MoneyVal: "Oh no not another review!"

The MoneyVal report is unquestionably a huge success for Jersey and reflects the hard work over a number of years of all the stakeholders, and those that made a contribution can be justly proud of their achievement. The report is one of the most detailed we have seen and leaves no stone unturned when assessing Jersey’s effectiveness in combating money laundering, the financing of terrorism and proliferation financing.

At what cost?

The final cost of the MoneyVal report is difficult to assess. Government do not publish financial information sufficient to make any form of accurate assessment and the same applies for all the other agencies involved with one exception – the Jersey Financial Services Commission.

In 2023 the JFSC annual report recorded “a deficit of £0.4m (2022: surplus £1.3m). This was a £1.7m change from 2022, where an increase in total income of £2.4m was offset by an increase in operating costs of £4.1m. These increases in operating costs principally relate to increases in staffing costs (£2.8m) and increases in professional services costs (£1m). Professional fees also saw an increase of £1m, driven by the need to respond to,  and appropriately support, the MoneyVal evaluation. Total operating costs increased by £4.1m (16%) to £30.1m.  Total income for the year reached £29.7m (2022: £27.3m) following an increase in regulatory fee income and a reduction in Registry fee income”.

In 2020 total income stood at £22.7m with total operating cost of £20.3m So in three years income increased significantly and total operating costs leapt to £30.1m. Such increases can in part be attributed to staffing up for MoneyVal.

Is it worth it?

It is therefore safe to assume that the MoneyVal review has cost the Island many millions of pounds and consumed huge amounts of resources. So, is it all worth it? The simple answer is yes! If Jersey had been grey listed for non-compliance, there would have been a catastrophic impact on the finance industry which is responsible for 42% of our GDP, with a significant detrimental knock-on effect to household income.  The favourable report was essential for the Island’s future prosperity and to maintain living standards in the island.

So, against the backdrop of the cost to the publics and regulator’s purse and having secured the most detailed and favourable assessment imaginable, it is somewhat surprising that the Government of Jersey announced that they will now “lead a strategic review of the approach to regulation of financial and professional services, to collaboratively modernise and simplify the legal and regulatory framework”. We understand that the scope of the review is being finalised and further communications will follow.

Experience shows that such reviews usually come at a huge cost, both in terms of the financial costs as well as the human resources needed to undertake the review and service its demands for information. The regulator like the other agencies must be striving to complete their own remediation exercise to address the findings highlighted in the MoneyVal report. Many financial institutions undergoing their own remediation exercise will no doubt be able to sympathise and appreciate the impact of undergoing a strategic review while working through a remediation exercise.

Much remains unclear of course, we do not know the scope, who will undertake the review, the cost and source of funding of such a review, the length of time such a review will take and the likely impact on progressing the MoneyVal remediation plan on the part of the JFSC.

Why now?

The timing of the announcement to modernise and simplify the regulations on the back of the MoneyVal assessment, risks some observers jumping to what is hopefully the incorrect conclusion that Jersey like so many other jurisdictions intend to scale back its financial crime defences now that a favourable MoneyVal outcome has been secured. Even if such a view is misconceived the timing of the announcement of a strategic review may be considered unfortunate and risks undermining the positive messaging arising from an excellent MoneyVal report.

The JFSC have been at the forefront of dealing with MoneyVal and imposing another review in such short order seems very odd. The regulator, like many of the other agencies, needs to focus on rebuilding its finances without the additional and unforeseen financial pressure of another review. Resources destined to address the remediation plan items and falling out of the MoneyVal report now risk being diverted towards the strategic review.

Could this not have waited until after the completion of the remediation exercise?  Perhaps Government should set out why they consider such a strategic review is necessary at this time, before deploying taxpayers’ money and adversely impacting the JFSC and their efforts to complete the remediation work needed. We are not averse to a strategic review of any organisation but simply questioning why now? The last thing everyone wants is to jeopardise the good work that has already been completed but also still needs to be undertaken as we demonstrate the timely implementation of the MoneyVal recommendations.

If you have been or currently are grappling with your own remediation exercise you will now doubt understand our concerns.

Our seasoned team at Baker Regulatory has over 200 years of combined experience in banking, funds, investments, and trust and company services, and can guide you with in-depth practical solutions as well as providing hands on experience.

Contact us on +44 (0) 1534 719222 or email us at enquiries@bakerregulatory.com