- Jersey has just been recognized as a global center for responsible finance, demonstrating its commitment to combating money laundering and terrorist financing.
- The island’s achievement has far-reaching implications for the global financial system, including for economies in Africa struggling with money laundering.
- African countries can take lessons on how to establish robust legal and regulatory frameworks for AML from Jersey to help plug vulnerabilities in their financial systems.
The scourge of money laundering continues to be a serious pain point for authorities across Africa, with many countries struggling to fight illicit flows albeit with persistent risks.
Currently, South Africa, the continent’s most advanced economy is under close watch according to the Financial Action Task Force (FATF) to institute tough measures to check money laundering avenues by October 2024.
In West Africa, persistent challenges of human trafficking, poaching, and wildlife trafficking, and runaway corruption continue to weaken the financial system of countries, creating a fertile ground for money laundering.
The grim picture in Africa of money laundering doesn’t end there. Already, the FATF has a total of nine African countries on its dirty list—the grey list—implying that these nations have huge deficiencies in their anti-money laundering laws and systems.
The nine countries under FATF greylist include East Africa’s giant economy Kenya and the continent’s mineral hub, the Democratic Republic of Congo (DRC). Others are oil-rich South Sudan, Burkina Faso, Cameroon and Mozambique. Crisis saddled Mali, and Africa’s new oil and gas frontier Namibia have also been blacklisted by the FATF.
Which begs the question, how can these countries improve on their anti-money laundering systems and help create a better climate for growth and investments? African countries may have to look for lessons from the small island of Jersey, a well-known corporate tax haven.
For years, Jersey’s tax-friendly laws were abused by unscrupulous individuals and corporations to engage in money laundering. But, the self-governing British Crown Dependency island close to France seems determined to change the tide.
Hiding proceeds of overseas crime in Jersey
As an International Finance Centre (IFC), Jersey offers all types of financial products and services, predominantly to non-resident clients that may seek to undertake business with trust and company service providers (TCSPs), the banking sector, investment businesses, lenders, and the securities sector including both public and private funds,” a new report by MONEYVAL, the Council of Europe’s anti-money laundering authority, notes.
“This has the potential to make the jurisdiction an enticing location for layering criminal proceeds. Main predicate offences are identified as relating to tax evasion, fraud, and corruption by non-residents seeking to hide the proceeds of overseas crime in Jersey,” adds MONEYVAL
With new tough measures on fighting money laundering, Jersey has just been recognized as an international center for responsible finance, demonstrating its commitment to combating money laundering and terrorist financing.
MONEYVAL undertook a detailed evaluation of Jersey’s financial system and concluded that Jersey’s anti-financial crime regime is among the most effective worldwide.
The MONEYVAL Fifth Round Mutual Evaluation Report assessed Jersey’s adherence to international standards. Key findings highlight Jersey’s exceptional performance in several areas, including:
- Risk Understanding and Cooperation: Jersey has been lauded for its proactive approach to identifying financial crime risks and its strong cooperation with international partners. This achievement places Jersey among a select group of jurisdictions globally recognized for their effectiveness in this area.
- Transparency and Beneficial Ownership: The report commends Jersey for its robust measures to ensure the accuracy and transparency of beneficial ownership information. Jersey’s commitment to reducing financial crime risks through these measures is unparalleled.
- International Cooperation: Jersey’s dedication to being a responsible international partner is evident in its effective provision of mutual legal assistance and cooperation with other jurisdictions.
The report acknowledges that while Jersey’s anti-money laundering framework is already robust, there are opportunities for further improvement in areas such as supervision, prevention, intelligence, and prosecution.
Authorities in Jersey note that the Island is committed to addressing these recommendations and building upon its already strong foundation.
“This report, which is produced in line with agreed international standards, is a strong endorsement of Jersey’s capabilities as a jurisdiction in combatting financial crime and reflects its commitment to upholding the very highest standards on the global stage. It is a report that should send a powerful and positive message to investors around the world and give them confidence in Jersey’s current and future standing,” noted Joe Moynihan, CEO of Jersey Finance.
The MONEYVAL report’s findings can serve as a benchmark for assessing AML (Anti Money Laundering) frameworks in Africa, a continent where many economies are struggling with similar issues.
For instance, several African nations face challenges in establishing robust legal and regulatory frameworks for AML, which can lead to vulnerabilities in their financial systems.
Across key economies in Africa, the lack of transparency in beneficial ownership and financial transactions remains a pain point in combating financial crime across the continent.
Additionally, MONEYVAL report underscores the importance of international cooperation, a critical area where many African countries can step up to enhance their effectiveness in tackling financial crime.
Read also: Kenya’s Grey Listing Revives Calls for Tougher Anti-Money Laundering Legislation
Lessons for Africa from Jersey on fighting money laundering
Jersey’s achievement in upholding the highest standards of financial integrity has far-reaching implications for the global financial system, including for economies in Africa grappling with persistent accusations of money laundering.
By demonstrating a strong commitment to combating financial crime, Jersey is steadily contributing to a safer and more stable international financial environment. This can enhance investor confidence in African markets, facilitate access to the much-needed capital, and support the development of robust financial systems across the continent.
Jersey’s success can also serve as a benchmark for African financial centers seeking to improve their anti-money laundering and counter-terrorist financing regimes.
By adopting similar standards and best practices, African countries can strengthen their financial sectors, protect their economies, and contribute to a more secure global financial order.
Furthermore, the findings from Jersey’s evaluation serve as a benchmark for African countries, many of which face significant challenges in their AML efforts. For example, Africa is particularly susceptible to financial crime, with an estimated $50 billion lost annually due to illicit financial flows, underscoring the urgent need for stronger AML frameworks.
Increasingly, several African nations struggle with weak regulatory frameworks and a lack of effective enforcement mechanisms, making them attractive targets for money laundering and other financial crimes.
In many economies, the lack of transparency in beneficial ownership and financial transactions remains a critical issue across the continent, impeding efforts to trace illicit funds.
In Jersey for instance, the Financial Services (Disclosure and Provision of Information) Law, Order, and Regulations require delivery and update of beneficial owner and controller information within 21 days, as well as significant person information, such as those holding director and equivalent positions of legal persons.
Overall, African countries must enhance their international cooperation to combat financial crime effectively, learning from Jersey’s model of mutual legal assistance and collaboration.
“In the area of formal cooperation, Jersey authorities have made improvements in execution times over the last five years. Assets of over GBP 3.2 million and USD 320 million have been shared with other jurisdictions as a result of MLA between 2018 and 2022,” MONEYVAL report states.
“More generally, Jersey has also engaged in bilateral capacity-building and information-sharing initiatives with several jurisdictions, particularly in the areas of tax transparency and beneficial ownership information.”
The Full report can be found here.
