Money Laundering and the Financing of Terrorism

Legislation and Regulatory Guidance

The Island introduced its first anti-money laundering legislation in 1987, the Drug Trafficking Offences Act. This was followed by other legislation such as the Prevention of Terrorism Act 1990, the Criminal Justice Act 1990 and the Criminal Justice Act 1991. A list of both the Island's historic and current anti-money laundering and countering the financing of terrorism legislation is below.

1. The Drug Trafficking Offences Act 1987;
2. The Prevention of Terrorism Act 1990;
3. The Criminal Justice Act 1990;
4. The Criminal Justice Act 1991;
5. The Drug Trafficking Act 1996;
6. The Criminal Justice (Money Laundering Offences) Act 1998;
7. The Anti-Money Laundering Code 1998;
8. The Anti-Money Laundering (Amendment) Codes 1999, 2001 and 2005;
9. The Criminal Justice Act 2001
10. The Terrorism (United Nations Measures) (Isle of Man) Order 2001
11. The Anti-Money Laundering (Money Service Businesses) Regulations 2002;
12. The Anti-Money Laundering (Online Gambling) Code 2002;
13. The Anti-Terrorism and Crime Act 2003;
14. The Criminal Justice (Money Laundering) Code 2007;
15. The Criminal Justice (Money Laundering) (Amendment) Code 2007;
16. The Criminal Justice (Money Laundering) (Amendment) Code 2008; and
17. Part 9 of the Financial Services Rule Book 2008.

The Commission issued updated guidance to its licenceholders in 1991, extending the application of guidance to the new investment business licenceholders, as well as to banks. The introduction of the Drug Trafficking Act 1996 led to a further revision of the Commission's guidance to licenceholders in the same year.

The introduction of the Criminal Justice (Money Laundering Offences) Act 1998 extended the definition of money laundering to cover all serious crimes, leading to its informal title of ""the all crimes legislation."" In addition, it led to the creation of the Anti-Money Laundering Code, which came into force on 1st December 1998. The Anti Money Laundering Code has subsequently been replaced by the Criminal Justice (Money Laundering) Code 2007 ("the 2007 Code") which came into force on 1st September 2007.

The 2007 Code applies to:

1. banking business, and any activity deemed to be banking business by the Commission under powers under the Banking Act 1998;
2. investment business;
3. collective investment schemes;
4. fiduciary services business;
5. insurance business;
6. building societies;
7. credit unions;
8. business carried on by a society (other than a building society or credit union) registered under the Industrial and Building Societies Act 1892;
9. local authorities authorised to raise or borrow money;
10. bureaux de change, cheque encashment facilities and money (including any representation of monetary value) transmission services etc.;
11. estate agents;
12. bookmakers and casinos(but excluding business which is online gambling to which the Anti-Money Laundering (Online Gambling and Peer to Peer Gambling) Code 2006 applies);
13. The Isle of Man Post Office Authority relating to activities undertaken on behalf of the National Savings Bank;
14. accountants, people who provide accountancy services, advocates, notaries and registered legal practitioners, who hold or manage client assets in the course of their activities or provide legal services which involves participation (whether by assisting in the planning or execution of any such transaction or otherwise by acting for, or on behalf of, a client in any such transaction) in a transaction in respect of land, managing bank, savings or security accounts or organising contributions for the promotion, formation, operation or management of bodies corporate;
15. the provision of safe custody facilities;
16. insurance intermediaries;
17. acting as retirement benefits schemes administrator;
18. acting as the trustee of a retirement benefits scheme;
19. dealing in goods of any description (including dealing as an auctioneer) whenever a transaction involves accepting a total cash payment of 15,000 euros or more;
20. providing audit services;
21. lending including consumer credit, mortgage credit factoring and the finance of commercial transactions (see Appendix B(c) of the Anti-Money Laundering Guidance Notes for further detail as to how this relates to intra-group business);
22. financial leasing arrangements in respect of products other than consumer products (see Appendix B(c) of the Anti-Money Laundering Guidance Notes for further detail as to how this relates to intra-group business);
23. any business involving the issuing and managing of means of payment (including but not limited to credit and debit cards, cheques, traveller's cheques, money orders, bankers' drafts and electronic money);
24. the business of providing financial guarantees and commitments (see Appendix B(c) of the Anti-Money Laundering Guidance Notes for further detail as to how this relates to intra-group business);
25. administering or managing money on behalf of other persons.

1. Establish identification procedures in respect of applicants for business and beneficial owners as soon as is reasonably practicable after contact is first made - for example, through satisfactory evidence of name, date of birth, address, and nationality;
2. Report suspicious transactions - when merited, following a robust assessment of the circumstances;
3. Maintain adequate records - in terms of completeness, format, location and period of retention, including a register of all enquiries made to the institution by the investigating authorities;
4. Adopt adequate internal controls and communication procedures - written procedures for preventing money laundering, and a register of all disclosures made by the relevant person to the investigating authorities;
5. Screen staff - In order to be satisfied as to the integrity of new directors or partners and new appropriate employees;
6. Provide appropriate training for employees - to educate them on a regular basis about money laundering techniques, their obligations under the law, the internal procedures to forestall and prevent money laundering, and the procedures to follow where money laundering is known or suspected; and
7. Establish internal reporting procedures - paragraph 14 of the Code requires that relevant businesses establish written internal reporting procedures covering:-
   1. to whom staff should report suspicious transactions;
   2. the establishment of a reporting chain;
   3. the appointment of a Money Laundering Reporting Officer ("MLRO");
   4. the MLRO having access to all relevant information, and that the MLRO takes account of it;
   5. the prompt reporting of suspicious transactions by the MLRO;
   6. and the establishment of a register recording certain minimum information.

Part 9 of the Financial Services Rule Book 2008 provides for money laundering and terrorist financing provisions specific to the Commission’s licenceholders. These provisions incorporate a risk based approach to customer due diligence including enhanced customer due diligence for higher risk customers. In addition, there are specific provisions for dealing with relationships involving Politically Exposed Persons, technological developments, foreign branches and subsidiaries and ongoing monitoring of business relationships. An extract of Part 9 of the Financial Services Rule Book 2008 can be found at Appendix B of the Anti-Money Laundering and Countering the Financing of Terrorism Handbook.

To accompany the Anti Money Laundering Code 1998, in January 1999 the Commission issued fully revised draft Anti-Money Laundering Guidance Notes ("AMLGN") to licenceholders, which went into force in April 2000. To reflect evolving international standards, new legislation on the Island, and the new licensed status of Corporate Service Providers, the AMLGN were further revised in December 2001, and April 2003.

With the introduction of the Part 9 of the Financial Services Rule Book and new requirements brought in with the 2007 Code, the Commission issued the Anti-Money Laundering and Countering the Financing of Terrorism Handbook on 1 August 2008. This Handbook replaced the Anti-Money Laundering Guidance Notes.

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