A look at the failures and possible solutions for Financial Service firms

In the highly regulated world of financial services, compliance is paramount. Non-compliance not only undermines the integrity of financial markets but also carries substantial penalties. The Financial Conduct Authority (FCA) has demonstrated a rigorous stance on ensuring firms adhere to regulations, as evidenced by the following case studies. Each case underscores critical lapses in compliance that led to significant fines and sanctions. By examining these instances, we can identify common pitfalls and explore strategies for preventing such breaches in the future.

The following three case studies – Santander UK Plc, James William Edward Lewis, and Floris Jakobus Huisamen highlight a severe lack of compliance resulting in penalties enforced by the FCA either the firm or and individual. These cases illustrate the necessity of robust anti-money laundering (AML) controls, accurate SM&CR reporting and honest financial promotions.

Continue reading as we delve into the themes and discuss potential preventative methods leveraging compliance monitoring tools for firms and individuals conducting Financial Services Activities.

Santander UK Plc:

Date: 8 December 2022

Penalty: £107,793,300

Reason: Santander UK failed in its AML controls. The FCA identified that Santander UK had significant issues with its AML framework. This included failing to properly establish the identity of the bank’s customers and the nature of their businesses, as well as failing to monitor transactions effectively.

Regulatory Reference: The penalty was imposed under section 206 of the Financial Services and Markets Act 2000 (FSMA).

Key Issues: The FCA highlighted the importance of banks having robust AML frameworks to prevent money laundering, which undermines the integrity of the UK financial system. The failures included inadequate customer due diligence and transaction monitoring.

Source: Final Notice to Santander UK Plc

The Solution: The consistent use of compliance monitoring systems provides the opportunity to address all the issues identified in the case study above. Establishing effective AML frameworks can be done through consistent monitoring, training and scheduled attestations. This is a function whereby a firm can set an ongoing task for relevant individuals or groups to record data as well as attest they are following up to date training and procedures. Additionally, a prompt function allows for customers to be efficiently contacted for due diligence with preset questionnaires that can be answered and automatically recorded.

In this case, the bank needed more than just a system in place. A system to monitor effectiveness of controls as well as ensuring ongoing training of staff on AML policies, internal procedures, and the bank’s systems and controls would have created the capacity to meet their ongoing due diligence requirements.

Floris Jakobus Huisamen

Date: 13 February 2024

Penalty: Financial penalty of £31,800. Order prohibiting Mr Huisamen from performing any function in relation to any regulated activities carried on by any authorised or exempt person or exempt professional firm.

Reason: Mr Huisamen was appointed as a Director of London Capital & Finance plc (LCF) on 1 July 2016 with the remit for Risk and Compliance. On 11 October 2023 the authority gave LCF a final notice for failing to ensure its financial promotions were fair, clear and not misleading over the period 7 June 2016 to 10 December 2018. As a director Mr Huisamen played a key role in the sign off process for confirming that LCF financial promotions complied with the financial promotion rules, including the fair, clear and not misleading rule.

Regulatory Reference: Penalties imposed under section 66 & 56 of the FSMA respectively.

Key Issues: During the relevant period, LCF failed to ensure that its financial promotions were fair, clear and not misleading, thereby breaching COBS 4.2.1(1)R.

Source: Final Notice to Floris Jakobus Huisamen

The Solution: A robust compliance management platform with a specific Financial Promotions checklist can offer the capacity to ensure compliant financial promotions. In the case study above, Mr Huisamen was held responsible as a result of being the key sign-off on non-compliant financial promotions. This could have been avoided with a system in place guiding the financial promotion through a checklist of compliance requirements, and ensuring approvals captured are ready for audit. In summary, a system with a robust checklist will help identify potential breaches in a financial promotion before approval.

ADM Investor Services International Limited

Date: 29 September 2023

Penalty: £6,470,600

Reason: Failure to improve upon identified weaknesses in AML systems and controls in relation to the CFD business, client “on-boarding” and compliance monitoring.

Regulatory Reference: Penalty imposed under section 206 of the Financial Services and Markets Act 2000

Key Issues: Following the 2014 Assessment, the FCA notified ADMISI that it identified weaknesses which required improvement in its risk management framework, compliance monitoring, and client risk assessment. This had not seen significant improvement by the next review in 2016.

Source: Final Notice to ADMISI

The Solution: Conducting a detailed ongoing risk assessment is an important element within compliance monitoring plans. Compliance monitoring systems should help track effectiveness of controls and provide senior management updates with necessary information to address risks in a timely manner. Continuously tracking and monitoring residual risk all contribute positively to demonstrating effective risk management.

