Global Regulation, Local Solutions Emerging Themes 2020 - Page 59



FINANCIAL CRIME AND INVESTIGATIONS
EMERGING THEMES 2020
In testing whether financial crime risks are
properly managed by firms, whether from an
enforcement investigation perspective or at
a supervisory deep dive visit, the FCA adopts
a similar approach in reviewing firms’ financial
crime systems and controls. Across a range
of suspected regulatory breaches – from
market abuse surveillance controls, to antimoney laundering controls, and in conducting
supervisory visits to understand controls around
anti-bribery and corruption – the FCA’s model
tests a number of core themes, five of which are
discussed below.
FCA’s
Enforcement division
financial crime
investigations
2015
2019
4. RESOURCING
An important area of focus for the FCA is in
relation to the board’s level of understanding of
the underlying issues it is required to manage.
Where a firm can demonstrate that it has an
extensive set of documents listing controls,
unless it demonstrates that the controls work
and are implemented, the FCA is unlikely to take
much comfort from the documents.
X
Sometimes board committees managing
financial crime risks do not receive training on
how financial crime may take place. This can
lead to questioning from the FCA on how the
board can properly manage and understand
risks if they have not been properly trained on
what the relevant financial crime is.
12
5%
of total investigations
90
13%
of total investigations
X
Having a set of documented controls in place
which are not operating appropriately is more
likely to lead the regulator to conclude that
there is a resourcing problem and that the
management of financial crime risks is not
being sufficiently prioritised by the firm. The
FCA looks to see how firms monitor and check
that the control framework actually works.
FCA open
investigations
into culture
2015
0
2019
70
1. CULTURE AND GOVERNANCE
3. DEVELOPMENT OF CONTROLS
5. ASSURANCE AND REVIEWS
One key new approach is the testing of a firm’s
approach to culture and governance. We see
this focus reflected in the fact that there are
currently around 70 open investigations into
culture (compared with none just four years
ago). In testing culture and governance, the
FCA wants to understand how the board
manages financial crime risk and provides
oversight. Questioning in this area will include
a focus on the quality and categories of
management information provided to
the board.
In looking at a firm’s controls, the FCA will first
look to understand how the controls were
developed. The risk assessment documentation
will be the FCA’s starting point and the regulator
will want to understand how a firm has gone
about understanding where the risks of financial
crimes arise across its businesses. The FCA then
seeks to understand how the controls have
been developed in order to mitigate against
the risks identified.
In assessing the effective operation of controls,
the FCA looks to understand how quality
assurance takes place and whether decisions
taken by Compliance staff (for example in
relation to closing alerts) are correctly made
and sample-checked.
The FCA may look to test:
58/
CONCLUSION
2. BOARD UNDERSTANDING
X
How the management information is selected
– has the board specifically requested
categories of data in order that it can
manage risk, or is it reliant on whatever the
head of a function chooses to escalate?
X
Are there examples of how the board takes
decisions in relation to the data it is given?
X
How are decisions taken by the board
cascaded down into the business?
X
It may look fantastic to have an intricate
set of policies in place – but if they do
not properly address the risks faced by
the businesses of the firm, or if they are
academic and just say what the law is, the
FCA is likely to question whether anyone
actually understands what they mean and
whether they are properly tailored. Showing
how controls are tailored and thoughtfully
produced by reference to the risks identified
will be important to convey.
In managing financial
crime risks, the FCA’s
methodology of the
assessment of controls is
likely to continue to focus
on these core themes.
Reviewing and assessing
financial crime control
frameworks, particularly
in relation to anti-bribery
and corruption, is likely to
remain a key area of focus
for the FCA in 2020.
As the risks that firms face are constantly
evolving, the FCA will be testing to understand
the triggers for the development of new controls
and the process by which existing controls are
reviewed.
X
Where a new regulatory change is introduced,
the FCA will look to see if a gap analysis
has been conducted and how the firm goes
about deciding if new policies or procedures
need to be introduced.
ANDREW TUSON
Partner,
London
/59

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