes such as fraud; The assessment recognised that, in addition drugs related (usually domestically based); to the number of SARs recorded by the FCU, taxation and excise evasion and corruption there will be many internal disclosures made and bribery (including embezzlement of by staff that do not result in SARs being public funds). submitted to the FCU. The regulator is looking at how it can improve its collection ML risk can relate to misuse of TCSP services data on ML/FT threats, vulnerabilities and for the commission of the predicate offence, mitigation. or for layering or integration of dishonestly obtained funds. Tax evasion remains a risk as a predicate offence or source of tainted funds.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Summary and proposed actions

Taking into account the assessments of vulnerability and threat the overall ML risk for TCSPs is considered to be medium high. This is as a consequence of the threats present in the global environment and not of the vulnerability of the sector in the Isle of Man which is assessed as medium owing to the strength of the AML controls.

No critical issues emerged for TCSPs out of the NRA; a number of possible improvements were identified however and will be the subject of further discussion between the FSC and the industry. The main points concern actions by the regulator and/or the FCU. These are:-

• Examination of the use of regulatory sanctions to ensure their appropriate and timely use as and when required. This is a general action arising out of the NRA and is not specific to TCSPs. 69

• For the FCU to identify any deficiencies in the quantity or quality of SAR reporting from

s the sector and to feedback for the next round of supervision and outreach. This is a t r

o

general action for the FCU to provide more guidance and training on SARs to all of p

e

R

industry and for feedback to MLROs (including the use of online reporting tools) and for

r

o

the FCU to develop and publish typologies specifically for the Isle of Man. t

c

e • The FSC/IOMFSA to undertake a more detailed survey of the CDD gathered by its S licensees to ensure that the assessment made of the availability of reliable ID infrastructure is robust.

• The FSC/IOMFSA to review the current data and information available for the TCSP sector and to work with the industry to ensure that where additional information can be secured that will enhance risk assessment for TCSPs that this is progressed.

Conclusions inherent vulnerabilities which in the main arise from the services provided and from TCSPs have been subject to licensing and some of the customer segments that these supervisory visits since 2001 and a risk-based are available to. These vulnerabilities and the approach to AML/CFT since 2008. The nature of the threats are not unique to the assessment concluded that this is a broadly Isle of Man but are global in nature. well controlled sector, but that there are

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Advocates Sector vulnerabilities The comparative strength of specific AML The Isle of Man Law Society was established controls for the sector, combined with the by statute in 1859 and is responsible for self- inherent vulnerability of the types of regulating the sector. The Manx Bar is a customers and services, indicated the fused profession of Solicitors & Barristers, general level of vulnerability for the sector. referred to as Advocates. As of March 2015 The overall vulnerability was assessed as there were 226 Practicing Advocates medium low. Assessment of the AML employed across 36 Advocates Practices. 9 controls found that the quality of these of the 27 Practices that conduct Business in controls was between medium and very high the Regulated Sector report having an and that no critical or urgent attention was international client base; the remainder required. provides regulated services to the local residents of the Isle of Man. The 9 Practices The key vulnerabilities arise from the extent delivering regulated legal services to an 70 and the value of international work provided international client base employ 112 of the to HNW clients with the primary risk being 226 Advocates at the Bar. deliberate connivance, collaboration or intent s t r

o of an Advocate to commit a legislative

p Work is conducted for named and identified

e breach or criminal offence. FATF and relevant

R clients, or where it is non-face-to-face

r typologies of legal services focus extensively o

t instruction is received which will be largely

c on the involvement of lawyers in ‘regulated e from Law Firms in England where the English S business’. The typologies highlight that it is law firm is the client and the Island via the delivery of this type of service that requirement is a point of company law in a Lawyers are most exposed to ML/FT activity. much larger deal. Vulnerability factors identified in typologies Advocate involvement in TCSP business for the sector were considered to be forms part of the legal practice in a small mitigated by high levels of sector awareness number of Practices and is not part of the and internal compliance controls (including core delivery service of Isle of Man the submission of an annual compliance Advocates. A number of Practices have return) which are monitored by the Law established separately licensed entities Society. Work is conducted for named and providing TCSP services. These businesses identified clients and where non-face-to-face are supervised by the Financial Supervision instruction is received it is largely from Law Commission. Firms in England where the English law firm The range of products and services offered is the client. by the 36 Practices fall mainly into 3 The assessment recognised that Advocate categories, criminal and civil legal aid work; involvement in TCSP business is limited to a General Practice Law Firms supporting the small number of Practices and does not domestic population with family matters and generally form part of their legal business, local conveyancing, and corporate and but is delivered through separately commercial work established and regulated TCSPs.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The assessment also took into account that • Misuse of client accounts Advocates are not permitted to accept referral work and so are not exposed to the • Purchase of real property risk of agents. They accept very limited cash into their practices, and the mature banking • Creation and management of trusts and system ensures a system of easy to monitor companies and traceable transaction records. • Managing client affairs

However, evidence shows that the legal Sector Threats profession in the Isle of Man is well aware of the threats and how its services may be The ML threat to the sector was assessed as abused such that it can mitigate the risks medium low; the sub group noted that there and reduce the potential for harm to the is a lower domestic threat, but a medium Island. The main sources of information international threat arising from persons / available to consider threats for this first NRA 71 entities who wish to abuse the system to were Suspicious Activity Reports (SARs) and launder the proceeds of crime. The main high level Mutual Legal Assistance Requests

s (MLARs). The information from SARs t sources of ML threat which are recognized at r

o a global level are considered to be relevant highlighted that the threat of international p

e

R to the Isle of Man because of its status as an ML is far greater than the domestic threat;