Similar to the bank case study, more than a system in place is needed to be compliant with AML requirements. In this instance, seeking external support from a governance, risk, and compliance firm with a robust risk management tool could have aided the firm to identify risks. Additionally, an internal audit of their framework and support to train staff on AML policies could have helped the firm implement an effective plan to manage their AML risk framework.

These cases highlight the FCA’s focus on ensuring that firms implement and maintain robust systems and controls to prevent financial crime and market abuse. The FCA’s stringent regulatory oversight aims to protect the integrity of the financial system and uphold high standards across the industry. When firms fail to meet these standards, the penalties can be substantial, as demonstrated by the significant fines and sanctions in these case studies.

ComplyPortal understands the critical importance of rigorous and continuous compliance monitoring and reporting. We recognise that adhering to regulatory requirements is not just about avoiding penalties but also about maintaining trust and credibility in the market. Our tried and tested solution is designed to help firms meet the complex requirements set by regulators. By providing comprehensive tools for compliance monitoring, reporting and audit trails,

ComplyPortal enables firms to demonstrate their adherence to regulatory standards effectively. Our platform ensures that firms can stay ahead of regulatory changes, mitigate risks, and maintain a strong compliance posture in an ever-evolving financial landscape.

To find out how ComplyPortal can solidify your compliance Book a demo.

To out more about how the ComplyPortal platform can help firms adapt to new regulatory expectations at: https://complyportal.uk/modules/

About ComplyPortal:

First developed in 2011 by compliance professionals for compliance officers, ComplyPortal offers workflow, automation, and several modules to help firms with control and regulatory compliance monitoring. 

ComplyPortal simplifies financial services regulatory compliance management on an easy-to-use cloud-based comprehensive compliance platform. It enables compliance officers, risk officers and senior management to keep track of their firm’s regulatory responsibilities and workflows. Our platform includes the following modules, among others: 

• Monitoring: a year-round schedule pre-populated with monitoring questionnaires to ease compliance processes.
• Approvals: authorise request and keep track of workflows
• Registers: lists controlled by the Compliance officer, but easy for staff to view.
• Risk: map and control risk areas to effectively identify and manage risk for your firm.
• Training: access our LMS platform for all Compliance and Governance Training

“Supervisors and regulatory bodies are adapting to the challenges of modern regulation, and ComplyPortal’s Director, Luis Parra, shares his advice for how regulated firms can adapt and keep up with these changes.”

By now, ‘fintech’ and ‘regtech’ have become familiar terms within and even beyond the world of financial services—but how familiar are you with ‘Suptech’? Short for ‘Supervisory technology’, suptech is a term that covers the use of technology to support and assist regulatory agencies in their supervisory function. Just as regtech and fintech solutions help businesses and consumers optimise tasks and workflows, suptech works in a similar way to make supervision more efficient and effective—and regulated entities must adapt in order to keep up.

Be it access to or management of data, automation, data analysis, or simply the speed that comes with digitising previously manual operations, suptech is creating new standards of supervision and regulation. Using technology allows supervisors to monitor and review the actions of regulated entities in greater detail and at a faster pace. Suptech applications can sift through thousands of regulatory filings and identify potential supervisory issues, whereas it is impossible for supervisors to review each one closely. This enriched capability and insight means firms will be under the microscope like never before, and without equivalent digital solutions of their own, there is a chance they could be caught on the back foot.

With regulators increasingly turning to data- and technology-driven supervision, firms must adapt at pace in order to avoid falling behind on compliance demands. Fortunately, it is easier than ever for firms to find the right regtech solution for their needs. There are a plethora of options available on the market; the key is choosing a solution which can be tailored to your firm’s needs and is supported by compliance experts for the most up-to-date information.

While this level of change in regulation and compliance might be alarming, it should also be viewed as an opportunity. January is often a time spent reflecting and acting on new ways of operating, either personally or professionally. What better time to review your internal compliance processes and assess if they are ready for the challenges of a new year and a more digital age of compliance and regulation?

Discover how ComplyPortal can help you adapt to new and future challenges at: https://complyportal.uk/modules

Find Luis’s previous blog post here: Practical Tips for Implementing Compliance Software

About ComplyPortal:

First developed in 2011 by compliance professionals for compliance officers, ComplyPortal offers workflow, automation, and several modules to help firms with control and regulatory compliance monitoring.

ComplyPortal simplifies financial services regulatory compliance management on an easy-to-use cloud-based comprehensive compliance platform. It enables compliance officers, risk officers and senior management to keep track of their firm’s regulatory responsibilities and workflows. Our platform includes the following modules, among others:

• Monitoring: a year-round schedule pre-populated with monitoring questionnaires to ease compliance processes.
• Registers: lists controlled by the Compliance officer, but easy for staff to view.
• Risk: map and control risk areas to effectively identify and manage risk for your firm.
• eKYC solution: perform comprehensive searches, including client identity verification, document authenticity, and more for a comprehensive KYC and AML approach

CLICK HERE TO GET STARTED!

