What does ‘transaction monitoring’ mean in practice ?

Under Isle of Man legislation, there is a legal requirement for an Isle of Man Corporate Service Providers like ourselves who provide registered office / registered agent services to monitor the ongoing activity (transactions) of client companies to which we provide those services. This applies even where we are not providing professional directors to the entity.

Our goal is to meet our legal requirements in this regard while making the monitoring process as painless (and efficient) as possible for both ourselves and, of course, our clients.

Subject to certain minimum requirements, we are permitted to take a risked based approach to this and since all of our clients are different we tend to tailor our requirements on a case by case basis to suit the circumstances. Obviously, holding companies with no bank accounts are simpler to deal with from a transaction monitoring perspective than (say) active trading companies.

However, by way of illustration…

A typical the monitoring regime for an ‘active’ company with non Isle of Man directors, would consist of the following…

(1) Provision of copy bank statements (Quarterly or bi-annually depending on risk profile)
(2) Provision of sales / purchase invoices (Quarterly or bi-annually depending on risk profile)
(3) Cash book with transaction analysis (Quarterly or bi-annually depending on risk profile)
(4) Provision of board minutes, members minutes, written resolutions and commercial agreements (Quarterly or bi-annually depending on risk profile)
(5) Narrative paragraph outlining any significant business developments (Quarterly or bi-annually depending on risk profile)
(6) Provision of financial statements (annually)

Most of our clients provide the required monitoring information to us as a matter of routine. (thank you). Occasionally, a gentle reminder is required – which of course is fine too.

Where regular or multiple reminders are required, we sometimes charge the client on a time spent basis for following matters up and on the rare occasions that clients don’t respond at all by providing the necessary documents, we are required to give notice of the cessation of our services and terminate our business relationship with them.

We are sometimes asked why we need to monitor transactions at all; afterall, UK corporate service providers don’t seem to follow this practice…

For those interested, our legal requirement for ongoing monitoring in the Isle of Man flows from the following local legislation…

Firstly, the 2006 Companies Act & and Foundations Act 2011 impose a statutory obligations for certain documents to be held at the office of the Registered Agent. As well as corporate documents, statutory registers and accounts, this includes financial records. See sections 78 & 80 of the Isle of Man Companies Act 2006 and Sections 41 & 42 of the Foundations Act 2011. Failure to comply is a criminal offence.

Secondly, Paragraphs 9 & 11 of The Anti Money Laundering and Countering of the Finance of Terrorism Code 2015 requires Isle of Man Financial Services licence-holders (including CSPs) to…

“perform ongoing and effective monitoring of any business relationship – including appropriate scrutiny of transactions and other activities” and also to “establish, maintain and operate the procedures” during a business relationship “which enable the examination of the background and purpose of continuing relationship.”

Failure by a licence-holder to comply with the requirements of the The Anti Money Laundering and Countering of the Finance of Terrorism Code 2015 is a criminal offence.

0 Comments

Leave a reply

Your email address will not be published. Required fields are marked *

*

©2017 Middleton Katz Chartered Secretaries LLC is licensed by the Isle of Man Financial Services Authority

Log in with your credentials

Forgot your details?