r

o international finance centre. that nearly a third of domestic SARs related t

c

to cash activity and that the highest number e

S Where predicate offences occur off-island but of SARs relate to the UK which is consistent the proceeds of criminal activity may flow with the fact that the UK is a core market. through the Isle of Man, the core threats Nearly 40% of all SARs were made due to arise from the following: white collar crimes fiscal concerns. This highlights that the such as fraud; drug related (usually abuse of the Isle of Man for tax related domestically based); taxation and excise offences remains a threat. evasion and corruption and bribery (including embezzlement of public funds). As a large source of Advocate work in the Isle of Man comes from the UK, the threats The threat to the sector was considered to (and vulnerabilities) facing UK lawyers were be from criminals seeking to use legal considered to be particularly relevant. professionals to act as gatekeepers Between September 2014 and May 2015 the (colluding unwittingly or otherwise) in Solicitors Regulatory Authority and the gaining easier access to other parts of the National Crime Agency jointly conducted financial framework whilst maintaining work with UK firms to ensure robust systems distance from it, or to use the client accounts were in place to guard against ML by large- maintained by Advocates to shield money scale criminal organisations. Relationships away from scrutiny. Notable features with UK law firms have historically been identified by the FATF Report 2013 ‘Money viewed as low risk, however the assessment Laundering and Terrorist Financing noted that there would be a need to consider Vulnerabilities of Legal Professionals’ include; the outcomes of this regulatory review of the UK sector for the Isle of Man risk rating.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Summary and proposed actions

Taking into account the assessments of vulnerability and threat, the overall ML risk for the legal profession arising out of the NRA is considered to be medium low. Awareness of ML risk indictors appears high and risk appetite low across the profession.

There were no critical issues emerging for the sector out of the NRA; a small number of improvements were identified and will be the subject of further discussion between the FSA and the Law Society for the sector. These are:-

• The FSC/IOMFSA and government to examine the use of regulatory sanctions to ensure their appropriate and timely use as and when required. Ensuring that the use of regulatory sanctions is properly understood and that these sanctions are being used appropriately is a general action arising out of the NRA and is not specific to the legal profession. 72 • The FCU to identify any deficiencies in the quantity or quality of SAR reporting from the sector and to feedback, with support from the FSC/IOMFSA and the Law Society, any s t r lessons into the next round of supervision and outreach. The NRA identified the need for o p

e the FCU to provide more guidance and training on SARs to all of industry and for feedback R

r to MLROs (including the use of online reporting tools) and for the FCU to develop and o t

c publish typologies specifically for the Isle of Man. e S • The FSC/IOMFSA to review the current data and information available for the sector with the Law Society and to work with the sector to ensure that where additional information can be secured that will enhance the risk assessment process that this is progressed.

The Law Society also identified its priorities as supervisor, which are to ensure ongoing and detailed AML/CFT education for Advocates and testing as to the ongoing effectiveness of the compliance systems in place.

Conclusions has adopted a risk based approach to AML supervision of Member Practices since 2011. The legal profession is well aware of the With the Designated Businesses Act coming threats posed by ML and has well- into force in October 2015 co-ordination established compliance controls in place to between the FSC/FSA and the Law Society as protect against this. The overall exposure to the Self-Regulatory Body will be imperative. the threat of international ML is mainly to a The submission by all registered Firms of relatively small number of firms, although Advocates of an AML specific annual return altogether they employ 112 Advocates at the with appropriate and relevant reporting Bar. The Law Society has been responsible statistics should also allow for improved for self-regulating the sector since 2009 and analysis in the future.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Accountants It is noted that the professional bodies will continue to provide guidance and collect The Department of Home Affairs (DHA) has data on AML and other regulatory matters been responsible for AML oversight of for and from members; much of which will Accountants from 2008 until 2015. In 2010 a likely remain relevant to the overall ‘Memorandum of Understanding’ established assessment. arrangements with five of the professional There was little evidence available as to the accountancy bodies requiring those bodies to extent of local business conducted by the report the AML oversight activity conducted sector, but the assessment reflected the of their members to the DHA. assumption that there is a cross-section of The accountancy bodies provided some local and international business taking place. annual feedback; the extent of oversight in No testing was conducted as to these the Island and supervision remained limited assumptions. however. The 2009 IMF Report included a number of findings and recommendations for 73 accountants, which the DHA sought to Sector vulnerabilities address via the MOU. Progress was limited s

t

r by the absence of a central coordinating o

The inherent vulnerability of the accountancy p oversight body in the Isle of Man. e sector was assessed as being medium and R

r

o

the strength of the AML control framework t

In September 2013 the DHA provided c was also identified as medium. Assessment e

S information for the technical assessment of the AML controls found that the quality of work that was conducted for the MONEYVAL these controls for the sector was between Interim Report. There were no required low and medium high. The partial actions or recommendations to be fulfilled fragmentation and coverage of self- stemming from this report. At that time regulatory bodies (SRBs) at the time of the approximately 234 firms or individuals were NRA is reflected in some of the lower scores identified as being active in the ‘accountancy’ e.g. for entry control and supervision. field. For those identified accountants not currently assigned to a professional body there was assumed to be limited or no oversight or supervision at the time the NRA was conducted.

The Designated Businesses Act 2015 will ensure that all registered firms of accountants and those representing themselves as accountants must submit an AML specific annual return to the FSA. As the legislation was not enacted at the time of the NRA, whilst it was noted, it could not be considered as a mitigating factor in respect of the risk assessment.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The full co-operation and assistance of the Sector Threats professional accountancy bodies of the ACCA and the ICAEW was secured for the NRA; The ML threat was assessed as medium low; this ensured that information was available the sub group noted that there is a lower in respect of a number of distinct AML areas domestic threat, but a medium international including AML training requirements and threat arising from persons / entities who procedure and control expectations. The wish to abuse the system to launder the assessment was able to take into account proceeds of crime. the AML supervisory regime currently employed by the two professional bodies. The main sources of ML threat which are recognized at a global level are considered to Tax advisors and insolvency practitioners be relevant to the Isle of Man because of its were included in discussions concerning the status as an international finance centre. The sector. It was considered that ACCA/ ICAEW assessment concluded that the domestic registered firms were likely to provide tax threat of ML is mainly confined to self- 74 advice to their clients, reflecting the laundering in relation to lower level drug professional client acceptance standards set related crime, petty theft and potentially more complex fraud / fiscal related matters. s out in the Consultative Committee of t r

o Accountancy Bodies (CCAB) anti-money For the first two, the laundering of illicitly p

