FCA UPDATES & DEVELOPMENTS

The Financial Ombudsman Service has published a consultation on a proposal to temporary change how it publishes firm-specific complaints data. This is as a result of a major increase in for the FOS’ help during the pandemic.

The organisation proposes, for a limited time, complaints with its service that are settled proactively by businesses before the FOS has issued its opinion will not count towards the business’ uphold rate.

The FOS plans to publish its next steps and implement its plan by 1 November.

The FCA has published an article setting out its expectations for remote or hybrid working for firms to continue meeting its regulatory responsibilities.
Firms considering remote working, or a hybrid environment will be evaluated by the FCA on a case-by-case basis.

The article sets out the following indicative and non-exhaustive list:

Firms should be able to prove that the lack of a centralised location or remote working does not or is unlikely to:

  • Affect the firm’s location in the UK, or its ability to meet and continue to meet the threshold conditions for the regulated activities it has or will have permission for – or any equivalent requirements, where these do not apply.
  • Prevent the FCA receiving information about a firm.
  • Reduce the accuracy of the Financial Services (FS) Register for others if, for example, consumers are not able to contact the firm at the principal place of business shown on the FS Register.
  • Affect the ability of the firm to oversee its functions including any outsourced functions.
  • Cause detriment to consumers.
  • Damage the integrity of the market.
  • Increase the risk of financial crime.
  • Reduce competition.

A firm must also prove that there is satisfactory planning:

  • That there is a plan in place, which has been reviewed before making any temporary arrangements permanent and is reviewed periodically to identify new risks.
  • There is appropriate governance and oversight by senior managers under the Senior Managers regime, and committees such as the Board, and by non-executive directors where applicable, and this governance is capable of being maintained.
  • A firm can cascade policies and procedures to reduce any potential for financial crime arising from its working arrangements.
  • An appropriate culture can be put in place and maintained in a remote working environment.
  • Control functions such as risk, compliance and internal audit can carry out their functions unaffected, such as when listening to client calls or reviewing files.
  • The nature, scale and complexity of its activities, or legislation, does not require the presence of an office location.
  • It has the systems and controls, including the necessary IT functionality, to support the above factors being in place, and these systems are robust.
  • It’s considered any data, cyber and security risks, particularly as staff may transport confidential material and laptops more frequently in a hybrid arrangement.
  • It has appropriate record keeping procedures in place.
  • It can meet and continue to meet any specific regulatory requirements, such as call recordings, order and trade surveillance, and consumers being able to access services.
  • The firm has considered the effect on staff, including wellbeing, training and diversity and inclusion matters.
  • Where any staff will be working from abroad the firm has considered the operational and legal risks.

The FCA reminds firms to notify them of any material changes to how the firm intends to operate under Principle 11. SUP 15.3 provides additional rules and guidance about what the FCA would expect notice from firms.

CCL can provide advice and help in remaining compliant from changing operations, for more information please contact us. CCL can also help you centralise your compliance framework in a decentralised business model using our bespoke compliance software, CCL CORE. For a demo of our software, please contact us.

The FCA has published the final rules regarding the Investment Firms Prudential Regime (IFPR). The rules aim to streamline and simplify prudential requirements for solo-regulated firm authorised under the Markets and Financial Instruments Directive (MiFID).

The IFPR will apply to the following firms:

  • MiFID investment firms
  • Collective Portfolio Investment firms
  • regulated and unregulated holding companies of groups that contain either of the above.

All firms must prepare for the regime which comes into force on 1 January 2022.

CCL can provide advice and help in implementing the IFPR, and also beyond the implementation date. For more information please contact us.

PRA UPDATES & DEVELOPMENTS

The PRA has published a climate change adaptation report in response to an invitation by the Department for Environment, Food & Rural Affairs. The report sets out the PRA’s response to the risks posed by climate change to its operations and policy functions in two parts:

  • Part A examines: the risks posed by climate change to PRA regulated firms; the progress they have made in their management of these risks; what the PRA’s response to these risks has been; and the PRA’s supervisory strategy from 2022.
  • Part B examines: the relationship between climate change and the banking and insurance regulatory capital regimes and the PRA’s planned future work in this space
EU REGULATORY UPDATES

The European Banking Authority has published a draft Regulatory Technical Standard (RTS) on the disclosure of investment policy by investment firms. It references article 52 of the Investment Firms Regulation setting out the requirement for firms to disclosure information on investment policy including:

  • Proportion of voting rights attached to shares held
  • Voting behaviour
  • Use of proxy advisor firms
  • Voting guidelines

The objective of the disclosure is to publicise information about the intended influence of investment firms on companies in which they hold shares. Only firms that do not meet the conditions for qualifying as a small and non-interconnected investment firm have to disclose this information.

The final draft has been submitted to the European Commission and the first disclosure date is set to be 31 December 2021.

CCL can provide advice and help on complying with the regime, for more information please contact us.

 

FINANCIAL CRIME

The UK Finance has published a paper offering a practical and risk-based definition of public officials for the purposes of anti-bribery and corruption compliance. The guidance provides a broad approach building on international legal analysis and recent case law.

It aims to provide the industry work to a consistent definition and include considerations from an anti-money laundering perspective on politically exposed persons. No guidance is provided on the latter.

HM Treasury has published a new statutory instrument ‘The Financial Services Act 2021 (Commencement No. 3) Regulations 2021’. The instrument refers to section 31 of the Financial Services Act 2021 coming into force on 1 November 2021. This refers to the increase of the maximum sentence for conviction on indictment for insider dealing offences from seven to ten years.

HM Treasury has published an advisory notice regarding high-risk jurisdictions for money laundering and terrorist financing. The notice follows statements from the Financial Action Task Force (FATF) identifying jurisdictions with strategic deficiencies in AML/CTF controls.

The notice sets out the following countries as high-risk jurisdictions:

  • DPRK
  • Iran

The notice also identifies a list of countries firms should take appropriate action to minimise their risk, which may include the use of enhanced due diligence.

CCL can provide advice and help in creating or maintaining robust AML systems and controls, for more information please contact us.

ENFORCEMENT ACTIONS

The FCA has prohibited Omar Hussein, former director and financial adviser at Consumer Wealth Ltd, from working in financial services. Mr Hussein has also been fined £116,000 for providing reckless and unsuitable pension switch advice.

The individual has been found by the FCA to have provided advice to customers on switching pension when that was often unnecessary and not in their best interest.

Mr Hussein had disregarded clear statements and risk warnings on certain products and claimed that investors were professional investors with no reasonable basis.

The firm has now ceased trading and is in liquidation. The Financial Services Compensation Scheme (FSCS) is investigating claims and have paid compensation to 437 customers of the firm.

Mr Hussein had agreed to settle and qualified for the 30% discount. Without the discount, the fine would have been £165,797.38.

The FCA has fined Credit Suisse for serious financial crime due diligence failings related to loans worth $1.3 billion arranged for the Republic of Mozambique. The loans and a bond exchange were tainted with corruption.
Credit Suisse was found to have sufficient information from which it should have been aware of the risk of bribery associated with the two Mozambique loans and a bond exchange related to government sponsored projects.
As a result of the tainted loans, the firm has undertaken to forgive US$200 million of debt owed by the Republic of Mozambique. The FCA has subsequently fined the firm over £147 million as Credit Suisse had agreed to resolve the case with the FCA.

For advice or assurance on your financial crime controls, please contact us.

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