Anguilla: Speech made by Mr. John Lawrence, Director of the Financial Services Commission at the Launch of the Financial Services Commission, 2 February 2004, The Valley, Anguilla

Last Updated: 17 February 2004
Article by John Lawrence

Introduction and Thanks

Your Excellency, The Governor, Mr Peter Johnstone, Deputy Governor, Mr Mark Capes, Hon Minister of Finance Mr Victor Banks, Hon Attorney General, Senior members of Government, Executive Members of AFSA, Members of the Industry, Invited Guests.

Today is a big day for financial services in Anguilla. This is the day when the financial services regulatory body moves out from underneath the umbrella of government and attempts to stand up on its own two feet.

Let me take the opportunity straight away to record my own thanks and those of the Financial Services Commission to HE The Governor, to Minister Banks for all their support and assistance and to both Permanent Secretaries of the Ministry, Mr Marcel Fahie and Mr Carl Harrigan for their support in ensuring that the Commission sets off on the right note particularly from a funding perspective. As you may realize the Commission will fund itself from licence fees. However, since most licence fees for 2004 have already been paid into Government, the Ministry’s support for the first year of the Commission’s operations is therefore not only welcome but somewhat necessary.

Role And Functions Of The FSC

For those who do not read the Official Gazette or have not had an opportunity to become familiar with the functions of the Commission, let me quickly read them out to you.

They are:

  • to supervise financial services licensees

  • to consider and determine applications for licences and registrations;

  • to monitor compliance by regulated persons with the Anti-Money Laundering Regulations, Guidelines or Codes ;

  • to monitor financial services business carried on in or from within Anguilla and to take action against persons carrying on unlicensed activities;

  • to administer the financial services enactments

  • to supervise the administration of the Registry Acts by the Registrar of Companies;

  • to monitor the effectiveness of the financial services enactments to ensure they meet internationally accepted standards;

  • to advise the Governor and Government of Anguilla on matters relating to financial services business;

  • to encourage the development of high professional standards within the financial services industry, and to promote industry codes of conduct;

  • to maintain contact with foreign regulatory authorities and international associations of regulatory authorities relevant to the Commission’s functions and to provide regulatory assistance to foreign regulatory authorities in accordance with the Act;

  • to provide information and advice to licensees and the public concerning financial services as appropriate;

  • to take measures to develop and protect the financial services industry in Anguilla

Other Issues Covered By The Act

The Act also covers a number of administrative obligations and powers of the Commission in the following areas:

  • Appointment of a Board and the Board’s role, which will be oversight of the Commission
  • General Powers of the Commission
  • Funds and resources of the Commission
  • Requirements for budgets, accounts and annual report. The annual report will be a public document
  • Power of the Commission to gather regulatory information ( commonly known as Investigative powers)
  • Power of the Commission to disclose information to another regulatory body for regulatory purposes and the checks and restrictions that the Commission will be required to take into account before disclosing such information.
  • Enforcement Powers and Disciplinary action available to the Commission arising from failure by licensed institutions to do certain acts required by the legislation or from misconduct
  • Formation of an Appeals Board
  • Conflicts of interest issues
  • And as already stated, the ability of the Commission to issue Regulations and Codes.

IMF Update

The Governor has made brief reference to the IMF Report. Overall the IMF report, which was conducted at the end of 2002 was good. Its main recommendations were:

  1. to proceed as soon as possible with the Commission. So today we have met that recommendation
  2. there are a number of recommendations in respect of meeting the Basel Core principles in respect of bank supervision. As most of you know, domestic banking in Anguilla is supervised by the Eastern Caribbean Central Bank. However the regulation of any offshore banking would fall under the Commission. The two domestic banks, National Bank of Anguilla and Caribbean Commercial Bank, have been granted offshore banking licences and they are in preparations for setting up this facility. Nevertheless, in spite of the fact that Anguilla has no operating offshore banks at this specific time the IMF felt it appropriate to recommend that the existing legislation should be brought up to speed to meet all the Basel regulatory standards. On this point let me also add that the ECCB itself has a number of Basel core standards to meet, mainly in the area of assessment of risk areas affecting banks.
  3. The third area of recommendation was to commence on-site visits of service providers. Over 90 percent of service providers have now received a first onsite visit. When all visits are completed, the Commission will issue some general guidance based on our experience gained. The system of onsite visits will be fine- tuned and at some stage this year we shall recommence the process.
  4. The fourth main area of recommendation is in the area of Anti Money Laundering and Combatting the Financing of Terrorism. The IMF recognizes that Anguilla has a relatively strong legal framework for AML/CFT. The main recommendation centres on – and I quote
  5. " to improve the legislative and regulatory framework, particularly in the areas of extradition, affirmative requirements for financial institutions to file STRs and more streamlined AML Regulations and Guidance Notes.

  6. Finally the IMF recommended that the Money Laundering Reporting Authority should have a more formalized structure and this is being attended to.

Let me also mention at this juncture that the standard setter for AML/CFT issues is the Financial Action Task Force and the FATF has just revised its 40 AML recommendations and 8 Special recommendations on CFT. This will mean additional amendments during the course of the year to Anguilla’s existing AML Regulations and Guidance Notes.

I would like now to brief the industry and attendees on the financial services legislative programme for this year 2004.

Insurance Legislation

We have drafted a new Insurance Act to replace the original one drafted in 1968. It is that long ago , I’m afraid.

The new insurance act will cover both domestic insurance and offshore and in particular captive insurance. It will also cover insurance agents and insurance brokers, who will no longer be under the Ministry’s business licence system but will be regulated directly by the Commission. We shall be conducting a briefing for existing insurance agents and brokers before the legislation comes into force.

In terms of captive insurers, who will also need to be licensed, we are introducing the role of the insurance manager. The insurance manager traditionally is the consultant and manager to a captive insurance company and its role is to assist the captive in all areas of insurance administration. It follows that an insurance manager needs to have experience in managing insurance companies. We have therefore circulated information regarding a captive insurance diploma course at Caledonian University of Glasgow and we will be encouraging interested parties to take this exam.

Mutual Funds Legislation

The next important piece of legislation, that is ready is the proposed Mutual Funds Act. In case anybody is wondering, this legislation is not in competition with the existing Eastern Caribbean Securities Act because it is entirely offshore orientated. As a reminder however any securities business, whether actual or promoted, which touches the shores of any of the Organisation of Eastern Caribbean States will fall foul of the ECSE Act.

Anguilla’s Mutual Funds Act covers the following:

It will make it a requirement that all professional and private funds must be recognised. A professional fund is one where investors are deemed to be professional investors making a minimum investment of $100,000 with a single fund and where each investor elects to be treated as a professional investor. In other words he should know what he is about.

A private fund is one that limits the number of investors to 99 in a particular fund and where there is no public offering.

Public funds will be required to be registered. The definition of a public fund is simply where it is neither a professional nor a private fund.

The Act will also require managers and administrators of mutual funds to be licensed.

Now it is most likely that there are quite a number of mutual funds already being operated in or from within Anguilla through the medium of an IBC or ordinary company , which under current legislation is of course quite legitimate.

The Act will recognize that there is need for a transitional period of 3-6 months to allow for the process of registration or recognition of existing funds.

However before the Act comes into force, I think that it would be both helpful and prudent that we, as a jurisdiction, give notice of the Act to clients, so that they can prepare in advance for any application. The Commission will be advising service providers shortly on this issue.

The draft Act is based on a similar BVI model and I would like to thank the firm of Harney Westwood and Riegels for their assistance in reviewing the draft legislation.