e laundering guidance, including the obtained cash is a core threat. R

r requirement to conduct CDD on clients. o t

c Where predicate offences occur off-island but e

S The assessment noted that there is no the proceeds of criminal activity may flow register for insolvency practitioners nor is through the Isle of Man, the core threats specific accreditation required to practice in arise from the following: white collar crimes this field in the Isle of Man. Insolvency work such as fraud; drug related (usually was identified as a risk area; the assessment domestically based); taxation and excise considered that it may well be the case that evasion and corruption and bribery (including accountants are providing this service in the embezzlement of public funds). Island under Part V of the Companies Act 1931 and the Companies (Winding Up) Rules Accountants in the Isle of Man are not, on 1934. Further work will be required to assess the whole, involved with client funds and the risk / impact of this type of service. transactions and are therefore not the most exposed to direct involvement in ML related serious crime. A significant threat to the sector was considered to be from criminals seeking to use accountants as gatekeepers (colluding unwittingly or otherwise) in gaining easier access to other parts of the financial framework whilst maintaining distance from it.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Global typologies include the risk of The main sources of information available to collusion/complicity in misrepresenting consider threats for this first NRA were financial affairs (accounting fraud) and in Suspicious Activity Reports (SARs) and high matters relating to taxation (specifically level Mutual Legal Assistance Requests evasion). This area of risk is, the assessment (MLARs). The information from SARs concluded, the one which most accountants highlighted that the threat of international will encounter most frequently. Global ML is far greater than the domestic threat; typologies also indicate the provision of that nearly a third of domestic SARs related financial advice to criminal organisations, the to cash activity and that the highest number facilitation of access into the financial sector of SARs relate to the UK which is consistent and collusion and/or complicity in the with the fact that the UK is a core market. misrepresentation of financial affairs (i.e. Nearly 40% of all SARs were made due to accounting fraud). There is no reason why fiscal concerns. This highlights that the the Isle of Man is more or less immune to abuse of the Isle of Man for tax related these risks although the NRA did not identify offences remains a threat. cases where the accountancy sector in the 75 Isle of Man had been used in this way.

s

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Summary and proposed actions S

Taking into account the vulnerability and threat assessments, the overall ML risk for accountants is considered to be medium. The risk level reflects in part the current lack of detailed data/information concerning the sector in the Isle of Man which is being addressed as accountants become registered under the new legislation.

Whilst there is extensive evidence of guidance and professional body oversight of AML there is little application of Manx legislation and requirements included. In principle the Money Laundering Regulations 2007 are directly comparable to the principles in the Money Laundering and Terrorist Financing Code 2013 – both stemming from interpretation of POCA 2008 (POCA being almost identical in both UK and the Isle of Man). However, some jurisdiction customisation should be applied if the accountancy sector is to be compared with other sectors. A number of points were identified for action, the most significant of which concerns supervision.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Effectiveness of Supervision/ Conclusions Oversight Activities The reporting data on the number of Supervision and oversight for the sector is accountancy firms and individuals at the time the most important action identified. Once of the NRA was impacted by the lack of this is established on a uniform basis, standard reporting to an on-Island standards of compliance systems and registration body. However, whilst there reporting can be examined and compared appeared to be a large number of against required standards. This will be accountants ‘unassigned’ to professional achieved by the new legislation and, once bodies, the workgroup was reasonably registered, all accountancy practitioners will confident that in ACCA/ ICAEW accountant be subject to ongoing monitoring by the FSC members the assessment covered the and be required to maintain AML/CFT majority of international, complex matters. controls in accordance with the AML/CFT Code. With the introduction of the Designated 76 Businesses Act 2015, co-ordination between The assessment identified several other the FSC and the accountancy professional

s bodies will be imperative. The submission by

t areas for review; for example the next two r

o all registered accountancy firms and

p priorities concerned the effectiveness of

e individuals of an AML specific annual return R compliance systems and the effectiveness of

r with appropriate and relevant reporting o suspicious activity monitoring and reporting. t c statistics should also allow for improved e However the assessment recognised that it S was important for the new registration and analysis in the future. supervision arrangements to be introduced before other areas of work could most effectively be considered.

It is noted that cooperation from the ACCA and other accountancy bodies in respect of NRA data and information was very good. The primary challenge was that the nature of data required for the NRA, where it was available, did not necessarily match with historic data collected by the professional bodies. Although this situation is expected to improve, this assessment was generally limited by the information available.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

ANNEX I National Risk Assessment Process

Introduction The Strategic Group is responsible for setting the overall direction of the NRA work in In February 2012, the Financial Action Task respect of revised FATF Recommendation 1. Force (FATF) adopted updated the Anti- Recommendation 1 introduces a new Money Laundering / Combating the international requirement for countries to Financing of Terrorism (AML / CFT) conduct assessments of their Money Recommendations and published a revised Laundering / Terrorist Financing (ML / TF) assessment methodology. risks and to introduce measures to address these. In June 2013 the Strategic Group The revised FATF Recommendations agreed terms for a high level NRA Group, represent a significant re-write from the also led by the Chief Secretary, and in standards against which the Isle of Man was October 2013 an NRA Working Group was last assessed by the International Monetary established to take forward the work Fund (IMF) in 2008. In response to revised required. FATF Recommendation 2, concerning national cooperation and coordination, a pre- The Strategic Group agreed upon the 77 existing senior level working group was advisability of using an internationally

formally designated by the Isle of Man recognised model, in the form of the World I

Bank NRA Self-Assessment Tool. In summer x Government’s Council of Ministers as the e n

AML/CFT Strategic Group (the Strategic 2014 the Strategic Group secured the n Group) to serve as the cooperation and resources for this and for the appointment, A coordination body within the Isle of Man in October 2014, of an NRA Project Manager Government for the purposes of addressing based in the Cabinet Office to lead and and implementing the FATF coordinate the work required. The NRA Recommendations. process for the Isle of Man fully commenced in October 2014 and was substantially The Strategic Group is chaired by the Chief concluded by June 2015. Secretary and includes senior representatives from Cabinet Office, HM Attorney General’s Chambers; the Treasury; the Department of Home Affairs; Isle of Man Constabulary, Customs and Excise, Industry Regulators, the Isle of Man Office of Fair Trading and others.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Coordination of the NRA In practice given the size of the Isle of Man, A voluntary questionnaire provided a starting which is a small jurisdiction, the point for the NRA; this was circulated to membership of the two national groups industry in August 2014 with a separate (comprising Government agencies only) questionnaire circulated internally within substantially overlapped and the group also Government, both seeking information to functioned as the technical WG for the NRA inform the NRA. This and other information project with the majority of members being such as that collated for the First 3rd Round senior technical specialists. The following Written Progress Report submitted to the institutions participated in the national WG MONEYVAL plenary in September 2013, (some institutions were represented by provided a basis for the work. Briefings to more than one person): key Government officers and industry representatives took place in September • Financial Crime Unit (including the 2014 and at the same time seven thematic Financial Intelligence Unit) 78 working groups were established In preparation for a first workshop with the • Financial Supervisory Authorities (Financial Services Commission; the I

