Are you thinking of incorporating a company? Registering a branch of an overseas company? Creating a trust? Do you need to engage someone to act as your director, secretary, executor or trustee? If so, you may soon need to look a bit harder for someone able to provide these services to you.
As of April 25, 2023, the transition period under the Trust and Corporate Services Providers Act (the Act) will come to an end and only (i) persons who have been licensed to provide trust services or corporate services; and (ii) persons who were providing such services prior to April 25, 2022 and have applied for a licence to provide the service prior to April 25, 2023, will be able to offer such services as a business.
For many attorneys the end of the transition period under the Act will signal a major change to their corporate and probate practices. A change that many did not realise was coming when the International Corporate Services Providers Act, passed in 2017 (limited to the international market), was amended at the end of 2021 to apply to the domestic market and was finally brought into force on April 25, 2022.
Corporate attorneys are used to assisting their clients with all their interactions with the Companies Office of Jamaica. Some even agree to act as nominee director or nominee shareholder of the company. Others may allow the client to use their business address as the registered address for the company or to keep the statutory registers for the company (especially where the client has not yet identified a physical place of business in Jamaica). All these activities now constitute corporate services and can only be provided in accordance with the Act.
Probate attorneys may also have to change the way they practice. A probate attorney typically assists the executor of the deceased's estate to locate the assets, advertise for creditors, pay beneficiaries and other related services to assist the executor or administrator to administer the estate once the grant of probate has been obtained. These activities may, however, fall within the category of "administration services in relation to the trust" where the will being administered includes a trust, as most tend to do, and require the person providing such a service as a business to be licensed to do so. Creating a trust, acting as an executor, administrator or trustee in relation to a trust are also defined by the Trust and Corporate Services Providers Act as trust services requiring a licence.
Attorneys wishing to offer, or to continue offering these services, are weighing whether the business is worth undertaking the onerous application process, the significant application and renewal fees, the requirement for professional indemnity insurance to the specified limit and subjecting themselves to the dual regulation of both the General Legal Council and the Financial Services Commission (FSC). This arises, not simply by virtue of being an attorney, but because this kind of activity already brings each attorney within the Proceeds of Crime Designated Non-Financial Institutions (DNFI) regime. A number of additional obligations and implications may also flow from being a person regulated by the FSC.
The General Legal Council, the Jamaican Bar Association and other professional bodies have sought to highlight to the minister of finance, the FSC and other government entities several concerns which the profession has with the regime. Although the FSC has issued a few clarifications which help to identify the kinds of services not intended to be captured by the Act, a major concern of the Government has been ensuring that there is no delay in the process that could result in the country being black-listed following its next evaluation by the Financial Action Task Force (FATF), now scheduled to take place near the end of June 2023.
The legal profession, however, continues to raise the following concerns for urgent attention:
1. Dual-regulation is not advisable, it results in confusion and ambiguity â€“ the guidance from FATF seems to avoid this kind of dual regulation by making clear that the services to be regulated under this type of legislation should not cover businesses that are otherwise regulated.
2. There is no distinction in the licence fee payable or other aspects of the regulatory framework (other than the professional indemnity insurance requirement) that has any regard to the size of the business that the service provider undertakes (even the provision of services to one or two clients could bring someone within the regime).
3. There is no simplified application process that pays any real regard to the fact that the applicant is already an entity within the regulated sector.
4. The Act contains errors that need to be corrected (reference is made to legislation not yet in force and not all references to remove "international" from the legislation have been picked up.)
5. Low-risk trust estates can be identified and excluded, as they have been in other jurisdictions.
6. If attorneys and other professionals opt to no longer provide these services, as many have indicated that they will do, it is the Jamaican public that will suffer, either due to the increase in fees likely to flow from the fewer service providers seeking to provide the service at increased cost or from having to navigate the trust services and corporate services without the assistance of competent attorneys.
Attorneys understand and appreciate the need for Jamaica to avoid being black-listed; however, we encourage the Government to consider postponing the end of the transition period and focus on implementing the legislative changes that are required so as to avoid unintended consequences and confusion. Pushing back the transition period would allow time to address some of these issues, with the country still being ready for the evaluation when it occurs. Otherwise, this may be a case of regulatory haste, producing unnecessary waste, to the detriment of the general public.
Hilary Reid is a Partner at Myers, Fletcher and Gordon. He may be contacted at Hilary.Reid@mfg.com.jm or through the firm's website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.
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