Protected Cell Legislation

The third important piece of legislation is the proposed Protected Cell Companies Act.. The Act will provide for any company, for which the Companies Act applies to apply to operate what are called protected cell accounts. Basically one of the main reasons for PCC legislation is to allow very small entities or accounts to form say there own captive insurance facility within the framework of a protected cell company or indeed to form any type of statutory division within a company provided the business is approved by the Commission. A protected cell account is not a legal entity nor is it a separate body corporate but the Act protects the assets of an account from the liabilities of another account and from the liabilities of the company itself. A protected cell company may have as many accounts as its administration might allow.

Protected Cells is a more difficult concept to grasp and I have to admit that we do not yet have all the answers at the Commission. To understand PCCs in very simple terms one should think of a bank, which would be the protected cell company, and then one should think of a customer of that bank, which would be the protected cell account.

The PCC legislation can provide a number of benefits not only in the area of captive insurance but also for international trading and asset-owning businesses

Anguilla’s legislation is modeled very closely on the Bermuda Segregated Accounts Company legislation and I would like to thank the law firm of Conyers Dill and Pearman for their assistance in reviewing the draft legislation.

I also have to thank the stalwarts of the Government of Anguilla/ AFSA Legislative Committee and in particular the law firm of Webster Dyrud Mitchell for the hours contributed into working on and preparing all this legislation.

Captive Insurance, Mutual Funds and Protected Cell legislation will put Anguilla onto another level of financial services involvement. I would therefore strongly encourage every member of Anguilla’s financial services industry to become knowledgeable with this new legislation and to seek out application of it for potential customers. The Commission will be here to assist in this regard.

Other Legislative Initiatives

Let me mention a number of other new pieces of legislation or proposed amendments to existing legislation, which we have in store for 2004

  1. Under the Companies Act it is proposed to require all companies to have a registered agent, who is a licensed service provider
  2. Under the Limited Liability Companies Act it is proposed to allow the continuation of any foreign company, not just a foreign LLC, into an Anguillian LLC.
  3. Consideration will be given to forming a new Limited Liability Partnership Act. Jersey, Belize and the UK has such legislation. The Commission will be reviewing its application and benefits to the jurisdiction.
  4. The Trusts Act is one of the few Acts from1994 that has not undergone any amendment and it is time for smarter brains than the one speaking to you to have a look at this Act and to see what developments over the last 10 years in the practices of trusts and trust administration need to be incorporated.
  5. One main point that is pending from the 2000 KPMG Review is the recommendation that all bearer shares should be immobilized. We shall be putting forward shortly our own proposals to meet this recommendation
  6. We shall aim to commence the debate as to whether the IBC Act and The Companies Act should be amalgamated. We could refer to the new entity as an ABC (Anguilla Business Company).

I believe that if we are able to manage that all this proposed legislation be passed during 2004 for the benefit of Anguilla, the Commission will have started well and the industry will be well equipped to move the jurisdiction forward.

I am not going to talk about promotion because the Commission is a regulatory body, but let me say that the Commission is here to give advice on developmental issues. This is particularly important in a small jurisdiction. We shall be hearing from Anguilla Financial Services Association on this issue.

I am also not going to talk about the threats and initiatives to international tax havens. We are all familiar with these. Our job is to move forward, by setting the standards, ensuring that standards are adhered to and that best advice is available and is given and that Anguilla establishes a reputation for service, for which the Acorn system has already set the tone.

What Can You Expect From the New Commission ?

You can expect:

  • Integrity,
  • Fairness and a level playing field,
  • High ethical standards,
  • Access to the commission on a wide range of financial services issues,

You can expect:

  • The commission to consult with industry and industry sectors on major issues,
  • The commission to give general help and assistance on financial services matters and
  • To provide a highly focused regulatory environment and oversight.

What do we expect of practitioners and licencees ?

  • High standards of service and conduct in respect of client business,
  • Compliance with legislation and regulations and standards set,
  • Early consultation with the commission in respect of problems or concerns affecting either their own financial services business or their industry,
  • A strong afsa association in which all licencees and service providers are members.

Thank you very much for your attention this afternoon.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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