World Bank team in November 2014, seven

x Insurance and Pensions Authority and the e thematic working groups were established, n

n and began preparations, collating data and Gambling Supervision Commission). A giving consideration to the threats and • Customs and Excise Division of Treasury vulnerabilities. • Income Tax Division of Treasury The seven working groups were as follows; • Department of Home Affairs (IOM • National Level Threats Constabulary, AML legislation) • National Level Vulnerabilities • Attorney General’s Chambers • Banking (prosecutions, mutual legal assistance, international) • Securities • IOM Courts of Justice • Insurance and pensions • Department of Economic Development • Other financial institutions, including (trade and commerce including the money service businesses and foreign Business Development Agency; Aircraft, exchange and; Shipping and Companies Registries).

• Designated Non-Financial Businesses and • Cabinet Office (including good Professions (DNFBP) including advocates, government, international relationships) accountants, online gambling and Trust and Company Service Providers (TCSPs) • Office of Fair Trading (including registration of money lenders and consumer advice)

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The World Bank NRA self-assessment tool The extent and manner of private sector provided the Island with a structured model involvement is left to the country concerned. to enable the collection and collation of all It was agreed at the outset that private required data and evidence. The Isle of Man sector involvement would be of considerable was responsible for collating all of the data benefit to the NRA process and that industry and evidence for input into the Tool; a team representatives should be invited to from the World Bank provided the expert participate in the sector sub-groups. advice, training and support during the completion of the NRA and reviewed the The private sector representatives were from draft documents to assist in refining the NRA the associations of the relevant sectors and and Action Plan which took place during a professions, along with some other key Final Workshop in April 2015. individuals. As might be expected, there was not a consistent level of representation Each sector working group completed its throughout the process; some associations own module which formed part of the NRA were more engaged at one stage or another. assessment. The National Threat and For a few sectors (e.g. High Value Goods 79 Vulnerability group used this data and Dealers) following an initial review of risk it

included it with their own assessment of the was determined that there was no need to I

Isle of Man’s overall ability to combat ML. focus on them owing to a number of factors x e n

Terrorist financing was considered separately and this was therefore reflected in the level n within the assessment by a group of officers of ongoing engagement that took place. A including representatives from the Financial Crime Unit, the Financial Supervision Commission, Customs and Excise and HM Attorney General’s Chambers.

Private sector involvement

Private sector involvement in the NRA was strongly recommended as this can provide useful insights from outside the public sector. This involvement also raises awareness, which is important as the private sector institutions are among the primary audience of the NRA.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The following associations participated in the regulators, law enforcement, and other NRA being represented and/or consulted public sector representatives sitting together with during the process: and all working constructively towards the same goal. • The IOM Law Society

• IOM Bankers Association Consideration of the sectors • Association of Corporate Service Providers The Department of Economic Development • Manx Insurance Industry created a weighting model for the NRA which assigned significance to the various • Institute of Chartered Accountants in sectors being research for the project. The England and Wales model considered five factors for each sector, 80 • IOM Captive Insurance Association and provided weighting points to each sector dependent on the size of each factor. The I

factors used were:

x • IOM Funds Association e n n

A • Chartered Institute of Securities and • Assets under management Investments • Capital flow • Manx eGaming Association • Income (profit) • Manx Digital Currency Association • Employment • Association of Estate Agents • GDP contribution • IOM Association of Pension Scheme Providers This was to ensure that appropriate consideration was given, not just to the level • Chartered Institute of Taxation of threat and vulnerability presented by a particular sector, but also to the size of that • Association of Chartered Certified sector relative to the overall financial/non- Accountants financial services sectors in the Island and thus avoid any distortion of the results. The feedback from the private sector (and the public sector) during the NRA process and subsequently has been very positive with views expressed that the public-private sector dialogue had been constructive and had helped to enhance cooperation. Comments were made that for some participants it was the first time that they had experienced the private sector, the

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d s n m s h t d s e f n v t d o i t o . i d e o r a c e s r y d n h n . n t t 8 Annex I 1 NATIONAL RISK ASSESSMENT 2015

ANNEX II Isle of Man Government AML/CFT Framework

Several AML/CFT pan-Government groups and industry. The work of this group feeds into exist in the Isle of Man, including: the considerations of both the Strategic and the Technical AML/CFT groups. • The AML/CFT Strategic Group — a high level committee consisting of senior officers from The diagram below sets out the inter- Government, the regulators and law enforce - relationships between the various AML/CFT ment, chaired by the Chief Secretary. groups. Political bodies are highlighted in • The AML/CFT Technical Group — which re - blue; officers in green and industry in pink. ports into the AML/CFT Strategic Group. The Serious Crime Strategic Group will be • The Joint Anti-Money Laundering Advisory replaced by the FIU Board once the Financial Group (JAMLAG) - an industry liaison forum Intelligence Unit Bill receives Royal Assent. which brings together Government, regulators

Figure 6. Isle of Man Government AML / CFT Groups 82 Council of Ministers I I

x e n n A National Strategy Group

Serious Crime AML/CFT NRA Strategic Strategic Board of Strategic Group Group the FCU

JAMLAG Consultative Group

AML/CFT Technical Group Industry bodies and Professional Associations

Council of Ministers and the Chief Minister with a small number of advisers also present. Its purpose is to set The Council of Ministers is the highest level national and international policy which decision making body within the Isle of Man includes matters in respect of AML/CFT and Government. It consists of eight Ministers to provide clear leadership to the separate

