The Jersey Financial Services Commission (JFSC) has imposed a civil financial penalty of £803,661 ($974,234, €933,238) on the Jersey arm of financial services provider IQ-EQ.
The fine is for regulatory breaches, identified in a regulatory report issued in 2020.
Prior to 2018, IQ-EQ was named First Names and it grew rapidly following the acquisition of a number of Jersey-regulated trust company businesses between 2012-2016.
Following this period, and a change in ownership, after which First Names rebranded to IQ-EQ, the JFSC requested that an independent reporting professional assess the effectiveness of IQ-EQ Jersey’s processes, systems and controls and compliance with the regulatory framework during 2018-2019 by reference to a targeted review of 16 customer structures.
From the findings of the review, the JFSC concluded that during 2018-2019, “specific IQ-EQ Jersey systems, controls and corporate governance arrangements were in breach of regulatory requirements”.
Findings
The JFSC determined it necessary and proportionate to impose the civil financial penalty having concluded that IQ-EQ Jersey “negligently breached requirements” of the anti-money laundering code and the code of practice for trust company businesses.
The regulator found that the firm failed to conduct and record an up-to-date anti-money laundering and counter-terrorism finance business risk assessment and strategy.
It also failed to keep adequate records, establish and maintain an approach to AML/CFT, as well as “take all reasonable steps to obtain sufficient information so that it could exercise discretion or other powers in a proper manner, where it was responsible for exercising discretion for its customers”.
The regulator also found that the firm did not:
- Ensure it implemented adequate procedures to conduct detailed and robust reviews of its customers at appropriate intervals;
- Have its business affairs adequately monitored and controlled at senior management and board level;
- Comply with all AML/CFT legislation and guidance; and
- Supply customers with confirmation, in writing, of the services that it was providing.
Acceptance
Jill Britton, JFSC director general, said: “This penalty is levied against IQ-EQ Jersey due to the regulatory breaches identified in a reporting professional’s report. We consider the board of IQ-EQ Jersey did not respond adequately to the increased scale and complexity of the business following a series of acquisitions between 2012 – 2016. Failures of this nature have the potential to undermine the integrity and stability of Jersey’s financial services industry.
“This is an important case for the JFSC in upholding compliance with international standards. We urge all financial services businesses operating in the island to review the findings identified in the public statement issued today by the JFSC in relation to this case, and to ensure their own compliance with our regulatory framework.”
Ben Newman, IQ-EQ Jersey managing director, added: “IQ-EQ accepts the findings identified in the public statement issued today by the JFSC, and recognises the challenges presented during the previous period of rapid growth and acquisition.
“We have undertaken a comprehensive remediation programme, which will further strengthen our systems and controls. We are grateful to the JFSC for the opportunity to work with it to resolve matters, which principally arose in acquired businesses. No customer suffered loss from the matters identified.”
By accepting the findings and agreeing to settle at an early stage, IQ-EQ avoided a potential fine of over £1.6m.
