The FCA are on their way: are you ready?
It’s a Monday morning, you’re hearing about Dave’s latest hike across the Malvern Hills, dunking a digestive into your frothy coffee and the phone rings, it’s the FCA. Your firm has been chosen for a financial crime regulatory visit in 6 weeks’ time. Are you ready?
I don’t mean this as a scare tactic and you may well answer ‘yes!’, however the timeframe, from the moment the FCA notifies you of an assessment, to when they are on site - is short. This is even more pertinent given the regulator has just stated at the PIMFA Financial Crime Conference on May 18th that they will assess firms with little or no warning if they’ve reason to believe there is a risk of harm present. As an ex-regulator and a consultant, I see time and time again firms who aren’t prepared and this needn’t be the case.
I’ve recently returned to work following maternity leave. And having spent some time catching up on what’s going on, it's clear that not a lot has changed (unlike my personal life) in terms of the FCA’s approach. I wanted to assist no doubt stretched financial crime teams by capturing some of my thoughts and insights from my many years in the FCA’s financial crime specialist supervision team and as a consultant.
Be honest with yourself and challenge others
Being proactive and not waiting to be notified of a visit will give you the time to make meaningful adjustments within a realistic timeframe. This will inevitably be less stressful for all involved, improve visit findings and help minimise the extent to which regulatory tools are deployed. This can bring with it reputational and economic benefits whilst also decreasing the level of regulatory scrutiny in the future – a win win.
Collectively and individually here are some things to ask yourselves:
To what extent can you articulate the key documents and processes which should make up a robust financial crime framework, and how these fit together? Will these make sense to someone seeing them for the first time?
How can you demonstrate senior management really understand and engage with the information which is presented to them? Is there documented evidence of this?
To what extent do you understand why any thresholds have been put in place, from those used in transaction monitoring to the risk appetite statement?
How can you show you have taken note and learnt from other firms’ mistakes and FCA communications?
It’s important that any regulatory visit or engagement is taken seriously and it’s imperative you use what time you have wisely. We can help you before and during by:
Conducting document reviews and mock walkthroughs / interviews - These will be accurate in terms of assessment points, content and tone.
Setting out what actions to prioritise to have the most impact - We can help you plan which mitigation actions to prioritise to achieve the most material uplifts within the time constraints and assisting you in this process.
Explaining how to best communicate with the regulator - This is especially important if there are known areas of weakness and / or if you are not used to dealing with the regulator.
Ensuring consistency - Alarm bells start ringing if the messaging across the three lines of defence and from senior management is inconsistent.
Advising on what the FCA findings will likely conclude - The most material FCA findings occur when firms have not self-identified weaknesses within their control framework. Even if there isn’t time to update aspects of the financial crime framework, at least you can propose a clear enhancement plan.
More broadly, we also produce regular gap analysis documents on the back of regulatory publications. These free tools help you keep on top of market activities, assessing your own vulnerabilities and enabling you to take corrective action ahead of any potential regulatory engagements.
Why us?
One of the key reasons I was drawn to Avyse was our purpose-led approach. Even in the short time I’ve been here, I’ve seen first-hand that we constantly challenge ourselves to ensure we are offering quality reviews and tailored uplifts which are proportionate and clearly explain what enhancements have been made and importantly, why. The corporate culture is genuinely one of supporting clients for the long term and that’s good for you, as well as us.
Please get in touch, whether or not you have been contacted by the regulator - we’re a friendly team with buckets of experience and whatever stage you’re at, we can help.
More blogs from me to come over the next couple of weeks:
Now I’ve got stuck into a few different projects, I’ll be discussing some common weaknesses. This will include recent case studies to bring them to life. I’ll also be looking forward and will set out what I believe the FCA will likely focus on given their latest priorities and wider industry developments.
Holly