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

legal entities of departments, offices and a. To support the Isle of Man Government statutory boards which make up the Isle of Commitment to Combating Money Laundering Man Government. It also has some statutory and the Financing of Terrorism and decision-making functions and importantly Proliferation through the provision of has a reserved power to give a department corporate advice and support. or statutory board directions with regard to the exercise of functions where it appears to b. To consider the implications for the Island it to affect the public interest. of the development of relevant international standards and related initiatives.

c. To lead on and coordinate preparations for National Strategy Group assessments of the Island’s compliance with the FATF Recommendations, and other The National Strategy Group (NSG) is a sub- relevant international standards such as Basel, committee of the Council of Ministers and IOSCO and IAIS, by international bodies. consists of the Chief Minister and the 83 Ministers for Treasury and Economic d. To lead on and coordinate the consideration Development with a number of advisors and progression of any recommendations I I

made following the international assessments present. It is responsible for ensuring that x e priority is given to national imperatives referred to above. n n within the National Strategic Plan. The A Committee identifies work streams which e. To provide advice to the Council of Ministers require policy development and together on relevant matters and to make with the other Council of Ministers recommendations to Council where any Committees, identifies and drafts policies to significant policy decision is required, and in recommend to Council of Ministers. particular where there may be financial or resource implications, or issues concerning the international reputation of the Island.

Anti-Money Laundering and The AML/CFT Strategic Group is chaired by the Chief Secretary and comprises, ex officio, Combating the Financing of the Chief Financial Officer, Chief Executive of Terrorism Strategic Group the Department of Home Affairs, HM Acting Attorney General, Chief Executives of the The purpose of the Anti-Money Laundering regulators, the Chief Constable and a and Combating the Financing of Terrorism number of advisers from across Government. Strategic Group is to provide an effective The Strategic Group is not a legal entity, mechanism to enable relevant officers in neither is it provided for in current Government, the regulators and law legislation; rather the Strategic Group enforcement in the Island to cooperate and receives its mandate from the Council of coordinate with each other concerning the Ministers. development and implementation of policies and activities related to combating ML / TF, the financing of proliferation of weapons of mass destruction, and compliance with related international financial standards. The terms of reference are as follows:

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Serious Crime Strategic Board the implications for the Isle of Man of changes to international standards and the The Serious Crime Strategic Board is chaired effectiveness of measures intended to tackle by the Chief Constable and brings together ML / TF at Government and industry level. partner agencies in order to provide the The Technical Group comprises necessary governance for the operation of representatives from the regulators, law the Financial Crime Unit (which includes the enforcement, the Treasury, the Cabinet FIU) 33 . Office, the Departments of Home Affairs and Economic Development and the Office of Fair The Chief Constable is accountable to the Trading. Ad hoc sub groups may be formed Minister for Home Affairs, but works closely to consider particular issues. The Group is a with the partner agencies to meet strategic forum for coordination and discussion across and operational objectives and ensures that Government as well as focussing on matters the Board considers any strategic and in respect of AML/CFT regulation and organisational requirements proposed for it guidance and emerging issues in respect of 84 by the Council of Ministers. The partner the application of regulation. agencies are the Department of Home

I Affairs, HM Attorney General’s Chambers, the I

x Income Tax Division of the Treasury, and the e

n Joint Anti-Money Laundering

n Customs and Excise Division of the Treasury. A Advisory Group The FCU also has a role in formulating AML policy and strategy. Furthermore the Chief The Joint Anti-Money Laundering Advisory Constable sits on the AML/CFT Strategic Group (JAMLAG) is a representative Group and the Head of the FCU sits on the discussion forum for regulators, law AML/CFT Technical Group. This ensures that enforcement authorities and industry. any practical difficulties and findings made through the process of investigation can It provides a forum in which key inform the formulation of strategy and the stakeholders can comment and advise on potential risk areas for the Isle of Man. prospective changes to AML regulations and guidance. Furthermore, JAMLAG aims to foster coordination of AML practices between different industry sectors and acts, as Anti-Money Laundering and appropriate, as a review body for major Combating the Financing of changes to international ML standards which Terrorism Technical Group might be promulgated. Ad hoc sub groups may be formed to consider particular issues. The overall purpose of the AML/CFT Chairmanship of JAMLAG meetings rotates Technical Group is to provide advice and between the relevant authorities. support to the AML/CFT Strategic Group in respect of the development of ML regulation,

33 The SCSB will be replaced by the FIU Board once the FIU Act comes into force. The FIU Board will comprise HM Attorney Geberal, the Chief Constable and the Chief Officer (Collector) of the Customs and Excise Division. The new FIU Board will have a role in advising the Strategic Group regarding policy and strategy

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

ANNEX III Isle of Man International Sanctions Policy and Practice

Policy Until 2000 the UK also assumed responsibility for administering sanctions It has been the longstanding practice of the controls in the Island through the Bank of Isle of Man Government to maintain the Isle England. The UK would make an Order in of Man’s international sanctions regimes in Council under the UNA 1946 to implement line with those of the United Nations, UN obligations for itself and subsequently European Union and United Kingdom. make separate Orders in Council for the Isle of Man, for the Channel Islands, and (using As confirmation of this policy, in October different enabling powers) for the Overseas 2012 the Council of Ministers endorsed the Territories. following formal statement of policy adopted by Treasury at its meeting on 19 September Although such Orders are still made by the 2012: UK to implement sanctions measures for the Overseas Territories, this is no longer the 85 “It is the policy of the Isle of Man Treasury that case for the Isle of Man 34 (or the Channel it will maintain the lists of those persons, Islands) which implement sanctions I I I

entities and organisations subject to financial measures using domestic legislation. x sanctions under applicable United Nations or Furthermore, since 2000 it has been the e n

European Union sanctions legislation so that responsibility of the Isle of Man Government n A they correspond to the Consolidated Lists to administer sanctions controls and provide issued by Her Majesty’s Treasury in the United information and advice to businesses about Kingdom.” such controls.

