IFC: Jersey is well-established as a leading offshore financial centre and has long been a key base for offshore banking and private wealth management. How important are Jersey’s high international regulatory standards to the success of its financial services sector?
MM: Jersey is one of the highest-rated jurisdictions globally for complying with international standards on anti-money laundering and countering terrorist financing. This has been recognised globally in independent assessments by some of the world’s leading bodies such as the IMF, OECD and most recently MONEYVAL. We see the consequences of jurisdictions doing badly, for example with blacklists, so we work hard to make sure we remain in a leading position among IFCs. We have an increased focus on financial crime and continually invest in our infrastructure to ensure we are at the forefront of regulation. Those who come to Jersey know that and that is part of the reason they choose Jersey.
IFC: What new policies are being introduced to ensure adherence to such standards?
MM: We have a full agenda over the next few years. We have long had the right rulebook and now it’s about making sure our risk assessments and supervisory work can consistently achieve the same high standards. Away from AML/CFT, we have a significant number of more locally focussed initiatives including the introduction of Jersey’s Bank Resolution framework to ensure that Jersey’s depositors are protected in the event of a bank failure, supervision of Consumer Lending so that Islanders who borrow money are treated fairly, and more comprehensive legislation of pensions so that Islanders saving for their future are afforded the right level of protection.
IFC: Do you feel that increasing regulatory demands from the EU and OECD are hampering innovation?
MM: You have to respect that the EU and OECD are doing a really difficult job, not just for Member States, but for all the jurisdictions around the world that do business with the EU. That job involves setting standards that promulgate strong compliance, including vital investor protections, and encouraging the rest of the world to follow suit. Of course, there is always a tension between innovation and established or developing rules. That is even more difficult when innovation occurs outside well established financial services firms. But that’s why, through our well-developed consultation processes and initiatives such as the JFSC’s Innovation Hub, we work to develop our regime so that doing business across borders remains compliant with those rules, while at the same time, helping innovators steer through the complex regulatory framework. Often it’s not that regulatory demands truly hamper innovation, rather it’s that innovators need support understanding regulatory demands and how to navigate them in a way that ultimately benefits their customers and investors. We are there to help in that regard.
IFC: How do you balance the demands for regulatory measures with ensuring that Jersey remains sufficiently innovative to meet client expectations?
Finding that balance between enabling a bold new idea and the need to protect the public is best achieved by remembering the similarities in our objectives. When you remember that all of our work is actually about making sure that things are done well, done sensitively, and done in a way that takes care of customers, the conversations take on the right tone. Supervision-technology is being developed all the time and regulators are becoming increasingly complex and technology-driven. This means that the JFSC is better able to understand innovators, and innovators the work of the JFSC. Regulators around the world need to develop new, dynamic, risk-focused supervisory approaches to support changing business models. We are doing just that at the JFSC and have taken steady steps forward in how we use technology. We are also developing new functionality, such as improved data analytics and registry supervision. Jersey has a well-established and well regulated financial services industry. By leveraging this success and utilising the technology that is available or being developed, I believe Jersey can go from strength to strength. Regulated firms are becoming more and more innovative, but also more and more familiar with how to ensure that our concerns are properly addressed as they innovate. This ultimately collaborative approach creates a seamless experience for their global customers; this will and should only continue.
IFC: Jersey has established itself as an international centre for Fintech. What support do you offer companies in this arena and what is your regulatory approach for creating a successful digital jurisdiction?
MM: This year we published the JFSC’s first ever Fintech and innovation report. We also published our findings on a KYC utility for Jersey and are working closely with Digital Jersey and Jersey Finance on Jersey’s Fintech roadmap. As we highlight in our Fintech and innovation report, the JFSC’s Innovation Hub works with technology businesses at all stages of development to help them understand how our regulatory regime works. Fintech enquiries have continued to rise, even during the COVID-19 pandemic, and during 2020 through the Innovation Hub we have helped more than 60 businesses understand the regulatory regime and secure the right kind of permissions to do business in or from within Jersey. Our involvement in the Global Financial Innovation Network (GFIN) is also an important part of the work that we do to support Fintech. Alongside dozens of other global regulators, we participate in developing thought leadership and identify best practice that we bring back to Jersey. Through GFIN we are also open to cross-border trials which is an exciting initiative where Fintechs can apply to the JFSC and at least one other international regulator in order to trial innovative businesses across jurisdictions.
IFC: What strategies does the Commission employ to combat money laundering and the financing of terrorism?
