Guernsey Consultation Signals End of 'No Consent' SAR Regime

Guernsey has launched a consultation that could force reform of its money laundering consent regime, one month after the States' Committee for Home Affairs circulated the paper "Consent Defence Against Money Laundering" to the financial services sector. The consultation closes on 17 December 2026, and many in the industry consider the review long overdue.

Practitioners have struggled for years with funds and investments left in limbo. The cause: increasingly cryptic and unhelpful responses from Guernsey's Financial Intelligence Unit (FIU) to consent requests.

How does the current regime work?

The threshold for suspicion is very low. Once a Money Laundering Reporting Officer files a suspicious activity report (SAR) with the FIU, dealing with suspected proceeds of crime may constitute a money laundering offence unless the FIU grants consent.

That leaves businesses exposed to criminal liability. Unlike the UK, Guernsey has no deemed consent mechanism if the FIU fails to act. Consent can simply be withheld without further action. Assets can sit effectively "frozen" indefinitely, and financial institutions act as de facto law enforcement agencies.

Historically the FIU took a pragmatic approach, granting consent for business fees and transactions necessary to maintain assets. That changed after 2011 Court of Appeal comments described consent as granted in the "interests of law enforcement". The result was the so-called "consent declined" response: where no law enforcement interest exists, businesses are told to take a risk-based approach, effectively assessing their own risk of committing a criminal offence.

Guernsey's Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 (POCL) was modelled on the UK's Criminal Justice Act 1988, not the later Proceeds of Crime Act 2002, so it never adopted deemed consent. No cogent reason for the failure to modernise has been given, despite later amendments.

The takeaway: the current regime leaves firms, not the state, carrying the criminal risk of frozen assets.

What triggered the consultation?

The trigger is external. The Financial Action Task Force revised its Recommendations late last year, requiring that withheld consent or suspension be subject to a specified maximum duration. Guernsey currently does not comply.

FATF's November 2025 guidance provides context. It states suspensions should last long enough for authorities to investigate, but as short as possible to minimise the impact on legitimate customers. Crucially, suspension is an interim measure and "should not be used indefinitely, or as a final measure".

The guidance also clarifies that determining whether property is criminal should rest with the authorities, not the private sector, in direct contrast with Guernsey's current approach. Despite this, the Consultation Paper shows the authorities would prefer to retain the existing regime.

The takeaway: FATF has done what years of industry lobbying could not, putting a hard compliance deadline under the issue.

What options are on the table?

The Consultation Paper offers four options:

1. Maintaining the status quo.
2. Adopting a deemed consent approach, in whole or part.
3. Abolishing the consent defence, in whole or part.
4. Replacing the consent defence with new legislative measures.

Options 1 and 3 are realistically non-starters. Neither provides a maximum duration for a suspension following a SAR, as the revised FATF Recommendations require.

Option 3 is particularly concerning. The authorities suggest abolishing the defence would clarify that businesses, not authorities, should determine whether a transaction exposes them to criminal liability. The Consultation Paper itself acknowledges the authorities' difficulties obtaining information from foreign law enforcement, information even less accessible to a private business.

Option 2, deemed consent, is realistically the only viable option. The UK regime has operated for more than 23 years without major complaint and complies with the revised Recommendations. The Cayman Islands, another offshore centre where SARs typically involve foreign criminality, adopted the UK model in January last year with no major issues raised.

The Paper argues Guernsey SARs more commonly involve foreign criminality, making investigations slower and harder, but provides no meaningful statistics. Guernsey's Economic and Financial Crime Bureau, set up a few years ago at considerable cost, has a strategic objective to assist the FIU and promotes its foreign law enforcement links. Guernsey could also adjust time limits rather than copy the UK model exactly.

Option 4 would replace the consent defence with two mechanisms: a statutory defence where law enforcement confirms an activity serves a law enforcement purpose, and an administrative freezing power allowing the FIU to suspend transactions while investigating, subject to a time limit. But a SAR would still be required, and dealing with suspected criminal property could still be an offence. Where no law enforcement purpose exists and the FIU declines to suspend, businesses are back where they started.

The takeaway: only deemed consent actually solves the problem FATF identified.

What happens next?

Appleby, whose partner Simon Florance authored the analysis, will submit a response before the 17 December 2026 deadline. Home Affairs will then determine its preferred approach and prepare a policy letter for the States, likely seeking amendments to POCL.

The process will take time. But change is inevitable if Guernsey is to comply with the revised FATF Recommendations. What that change will look like remains the big question for practitioners advising on frozen assets today.