There are a number of ways in which international sanctions are implemented by Implementation the Isle of Man Government using domestic legislation as set out in the following Until a few years ago international sanctions paragraphs. measures were normally implemented by the

United Kingdom in the Isle of Man’s behalf (with the prior agreement of the Isle of Man

Government) using powers in the United Nations Act 1946 (of Parliament) (UNA 1946)

34 However, some of the sanctions Orders in Council made by the UK for the Island continue to be in force.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

European Communities (Isle of To expedite the application and Man) Act 1973 implementation of EU sanctions instruments, Orders relating to the application of these The European Communities (Isle of Man) Act instruments can be made by the Council of Ministers and come into operation, with the 1973 35 allows the Isle of Man to make Regulations to implement any EU instrument approval of Tynwald only then being sought which applies to the Island under its limited as soon as practicable afterwards for the Order to continue in operation. Protocol 3 36 relationship with the EU. Where EU legislation does not, or may not, apply When the making of these Orders and directly to the Isle of Man the ECA 1973 also Regulations has been approved by the includes a power to make an Order to apply Council of Ministers it has become standard the relevant EU instrument to the Island with practice for the commencement provision to any necessary exceptions, adaptations and bring them into operation immediately after modifications; when an EU instrument has they have been made. In addition, there is a been applied to the Island in this way it can standard modification to an EU sanctions 86 then also be implemented with Regulations instrument when applied to the Isle of Man under the ECA 1973. Orders and Regulations

I whereby any reference in the instrument to

I made under the ECA 1973 can apply or I

an Annex to the instrument is to be x implement an EU instrument, as the case e

n construed as a reference to the Annex as

n may be, as that EU instrument is amended

A amended from time to time. from time to time. The power to make Orders and Regulations under the ECA 1973 The Annexes to EU sanctions instruments rests with the Council of Ministers. list, amongst other things, the persons, bodies and entities which are subject to As EU instruments concerning restrictive restrictive measures, so changes to these measures (i.e. sanctions) may not be, or lists generally have automatic effect in the may only partially be, applicable to the Isle Isle of Man once the EU instrument has been of Man under Protocol 3, the established applied. Only when the original EU practice is for an application Order as instrument is replaced or the substantive text described above to be made first and in the body of the instrument is amended is implementing Regulations then to be made. a further application Order and implementing Since the EU implements UN measures Regulations required. through its legislation as well as adopting restrictive measures on its own initiative this provides a route (albeit slightly indirect) for the Island to implement UN sanctions.

35 http://www.legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/1973/1973-0014/EuropeanCommunitiesIsleofManAct1973_2.pdf 36 https://www.gov.im/media/624101/protocol3relationshipwiththeeu.pdf

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The Orders and Regulations are drafted by Under the terms of the Customs and Excise the External Relations Division of the Isle of Agreement 1979 38 between the UK and the Man Government and can be done in a day. Isle of Man the Island is obliged to maintain In the normal course of events the Council of its export control law and procedure so that Ministers meets weekly on a Thursday, with it corresponds to those in place in the UK. a deadline for papers for approval being the previous Thursday. However, with the move In practice this is achieved by the application to electronic circulation, papers relating to by the Treasury of the relevant UK legislation the implementation of EU sanctions to the Isle of Man using the powers in our measures can now be circulated to the Customs and Excise Act 1993 39 (CEA 1993). Council of Ministers up to the day prior to a So, for example, the (UK’s) Export Control meeting if this is considered to be necessary. Order 2008 was applied to the Isle of Man by In cases of extreme urgency or if Council is the Export Control Order 2008 (Application) not meeting as normal for any reason, Order 2009 and subsequent UK orders which approval for the application and have amended or supplemented the 2008 implementation of EU sanctions can be Order have also been applied to the Island. 87 obtained by a quorum of the Ministers These application orders require Tynwald

indicating their approval following the approval after they have been made but they I I I electronic circulation of the instruments and can have retrospective effect back to when x e covering paper. the applied UK legislation came into force. n n A When the necessary legislation has been Similarly to the application of the UK’s made and it has come into operation, the general export control legislation, specific Customs and Excise Division of Treasury export control regime legislation is also handles the administration and enforcement applied to the Isle of Man. For example, the of the measures the Division maintains (UK’s) Export Control (Sudan, South Sudan comprehensive information about the and Central African Republic) Regulations measures that are currently in place on its 2014 were applied to the Island by the website 37 . Export Control (Sudan, South Sudan and Central African Republic Sanctions) Regulations 2014 (Application) Order 2015. Customs and Excise Acts Whilst there may be some overlap between the application and implementation of the EU In addition to application and Regulations using the powers in the ECA implementation of EU sanctions Regulations, 1973 and the application of the UK’s export the Treasury implements export control/arms control legislation using the CEA 1993 , embargo type restrictive measures using the between them most aspects of sanctions powers available to it under the Island’s regimes are covered. Customs and Excise Acts.

37 www.gov.im/categories/tax-vat-and-your-money/customs-and-excise/sanctions-and-export-control/ 38 https://www.gov.im/media/80147/customs_agreement1979.pdf 39 http://www.legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/1993/1993-0007/CustomsandExciseAct1993_2.pdf

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Immigration Acts was brought into operation on 1 January 2015, consolidated and replaced previous An element of some sanctions regimes that legislation, including the Terrorist-Asset is not implemented by the methods Freezing Etc. Act 2010 (of Parliament) as described above is the implementation of extended to the Isle of Man with travel bans targeted at certain individuals. modifications by Order in Council. Under this The Isle of Man keeps its legislation in line Act the Treasury may designate a person as with that in the UK’s implementing legislation being subject to a freeze on their financial by using the powers in the UK’s Immigration assets and other economic resources and Acts as they have been extended to the also give directions to financial institutions in Island 40 . an equivalent manner to the UK under Schedule 7 to the Counter Terrorism Act The UK’s Immigration (Designation of Travel 2008 (such as when the FATF has advised Bans) Order 2000, as amended, lists that measures should be taken). Resolutions of the Security Council of the 88 United Nations and instruments made by the Under this Act “designated person” is defined Council of the European Union under which as including a natural or legal person, group