A new update from the FCA reminds firms that remote and hybrid working practices are still subject to risk.

The Financial Services industry encompasses a variety of businesses, and so too do these companies employ a variety of working practices. Many companies shifted from office to work-from-home based approaches as a pandemic protection measure. This has led many companies to realise that, outside of a crisis, there can be many benefits to allowing employees to continue to work partly or entirely remotely.

However, while many companies are embracing the new ‘work-anywhere’ age, a disparate workforce may have an impact on your firm’s compliance abilities. This has been underscored by a recent update from the UK’s Financial Conduct Authority (FCA), which has made headlines for stating that its power to make visits to locations of work or business includes residential addresses.

As regulated firms and the regulator itself have a duty to protect consumers, competition, and market integrity, and to prevent financial crime, the FCA reminds firms that: “any form of remote or hybrid working adopted should not risk or compromise the firm’s ability to follow all rules, regulatory standards and obligations, or lead to a failure to meet them.” Not only do Compliance Officers have the challenge of managing regular compliance control functions and internal audits—and perhaps even fellow compliance staff—across multiple environments, but they must also ensure that the conducting of regulated activities across multiple environments does not create additional risks.

So how can compliance officers achieve this?

Practically speaking, the rise of regtech usage to manage compliance and execute work can also help ensure that compliance is maintained across remote and hybrid work environments. For example, using one centralised digital platform to conduct activities such as managing enterprise risk or regular compliance monitoring ensures that compliance can be maintained regardless of where employees are working from. Additionally, software which provides a secure digital location for activities such as remote attestations or document-sharing can assist with both remote oversight and workflow management and with providing clear audit trails for the regulator.

The regulator is also looking for compliance with the SM&CR scheme. Having an appointed Senior Manager with oversight over compliance activities, wherever they are conducted, helps with improving culture, governance, and accountability within your firm. Senior Managers in financial services firms—and indeed managers of various kinds in industries where staff can work remotely—often benefit from using dedicated digital tools to help maintain oversight and assign tasks.

Being a Compliance Officer or Senior Manager in the current ‘new normal’ of work is not without its challenges, from keeping up with industry developments and regulatory expectations to overseeing an ever-evolving workforce. Taking advantage of the security and connection offered by regtech and compliance management platforms is a simple yet highly effective step that can help firms stay on top of their many risk and compliance demands.

Find out more about how the ComplyPortal platform can help remote-and hybrid-working Compliance professionals at: https://complyportal.uk/modules

About ComplyPortal:

First developed in 2011 by compliance professionals for compliance officers, ComplyPortal offers workflow, automation, and several modules to help firms with control and regulatory compliance monitoring.

ComplyPortal simplifies financial services regulatory compliance management on an easy-to-use cloud-based comprehensive compliance platform. It enables compliance officers, risk officers and senior management to keep track of their firm’s regulatory responsibilities and workflows. Our platform includes the following modules, among others:

• Monitoring: a year-round schedule pre-populated with monitoring questionnaires to ease compliance processes.
• Registers: lists controlled by the Compliance officer, but easy for staff to view.
• Risk: map and control risk areas to effectively identify and manage risk for your firm.
• eKYC solution: perform comprehensive searches, including client identity verification, document authenticity, and more for a comprehensive KYC and AML approach

CLICK HERE TO GET STARTED!

Find out more about how our Monitoring module can make your compliance management much easier

Compliance monitoring is necessary, but does it have to be done manually? Here at ComplyPortal, we don’t think so. We know that digitising compliance helps to remove elements of human error while ensuring that your important – but potentially repetitive and time-consuming – compliance tasks are completed. This frees compliance officers and teams to use their all-important human skills and expertise to tackle more complex compliance tasks.

Read on to find out how our Monitoring module can help you.

Who is it for: regulated firms monitoring Governance, Risk, and Compliance

Key features:

• Monitoring questionnaires for the whole year
• Records of completed monitoring activities
• Reminders of monitoring tasks that are due or upcoming
• Full reporting and audit trail
• Assignable tasks to group or individuals
• Configurable to meet firms bespoke requirements

How it benefits you:

All your past, present, and future compliance monitoring activities can be housed in one place using our Monitoring module – making it much easier to keep track of and manage compliance tasks. ComplyPortal makes life easier for those using the system. You can even monitor compliance remotely from your home office, supporting work from home needs and keeping entire team on the same page. ComplyPortal can be used to stay on track on mobile and tablet devices as well as PCs.