MM: Being a centre of excellence in the fight against financial crime is critical for Jersey. All of our work pays careful attention to the need to fight the financial crime threat and our Strategic Roadmap (the JFSC’s overarching strategic plan) places this at the core of all that we do. Our strategy in respect of fighting financial crime has two core pillars: developing effective policy as the risks change and delivering effective supervision. Developing effective policy means ensuring that the regulatory regime in Jersey is fully aligned with the global standards set by the FATF, but more than that, it also means that we actively engage across the whole regulated sector to ensure that the rules we set are understood, such that regulated businesses can implement them and that they actually reduce the risk of financial crime. Delivering effective supervision means robustly inspecting compliance with those rules and taking action where standards fall short. Done well, this is a collaborative effort with local agencies including the Government and Law enforcement, as well as other regulators around the world. Effective supervision then feeds back into developing effective policy, both in Jersey and through our involvement in international forums such that where we have identified weaknesses, we contribute to closing the gaps and making it harder and harder for criminals to succeed.
IFC: As a Crown Dependency, how do you think the UK’s exit from the EU will impact on Jersey in terms of trade and financial services?
MM: In order to do business across borders you have to have rules in place that generally mean there is a level playing field compared to a domestic business in either jurisdiction. In the context of the EU this is called Equivalence. Jersey has worked tirelessly to make sure that we have equivalence for the kinds of business that we do across borders over many decades and on 1 January 2021 this won’t fall away. As we have arrived at the Brexit deadline there is still uncertainty. It is likely that the UK’s rules will be in lockstep with the EU for at least some time and that divergence will occur over manageable timescales. This is good news as it means we will be able to plan for change and take appropriate action to continue to be able to do that cross-border business. As Jersey is already integrated into global financial markets and interacts with a whole range of different regulatory regimes already, we are well practised at making sure that our regulatory framework can flex to enable cross-border business to continue. Managing this kind of challenge is in our DNA.
IFC: How do you envisage your relationship with the EU developing?
MM: The EU needs good partners to support and enable it in the capital raising process. In so far as Jersey is a channel for investment into Europe, we will always ensure that we act in good faith with our European regulatory colleagues, supporting and enabling them in implementing their regulatory mandate, just as we will with our closest colleagues in the UK. The EU is not only an important market place for global capital, it is also a highly respected standard setter. A lot of the direct work that the JFSC does with the EU is at the regulator-to-regulator level. This work takes place bilaterally, through participation in regulatory colleges, and through our involvement in bodies such as the International Organisation of Securities Commission. This work will continue uninterrupted. The Government of Jersey invests significant effort in maintaining strong relationships with governments around the world, including within the EU and Jersey benefits from the excellent work of the Channel Islands Brussels Office (CIBO). CIBO is a jointly funded non-profit organisation that promotes the interests of the Channel Islands in Europe, represents the Channel Islands to EU institutions and advises the governments of Guernsey and Jersey on EU policy issues. While it’s tempting to focus on the risks of Brexit and a potential souring of relationships, the vital work that we do in combatting financial crime and ensuring that Jersey maintains strong, internationally compliant standards across all regulated sectors has not diminished. As we have continued to engage with all of our counterparts during the Brexit process, we have found that their appetite for our ongoing participation in that truly international work continues to be strong.
IFC: Where can we expect the Commission to focus its efforts during 2021?
MM: Back in February we set out our commitment to being a proportionate, technologically savvy and engaged regulator. I am intensely proud to be able to say that COVID-19 hasn’t stopped us. Like the rest of the Island the JFSC staff have proven resilient and determined to get on with it, despite the virus. We launched our biggest ever capital investment programme in 2020 and we have continued with it, on time and in budget despite the crisis. We have really exciting new entity-experiences that we are launching, having redeveloped our portals. And we have done that at the same time as further developing our enforcement capacity and our industry engagement programme. We have delivered a huge programme of webinars and on-line briefings around COVID-19 and preparing for our new ways of engaging with industry. In 2021 you will see the benefits, while we move on to roll out a complete revamp of how our supervisors do their day-to-day job. This will help us to get better and better at focusing our resources on where the problems in the industry are and letting the ‘good guys’ get on with business. Part of that process is an intensified debate with industry about how we raise the money to fund our work. Regulation is not cheap. It’s increasingly capital intensive because it has to be technologically enabled both to match the technology in the sector and to assess increasingly complex risks. It’s an investment that pays dividends for Jersey and we all know it. Time and again, industry have made that clear. But we want to make sure that the way we raise our funding is the way that is more compatible with Jersey being internationally competitive and there are no better people to help us work out the smartest way to raise our funding than industry.
Martin Moloney is the Director General at the Jersey Financial Services Commission (JFSC). Prior to joining the JFSC, Martin worked for 16 years at the Central Bank of Ireland (CBI) where he held a range of senior positions. He has been Chair of ESMA’s Investment Management Standing Committee and of the European Systemic Risk Board’s Expert Group on Investment Funds. He has represented Ireland on the EU Committee of Securities Regulators and has represented Europe on the Board of IOSCO. He was recently a member of the Moneyval Strategy Review Group. Martin has an LLM in Business Law and a Masters qualification in Economic Policy, both from Trinity College Dublin. He has Postgraduate Diplomas in Arbitration and Regulatory Management and has completed professional examinations of the Chartered Institute of Bankers and the Chartered Institute of Arbitrators.