I persons are subject to travel bans. Under or entity included from time to time on the I I section 8B of the Immigration Act 1971 list provided for by Article 2(3) of Council x e

n persons who are included under these Regulation (EC) No 2580/2001 of 27 n

A “designated instruments” must (subject to December 2001 on specific restrictive certain limited exemptions) then be refused measures directed against certain persons entry to the UK or leave to remain in the UK. and entities with a view to combating terrorism as it has effect in the Island. Each time that the UK updates its legislation the External Relations Division of the Cabinet Any measure affected by the HM Treasury Office drafts an Order to update the Isle of after the coming into operation of TOCA Man’s legislation. The Island’s latest Order at 2014 that is the equivalent to a freezing the time of writing is the Immigration order or designation under the Act has effect (Designation of Travel Bans) Order 2015. in the Island as if made under TOCA2014 and in the same terms. The fact that a measure that is the equivalent to a direction has been affected by HM Treasury is also to Terrorism and Other Crime be taken as sufficient for Isle of Man (Financial Restrictions) Act Treasury to form the same reasonable belief or suspicion that gave rise to the effecting of 2014 the measure. The Terrorism and Other Crime (Financial Restrictions) Act 2014 41 (TOCA 2014) which

40 By the Immigration (Isle of Man) Order 2008 (SI 2008/680) 41 http://www.legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/2014/2014-0013/TerrorismandOtherCrimeFinancialRe - strictionsAct2014_1.pdf

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

ANNEX IV UK National Risk Assessment of Money Laundering and Terrorist Financing

The UK National Risk Assessment was The UK is the Island’s largest trading partner published on 15 October 2015, some months for financial services; this explains why the after the Isle of Man’s own National Risk largest numbers of Suspicious Activity Assessment was finalised. The Isle of Man Reports received by the FIU relate to the UK did not have sight of the UK assessment and why it is essential that Isle of Man prior to publication and was not consulted on financial institutions are never complacent any relevant matters prior to publication. The when engaged in business with UK UK is by far the Island’s largest trading customers and businesses. This view is partner in financial (and other) services and borne out by the UK’s own risk assessment. there are very close links between the Isle of Man and the UK, in particular with the City of Recovering criminal assets is a priority for all London. The assessment undertaken by HMT jurisdictions; where they have been and the Home Office is therefore relevant to laundered overseas this presents further the Isle of Man. It would have formed a part challenges. The Isle of Man Government, law 89 of the evidence base for the Island’s NRA enforcement agencies and regulators place had it been available at the time and it will great importance on international V inform future threat assessments. cooperation to assist with identification, I

x

restraint and recovery of such assets where e n

This annex to the Isle of Man report does they may either be present in the Island or n therefore not address the findings of the UK where they may have been channelled A NRA in detail at this time. There is however through the Island. There are a number of one relevant matter within the UK NRA which formal and informal procedures in place to directly concerns the Isle of Man and which enable this cooperation. is addressed here. Table 10.A of the UK report identifies the “Top 10 countries to which identified UK criminal assets were laundered, ranked by International Exposure estimated value, 2010/11 – 2014/15”. This table includes the Isle of Man as one of The Isle of Man recognises the threats in the those countries (ranked at number 9). It international sphere identified in Chapter 10 excludes internal movement of laundered of the UK report and is similarly exposed to funds between the countries that constitute them, with criminals seeking opportunities to the UK; England, Scotland, Northern Ireland transfer the proceeds of crime in or through and Wales. the Island or using professional services to facilitate laundering. Transferring proceeds of crime ‘offshore’ to avoid confiscation of assets also presents a real threat to the Isle of Man.

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

The table unfortunately does not provide a therefore were not brought to the attention of more informative context for the list nor the authorities in the Isle of Man and in the explain the types of data used to support it. majority of cases, only proactive liaison with The Isle of Man Government subsequently the UK NCA FIU established their existence. sought information from the UK Home Office regarding this table which, regardless of the • Those cases that the Attorney General’s lack of accompanying data, did not accord Chambers in the Isle of Man are aware of do with the information available to the Isle of not appear to have been used to populate the Man. This was notably in respect of assets JARD, which raises some further concerns frozen or recovered in the Island on behalf of regarding accuracy and relevance. the UK. The following facts have been obtained in respect of the table; • There are only a very small number of these cases, some of which have been settled. • The table was compiled from data arising out of the UK Joint Asset Recovery Database Table 10A of the UK NRA could therefore be (JARD) which is managed jointly by the NCA regarded as potentially misleading without 90 and the Home Office. The data sets are the above context to provide a fuller picture. populated by the investigating Law Further to a constructive dialogue with the

V Enforcement Agencies’ Financial Investigators. I

relevant UK authorities following the x

e publication of Table 10A a more effective n • The data relates to the identified assets or n

A “Free Property” of persons against whom a exchange of information is now taking place benefit figure has been raised and confiscation in respect of the information in the JARD, order has been applied. So, for example, a particularly on a FIU to FIU basis. person may be subject to a confiscation order The Isle of Man has also reiterated its of £50,000 in the UK, but if their total Free support for the UK Government in ensuring Property assets are much greater than this, criminal assets are recovered and that abuse then it is that larger figure that is entered into of financial institutions for money laundering the JARD. purposes is tackled. • In many cases the identified assets from which a confiscation order can be realised will therefore not have been judged to be ‘criminal’ by any UK court; the underlying data in the table is used as a ‘proxy’ measure only to indicate a potential ‘criminal lifestyle’.

• However, the cases in the table concerning the Isle of Man have, or are for the most part being, pursued directly via routes other than through Mutual Legal Assistance Requests and

