Jersey Private Funds (JPFs) and the Annual Compliance Return

JPFs continue to remain the growth product in Jersey’s fund industry and whilst the regime is a “lighter touch” regulatory regime for certain aspects, JPFs have to meet the provisions of the JPF Guide and adhere with Jersey’s AML/CFT/CPF regulations.

All JPFs are required to have an appointed Designated Service Provider (DSP) and will also require an AML Service Provider (AMLSP), usually performed by the same administration firm. Part G of the JPF Guide sets out the DSPs responsibility for a number of duties in relation the relevant JPF. This includes the completion of the JPF Annual Compliance Return, which is required to be completed as at 30 June and submitted online to the JFSC by 31 July.

JFSC Guidance

The JFSC published a reminder to DSPs in June 2020 on their expectations for completion of the JPF Annual Compliance Return:

•        Any material issues which have been identified must be notified to the JFSC via the online form within 28 calendar days. DSPs should not wait until the annual return to make a notification;
•        DSPs must be able to confirm that they have fulfilled all of their obligations to carry out all necessary due diligence and ensure that the promoter of the JPF has put in place reasonable measures to ensure that all service providers to the JPF are fit and proper and can fulfil their tasks in a responsible, professional and suitable manner.;
•        DSPs who have entered into a Deed of Covenant and Indemnity with the Promoter should be able to explain how the DSP 'ensures' that the promoter has put in place appropriate measures.
•        DSPs should be able to confirm positively that they are performing their duties in line with the requirements of the JPF Guide and under the Money Laundering Order

The JFSC considers the absence of the above confirmations unacceptable, unless the relevant issue(s) has already been notified and agreed with them. Finally the note reminds DSPs to enter the launch date of the JPF.

Examination Feedback

The JFSC conducted a themed examination on the role of a DSP to a JPF in 2020 and the examination feedback published identified the following findings specific to the completion of the JPF Annual Compliance Return:

•        Instances were found where confirmation had been provided that the JPFs were complying with all necessary AML/CFT/CPF requirements although no or inadequate testing or reviews had been undertaken and, in some cases, there had been no formal appointment of the MLRO & MLCO, and appropriate policies and procedures had not been adopted and/or followed;
•        In some cases inadequate checks had been made in relation to promoter due diligence;
•        Incorrect investor numbers had been submitted for multiple JPFs;
•        Identified JPF Returns had been completed giving inaccurate confirmations over a number of years without this being identified.

The feedback paper also published example of good practice which included:

•        An annual compliance checklist was tabled to the JPF Board regarding compliance with the JPF Guide and AML/CFT/CPF requirements. In addition, the DSP made reference to the JPF’s annual compliance checklist prior to filing the JPF Return with the JFSC;
•        The directors reviewed and agreed the JPF Return after considering the JPF’s CMP and whether any compliance issues had been reported in relation to the JPF;
•        The JPF’s Board minutes reflected the presentation of compliance reports.

Action

Ahead of submitting this year’s JPF Annual Compliance Returns we would recommend considering whether your existing processes require any enhancements to ensure that you have the relevant policies and procedures in place which enable you to fulfil your duties as both DSP and AMLSP.

If you would like to discuss your current control framework, please get in touch.