Guernsey money laundering fines 'must rise'

Finance companies are concentrated in the island's capital of St Peter Port

Guernsey needs to increase the penalties for money laundering and terrorism financing, experts at the Council of Europe have urged.

Europe's oldest political body said the maximum fine of £200,000 was not "dissuasive and proportionate" to the size of Guernsey's finance sector.

A States statement said it showed "major progress" compared to the 2010 International Monetary Fund assessment.

A spokesman said the recommendations for improvement were welcomed.

The Moneyval report said while there had been an "undeniable increase" in the number of investigations, prosecutions and convictions for money laundering in the last four years the figures remained "disproportionately low".

However, it said the sector's legal framework complied with international standards.

Guernsey's finance sector

• The largest single contributor to GDP of the Bailiwick

• While deposits taken by the banking sector have almost halved since its highest peak of £157bn in 2008, the funds under management and administration by the collective investment fund sector have more than doubled during the same period and stood at £220bn at the end of 2014

• Guernsey is globally one of the largest fund domiciles (especially private equity)

• Another significant amount of assets is managed and administered by the fiduciary sector

• Guernsey is also the fourth largest captive insurance domicile in the world with premium written in excess of £4.8bn

In the 49 areas of the industry the council looked at all but one was found to be compliant or largely compliant.

Financial penalties were found to be only partially compliant as they were not an "effective deterrent to non-compliance" and failures to report suspicious transactions were "rarely fined or in any other way sanctioned".

The report concluded: "Overall... Guernsey has a mature legal and regulatory system, which has been enhanced by the introduction of modern legislation covering all important aspects of the finance industry."

Chief Minister Jonathan Le Tocq said: "As a jurisdiction with a global finance sector, we need to demonstrate that we continue to meet in practice the highest international standards of law enforcement and regulation - and we have done so."

William Mason, director general of the Guernsey Financial Services Commission said: "We emerge from the inspection stronger with there being much more understanding of the Bailiwick in continental Europe."