Cabinet Office, Isle of Man Government NATIONAL RISK ASSESSMENT 2015

Glossary of terms and acronyms

Term or Definition acronym ACCA Associated of Chartered Certified Accountants AGC Attorney General’s Chambers AML Anti-Money Laundering AML / CFT Anti-Money Laundering / Combating Financing of Terrorism AML / CFT Code Anti-Money Laundering and Countering the Financing of Terrorism Code 2015 ATCA 2003 Anti-Terrorism and Crime Act 2003 AUM Assets Under Management Blockchain The basis of crypto currency. Aa distributed database; in the case of crypto currency a shared public ledger that enables e.g. bitcoin transactions to take place without an intermediary. BO Beneficial Ownership BVI British Virgin Islands CDD Customer / Corporate Due Diligence C&E (Isle of Man) Custom and Excise Division CFT Countering the Financing of Terrorism CIs Channel Islands Class 2 licence Functionaries which include investment managers, investment advisers and holder discretionary asset managers CSP Corporate Services Provider CRS Common Reporting Standard CTA Common Travel Area CVC Convertible Virtual Currency DBC Disclosure and Barring Checks DBS / DCS Defined Benefit Schemes / Defined Contribution Schemes DED Department of Economic Development DHA Department of Home Affairs DMLRO Deputy Money Laundering Reporting Officer DNFBP Designated Non-Financial Business or Profession DNFBP Bill Designated Businesses (Registration and Oversight) Bill EDD Enhanced Due Diligence Experienced An investor who meets certain criteria which qualify him as an investor who investor knows the risks of investing in a certain product FATCA Foreign Account Tax Compliance Act FATF Financial Action Task Force FCU Financial Crime Unit FIU Financial Intelligence Unit FOBT Fixed Odds Betting Terminal FSC Financial Supervision Commission FSC’s Financial The Rule Book sets out detailed requirements in relation to various matters Services Rule such as financial resources, conduct of business and risk management. It is the Book yardstick by which the FSC measures licence holders during supervisory visits FSRB Financial Services Regulatory Bodies FT Full Time (employee) GDP Gross Domestic Product GAAS Generally Accepted Auditing Standards GSC Gambling Supervision Commission HMRC Her Majesty’s Revenue and Customs HNW High Net Worth HNWI High Net Worth Individual

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NATIONAL RISK ASSESSMENT 2015

Term or Definition acronym HVGD High Value Good Dealer IA 2008 Insurance Act 2008 ICAEW Institute of Chartered Accountants in England and Wales IAMLR 2008 Insurance (Anti-Money Laundering) Regulations 2008 IAIS International Association of Insurance Supervisors IBC International Business Companies Act 1984 IFA Independent Financial Advisor OFI Other Financial Institution IGN Guidance Notes on Anti-Money Laundering and Preventing the Financing of Terrorism – for Insurers (Long Term Business) IMF International Monetary Fund IMF Report 2009 International Monetary Fund Report 2009 ILOR International Letters of Request IOSCO International Organisation of Securities Commissions IPA Insurance and Pensions Authority Institutional An investor which is a financial institution investor Investment Services being provided by Class 2 licence holders business IOM Isle of Man IOMG Isle of Man Government JAMLAG Joint Anti-Money Laundering Advisory Group ML Money Laundering MLAR Mutual Legal Assistance Request MLRO Money Laundering Reporting Officer ML / TF Money Laundering / Terrorist Financing ML / TF Code Anti-Money Laundering and Countering the Financing of Terrorism Code 2015 MONEYVAL Council of Europe’s committee of experts on money laundering, which conducts AML/CFT assessments of the Isle of Man MSB Money Service Business MVTS Money Value Transmission Services NAV Net Asset Value Non-retail funds Specialist, qualifying, experienced and professional investor funds. This category also encompasses closed ended investment companies and exempt schemes. Generally designed for institutional or experienced investors and then to have qualifying criteria for investment purposes NPO Non-Profit Organization NRA (Isle of Man) National Risk Assessment OFT (Isle of Man) Office of Fair Trading Overseas funds A fund which is incorporated outside of the Isle of Man but is managed or administered in the Isle of Man PEP Politically Exposed Person POCA 2008 Proceeds of Crime Act 2008 PT Part Time (employee) RBSA 2000 Retirement Benefits Schemes Act 2000 Regulated The following activities are regulated activities under the IA 2008 and are activities subject to the supervision of the IPA: a) carrying on or holding out as carrying on insurance business within the meaning of the IA 2008; b) acting or holding out as acting as an insurance manager, within the meaning of the IA 2008, for or in relation to an insurer; or c) acting or holding out as acting as an insurance intermediary within the

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NATIONAL RISK ASSESSMENT 2015

Term or Definition acronym meaning of the IA 2008in respect of effecting or carrying out contracts of insurance which are not investments within the meaning of the Regulated Activities Order 2011; Acting or holding out as acting as a retirement benefits schemes administrator within the meaning of the RBSA2000 is also a regulated activity. Under section 1 of that Act it is an offence for a person to market a retirement benefit scheme (a ‘scheme’) or to receive contributions into a scheme or to act by way of business as a trustee to a scheme unless that scheme is an authorised or recognised scheme within the meaning of the RBSA2000. Regulated entities The following are entities subject to the supervision of the IPA under the IA2008 or the RBSA2000:  Insurers authorised or permitted under sections 8 or 22 respectively of the IA2008;  Insurance managers registered under section 25 of the IA2008;  Insurance intermediaries registered under section 25 of the IA2008;  Schemes administrators registered under section 36 of the RBSA2000;  Retirement benefits schemes authorised under section 2 of the RBSA2000; and  Trustees of a retirement benefits scheme (for fit and proper purposes and AML oversight only). Retail Funds Authorised, regulated and full international collective investment schemes. Available to retail investors. Retail investor An investor which is considered to have less knowledge and experience of investing than an experienced or institutional investor SAR Suspicious Activity Report STR Suspicious Transaction Report SBEEB Small Business, Enterprise and Employment Bill (2015) SCSB Serious Crime Strategic Board SME Small and Medium Enterprise SOF Source of Funds SOW Source of Wealth SRB Self-Regulated Body TIEA Tax Information Exchange Agreement TCSP Trust and Company Services Provider TOCA 2014 Terrorism and Other Crime (Financial Restrictions) Act 2014 TF Terrorist Financing Tynwald Parliament of the Isle of Man UBO Ultimate Beneficial Ownership WMD Weapons of Mass Destruction 2002/03 FATF The FATF money laundering and terrorist financing typologies report 2002/03 Typologies 2003/04 FATF The FATF report on money laundering typologies 2003/04 Typologies 2004/05 FATF The FATF report on money laundering and terrorist financing typologies Typologies 2004/05 2010 MONEYVAL MONEYVAL report on money laundering through private pension funds and the Typologies insurance sector 2013 AML Code Money Laundering and Terrorist Financing Code 2013 2015 AML Code Anti-Money Laundering and Countering the Financing of Terrorism Code 2015

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