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'Financial grooming' on the rise

'Financial grooming' on the rise

Monday 22 June 2020

'Financial grooming' on the rise


A pensioner narrowly avoided losing their entire life's savings last year amid a spike in the number of cases of 'financial grooming', Jersey's financial regulator has revealed.

According to the JFSC, the problem has reached such a level that it is now focusing efforts on analysing such cases to spot and stop other potential crises before they happen.

The news came in its annual report, which was released last week.

The report shows that last year the JFSC dealt with 83 new cases.

JFSC (Credit: JFSC Facebook Page)

Pictured: The JFSC dealt with 83 new cases in 2019.

In 2019, a total of 97 cases were ‘live’ with 129 formal notices issued. The JFSC’s whistleblowing line received 26 calls, 16 of which led to investigations.

One case involved a “rogue independent financial adviser” whom the JFSC said they had managed to stop before they led a pensioner to lose their life savings.

The regulator said this was just one example of the type of financial grooming they are increasingly seeing. 

The JFSC said that engaging with victims once they have been “skilfully groomed” presents unique challenges, with the Enforcement team witnessing first-hand the emotional journey people go through when they learn they have lost their money.

“Sadly, the nature of the work we do means that we meet people who have lost some or all of their life savings,” the report notes. “These investors have typically been mis-sold high-risk investments by independent financial advisers. 

“In most instances, they are vulnerable, elderly, and alone. The majority are not financially sophisticated consumers, but ordinary people, and the impact of losing their money is life changing; both financially and emotionally.” 

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Pictured: The JFSC works closely with the Police's Joint Financial Crimes Unit (JFCU).

The JFSC has therefore started analysing cases in which an islander has been financially groomed, which includes researching victim and perpetrator profiling, and identifying red flags to spot this behaviour at its earliest stages. 

The JFSC’s intelligence function also receives confidential leads from a variety of sources, including suspicious activity reports (SARs) submitted by the Police's Joint Financial Crimes Unit (JFCU).

In 2019, the Commission processed 372 SARs from the JFCU, up from 160 in 2018.  This 233%, the regulator explained, could be the result of a “revamped triage process” that is now in place with the police.

“This reporting can only put our Supervision and Enforcement teams in a more informed position,” the report states.

“We verify the information we receive and, where appropriate, act upon it. In the most serious cases, vital intelligence has helped us to use our regulatory powers to protect some of the most vulnerable members of our community and to address significant business compliance failings that risk exposing Jersey to money laundering.” 

computer

Pictured: The JFSC has access to the Police National Compute

Since November 2019, the JFSC has access to the Police National Computer which allows them carry out background checks to identify individuals, with certain criminal convictions, and prevent them from entering or continuing to work in Jersey’s finance industry.

The system was used 120 times between November and December yielding 14 positive matches.

“Having direct access to this database will allow us to speed up our processing of principal and key person applications and conduct additional checks,” the regulator said.

“This is a real achievement for the JFSC as it demonstrates our commitment to meeting international standards and good practices such as those set by the Financial Action Task Force and the Group of International Finance Centre Supervisors.”

Last year saw the JFSC impose its first civil financial penalty - £381,000 - on a regulated business, Sanne. It followed what the JFSC described as “a serious and material contravention” of their Codes of Practice, in relation to conflicts of interest, compliance and staff training on money laundering and record keeping. 

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Pictured: IFC-based Sanne was slapped with a £381,000 fine by the JFSC last year.

Over the course of the year, they also issued four directions preventing individuals from fulfilling specific functions and directed a number of businesses to stop taking on any new business while they remediated regulatory shortcomings. 

They also released five public statements and resolved four enforcement cases through settlement agreements, which they described as a “proportionate solution” for cases in which a regulated business has acknowledged its shortcomings and made binding commitments to resolve them. 

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