Why the DPI Law?
What is it?
What do you need to do?
Annual confirmation statement
This article looks at the government's introduction of new legislation in relation to beneficial ownership and controlling interests requirements. This new legislation, the Financial Services (Disclosure and Provision of Information) (Jersey) Law 202- (the DPI Law), aims to implement in Jersey the requirements set out by the Financial Action Task Force (FATF), the intergovernmental body that sets standards for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
Secondary legislation for the DPI Law includes the Financial Services (Disclosure and Provision of Information) (Jersey) Order (the DPI Order) and the Financial Services (Disclosure and Provision of Information) (Jersey) Regulations (the DPI Regulations).
Following a public consultation in 2019, the DPI Law was adopted by the government on 14 July 2020 and is currently awaiting approval from the Privy Council. It is anticipated that the DPI Law will come into force on 1 December 2020, with the DPI Order and the DPI Regulations also taking effect from that date.
The FATF recently expanded and updated the set of recommendations that it published in 2012 to counter newly identified threats in areas such as money laundering and the financing of terrorism. In particular, the FATF emphasised the need for its member governments to have clearer transparency requirements and to take a more rigorous approach to fighting corruption, including financial corruption. One of the recommendations (FATF Recommendation 24) relates to the transparency and beneficial ownership of legal persons.
The DPI Law therefore seeks to allow the Jersey Financial Services Commission (JFSC) to continue to collect and make public certain information that it holds to give effect to FATF Recommendation 24. It also gives the government the ability to make regulations which determine additional information which may be made public and support the development of a more modern, and allow for a full digital, companies registry in Jersey.
What new requirements is the DPI Law introducing?
The DPI Law includes:
- a requirement for the basic regulating powers (ie, foundation documents) of all entities to be filed with the JFSC and made publicly available;
- the introduction of the enabling provisions to introduce a public register of officers;
- the timely updating of information held by the JFSC;
- a requirement that information be provided by a natural personal resident in Jersey or by a Jersey-regulated trust and company service provider (TCSP);
- the prevention of misuse of bearer shares; and
- controls on nominee shareholders and directors.
To which Jersey entities does the DPI Law apply?
The DPI Law captures a broad range of current and future bodies incorporated or established in Jersey, all of which are set out in the definition of 'entity'. These are:
- incorporated limited partnerships;
- limited liabilities companies;
- limited liability partnerships;
- separate limited partnerships; and
- limited partnerships (however, it remains unclear if a limited partnership will constitute an 'entity' in the final legislation).
Who is a beneficial owner?
The DPI Law defines a 'beneficial owner' in a manner consistent with the concept of beneficial ownership under the Money Laundering (Jersey) Order 2008 as an individual who ultimately owns or controls a customer or an individual on whose behalf a transaction is being conducted, including an individual who exercises ultimate effective control over a legal person or arrangement. This includes ownership or control through a chain of ownership or control other than direct control and will not include individuals owning securities listed on a stock exchange.
Who is a significant person?
The DPI Law defines 'significant person' broadly to capture individuals appointed formally and informally. A 'significant person' includes:
- a council member of a foundation;
- a partner or general partner or limited partner participating in the management of a partnership;
- a director or secretary (or any other person purporting to act in a similar capacity) of a company; and
- a manager of a limited liability company.
What information must be disclosed to, and will be held by, the JFSC?
The DPI Law requires the following information to be provided to the JFSC on application to establish an entity and within 21 days of becoming aware of a change, error or inaccuracy:
- beneficial ownership information;
- significant person information, which includes:
- full name;
- month and year of birth;
- business or correspondence address; and
- role in relation to the entity and occupation; and
- details of nominee shareholders (unless registered by the JFSC), which includes the identity of the proposed nominee and the identity of the proposed nominator.
Who discloses the information?
It is intended that all interactions with the JFSC will be through a nominated person who is resident in Jersey and will be accountable to the competent authorities for providing all required information and assistance as needed by the JFSC or other competent authorities.
Once the DPI Law comes into force, entities must therefore appoint a nominated person, who must be one of following persons:
- a TCSP regulated by the JFSC;
- a fund service provider regulated by the JFSC;
- a significant person ordinarily resident in Jersey; or
- a lawyer or an accountant regulated by the JFSC for the purposes of the Proceeds of Crime (Jersey) Law 1999.
An existing entity must provide details of its beneficial owners and any nominee shareholders within three months of the DPI Law coming into force, together with details of its nominated person.
As such, it is anticipated that the DPI Law will have a marginal impact on most entities given that Jersey already has a central register of beneficial owners and controllers of entities collated under the terms of the consent issued to the entities under the Control of Borrowing (Jersey) Order 1958.
However, a notable change for one entity in particular is that the DPI Law will amend the Foundations (Jersey) Law 2009 so that Jersey foundations will have to file for public review an abridged version of their regulations along with the foundation's charter which is already available to the public.
Once the DPI Law comes into force, entities, through their nominated person, must file an annual confirmation statement with the JFSC by the end of February each year, verifying that the beneficial ownership information, significant person information and any other prescribed information provided to the JFSC in respect of such entity is accurate as of 1 January of that year.
The DPI Law introduces several civil and criminal offences for, among other things:
- providing false or misleading information;
- failing to update information to the JFSC within 21 days of a change or error;
- failing to file an annual confirmation statement; and
- failing to appoint a nominated person.
Where an offence is committed by an entity and it is proven to have been committed with the consent of a significant person, that significant person will also be guilty of the same offence.
A range of penalties are introduced, including:
- daily default fines for subsequent offences;
- late-filing fees; and
- striking-off provisions.
For further information on this topic please contact Matthew Shaxson or William Costa at Ogier by telephone (+44 1534 514 000) or email ([email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.