How Grovelands helps our clients in the fight against Financial Crime  

At Grovelands we understand the many areas that the FCA are currently focusing on, and its seven priority themes for 2016/17. We are helping a number of clients in these important areas, particularly with implementing appropriate safeguards to prevent financial crime. This involves us providing SMEs and teams to deliver the onboarding, due diligence, and on-going review of clients’ files and systems so that correct outcomes are consistently delivered and maintained.

Recently we have managed to assist in the Wealth Management space, providing an expert team to hit the ground running for a holistic suitability review in the City.

Our clients need to act now on AML compliance

David Cameron’s Anti-Corruption Summit took place on 12 May 2016. The media focus and political scrutiny in this area is extreme; heightened by the leak of the Panama Papers, and the first UK National Risk Assessment being published last year, which confirmed that the City is highly unveiled to the risk of money laundering. The report concludes that the size and complexity of the UK’s financial sector is such that it is more exposed to criminality than in many other jurisdictions.

Unsurprisingly, one of the top priorities for the Financial Conduct Authority (FCA), as set out in their Business Plan 2016-17, will be dealing with financial crime and ensuring anti-money laundering (AML) compliance. It recognises that the UK financial system is a major global hub that attracts investment and activity from across the world, so they  intend to focus efforts on ensuring that our financial system has appropriate safeguards to prevent financial crime. It endeavours to do this in a proportionate way to ensure that the regime put in place operates efficiently, and that any unintended consequences of regulation are minimised.

What does the FCA hope to achieve this year?

The FCA wants the UK financial system to be a hostile sector for money launderers, and will use intelligence effectively to take early action that prevents money laundering. It hopes to secure, in the medium to long term, an improvement in firms’ AML controls, as well as an improvement in the perception of the UK’s AML regime from international assessors and overseas authorities.

How will the FCA do this?

  1. The FCA will continue to exercise due diligence on firms and individuals applying for authorisation, and continue proactive supervisory assessments of firms whose business models present a higher inherent risk of money laundering. The Senior Managers and Certification Regime that came into force this year specifically designates a Senior Manager function (SMF 17) responsible for Money Laundering Reporting.
  2. Proactive supervisory assessments of firms whose business models present a higher inherent risk of money laundering will be undertaken, and the ‘Financial Crime Annual Data Return’ will be rolled out. By asking firms to submit an annual data return the FCA will systematically gather statistics from firms about their financial crime risks. Examples of questions to be asked include: “Which countries do you operate in that you assess to be high-risk?” and, “What do you think are the types of fraud which are falling or rising in incidence? The aim being to enable the FCA to focus supervision on the right firms and deploy its resources effectively.
  3. Given the enforcement action taken against Barclays in November 2015, who were given a £72m fine for failing to minimise the risk that it may be used to facilitate financial crime, we can expect a similar stance this year. Similarly, Standard Bank PLC was fined £7.m in 2014 for failings relating to AML policies, and procedures for corporate customers connected to politically exposed persons.
  4. It will encourage whistleblowing intelligence from the industry, either directly to firms or covered by new rules on whistleblowing. With the ambition to change banking culture and ensure good governance, firms have had to nominate a Senior Manager to act as their Whistleblowing Champion.
  5. Membership of the Joint Fraud Taskforce will be maintained, bringing together law enforcement agencies, firms and regulators to better identify and respond to fraud.

The FCA is committed to reviewing and improving its AML supervisory approach so that it concurs with the latest international standards. They’re looking to work with the Treasury in implementing the 4th Money Laundering Directive by next June, and in preparing the Financial Action Task Force (FATF) national report in 2017.

The focus on financial crime and AML means that Financial Services institutions and individuals will increasingly come under scrutiny, with the risk of criminal or regulatory enforcement action against weak systems and controls and against individuals who do not comply with the procedures. This will result in significant fines and a risk that individuals will no longer be regarded as fit and proper to work in the financial sector.

If you’d like more information on how we can help you comply with any FCA regulations regarding Financial Crime, please contact Mark Newey on 01273 651 619.

 

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