Find out more about our Monitoring module and the rest of the ComplyPortal platform at: https://complyportal.uk/modules

About ComplyPortal – Compliance software since 2011:

First developed in 2011 by compliance professionals for compliance officers, ComplyPortal offers workflow, automation, and several modules to help firms with control and regulatory compliance monitoring.

ComplyPortal simplifies financial services regulatory compliance management on an easy-to-use cloud-based comprehensive compliance platform. It enables compliance officers, risk officers and senior management to keep track of their firm’s regulatory responsibilities and workflows. Our platform includes the following modules, among others:

• Monitoring: a year-round schedule pre-populated with monitoring questionnaires to ease compliance processes.
• Registers: lists controlled by the Compliance officer, but easy for staff to view.
• Risk: map and control risk areas to effectively identify and manage risk for your firm.
• eKYC system: perform comprehensive searches, including client identity verification, document authenticity, and more for a comprehensive KYC and AML approach

2020 was an unprecedented year. It catapulted the use of technology and required individuals to adapt to a very different way of working. Of course this was true for all, but especially true for Compliance Officers who needed to adapt ways of working against an unprecedented level of new rules and regulations.

For that reason, automated approaches to risk and compliance saw a rise this year. Automation is the key here, and incorporating advanced rules enhanced by machine learning is becoming a must.

Automation can help firms with resource-intensive tasks such as risk management, identity management, compliance checks, transaction monitoring and regulatory reporting.

We talk to companies all day, everyday about how software can streamline business processes, automate routine tasks, generate arduous reports in seconds and most importantly… improve overall organizational efficiency.

As we navigate the aftermath of a bumper year of expected and unexpected challenges, compliance officers continue to play a crucial role in maintaining organisational stability. With a few months of 2021 under our belts – covering everything from early post-Brexit life to a new US administration and Covid vaccination roll-outs – firms are looking to both learn from the past year and prepare for any future changes.

The following are core issues compliance officers will have to address – some in new and unprecedented ways – in 2021.

Business Continuity

The Covid-19 crisis has demonstrated that, if required, firms can adapt at pace to unprecedented crises and demands. Firms have also been tested by down-to-the-wire Brexit talks which generated much uncertainty about potential future outcomes for business and trade. All of this has reinforced how crucial business continuity plans are. While compliance officers cannot predict the future, they must work with their organisations and with financial regulators, stress testing and scenario planning to prepare for multiple eventualities.

Regulatory Change

Regulatory change is commonplace in financial services and – despite the upheavals of the past year – this is unlikely to slow down any time soon. With national and international policy changes, a continually evolving global pandemic, and ongoing industry developments like the rise of amateur and meme investors, there is much for regulators to respond to. As such, compliance and risk officers have multiple avenues to keep an eye on.

Compliance Optimisation

Considering the myriad challenges facing compliance officers, investing appropriately into skills development and digital resources is more important than ever. Reuters’s 2020 Cost of Compliance report identified the following as the top three skills needed by an ideal compliance officer:

1. 1. Subject matter expertise
   2. Communication skills
   3. Integrity

Staying ahead of the curve is a business necessity. Investment in continuous professional development (CPD) for compliance officers and their teams is also crucial so they have the right skills to meet new and existing challenges.

Digital investment is an additional means to help compliance teams juggle the multiple demands placed upon them. Regulatory technology (RegTech) is being increasingly relied upon by compliance professionals to efficiently address their roles and responsibilities, be it managing workflows for remote or hybrid teams to demonstrating compliance to regulators. Solutions such as ComplyPortal, which was developed by compliance officers with compliance officers in mind, give teams the freedom to work anywhere with agility, efficiency, accuracy, and access to comprehensive support in order to juggle the competing demands that modern compliance brings.

About ComplyPortal – Compliance software since 2011:

First developed in 2011 by compliance professionals for compliance officers, ComplyPortal offers workflow, automation, and several modules to help firms with control and regulatory compliance monitoring.

ComplyPortal simplifies financial services regulatory compliance management on an easy-to-use cloud-based comprehensive compliance platform. It enables compliance officers, risk officers and senior management to keep track of their firm’s regulatory responsibilities and workflows. Our platform includes the following modules, among others:

• Monitoring: a year-round schedule pre-populated with monitoring questionnaires to ease compliance processes.
• Registers: lists controlled by the Compliance officer, but easy for staff to view.
• Risk: map and control risk areas to effectively identify and manage risk for your firm.
• eKYC system: perform comprehensive searches, including client identity verification, document authenticity, and more for a comprehensive KYC and AML approach

CLICK HERE TO GET STARTED!