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Compliance Audits - What’s the Point?

[fa icon="calendar"] 05-May-2017 14:50:00 / by Nick Patterson

Financial Services Audit London

Today’s consumer generally has a choice of banking providers. They get to call the shots while banks tow the line and play nicely for the good consumers.

Not so for payment or e-money institutions.

If you’re fortunate enough to still retain banking facilities as a payment or e-money institution, keeping your bank happy is now, more than ever, an essential requirement within the UK remittance industry.

Banks in this sector have an ever-increasing threshold of requirements for clients to retain banking facilities or, as a new client, enter the UK banking system. Enter the compliance audit. External and independent, it was formally introduced as a requirement during the summer of 2013 by a leading UK bank.

This article provides readers with a simple snapshot of compliance audits - free from industry jargon - to help readers better understnad their importance and the benefits they bring.

What is a compliance audit?

It is a snapshot review of your business to ensure all systems, procedures and controls exist, are effective and meet or exceed what you should be doing, as per your obligations as a payment or e-money institution based in the UK.

This independent and external review provides stakeholders with key information of the issues that could affect the business, its clients and ultimately its banking partner(s).

Viewed in the right light, it’s an invaluable process, providing your business with a competitive advantage.  It should notbe viewed as an avoidable cost, with a focus only on the firm’s failings.

Why do we need a compliance audit?

In a nutshell - to keep the banks happy.

While it’s not a regulatory requirement, if your current or prospective bank insists you have one, then your banking relationship is only going to blossom by meeting, and preferably exceeding, the ongoing account requirements.

It also promotes a culture of good compliance. Firms keen to identify ‘issues’ within systems, procedures, controls and personnel are able to promptly remediate problems, and reduce the risk of exposure to money laundering (ML) or terrorist financing (TF). This avoids things like a possible public censure by the regulator, a fine or, worse still, removal of the firm’s authorised status for significant and repeat failings.

What are the benefits of a compliance audit?

Keeping your bank content is fundamental for retention or acquisition of bank accounts. Engaging a reputable firm to conduct an annual compliance audit is now viewed by many banks in the sector to be a ‘normal’ ongoing annual cost of business.

Like a moth to a flame, firms with a good reputation for a compliance culture can attract a better calibre of employees, especially to senior roles within a firm. A compliance audit is indicative that the firm is going above and beyond its regulatory requirements to improve the business processes.

How do you meet requirements?

fscom’s compliance audits check your regulatory obligations against what you are doing in practice. Firms that embrace the compliance audit process benefit from an onsite assessment, identification of issues and provision of remedial options. Why? Because a firm that has fewer ‘issues’, a good client book and decent payment volumes is a more attractive business proposition for future external investment or for a possible buyout. This is when being a stickler for rules and an ambition to constantly improve really pays off.

Choosing a compliance audit firm

The external compliance audit process is here to stay. Moreover, the breadth of scope and significance placed on the audit findings has evolved over the years since 2013. However, as it’s not currently a regulatory requirement, and different consultancies have different auditing methods and experience, make sure the reputation of the compliance audit firm is a primary factor in your decision to engage.

Contact us for a compliance audit

Topics: AML Audit