If you’ve been following the news over the past week or so you’ll no doubt be aware of the latest dossier on leaked information – titled the Paradise Papers – from the International Consortium of International Journalists (ICIJ).
The competence and capability expected of holders of the compliance function has been brought into sharp focus by two final notices issued by the Financial Conduct Authority (FCA) this summer. One holder of the compliance function (the CF10), was fined £75,000 for failing to exercise due skill, care and diligence in performing his compliance oversight role. The other, a would-be compliance officer, had his application for CF10 and the money laundering reporting function (CF11) refused on the grounds of ‘competence and capability’.
Risk assessments have been a part of the EU Anti Money Laundering landscape for some time now and while 4MLD brought to the fore the need to have documented risk assessments, they are by no means a new concept.
Last year, the FCA sent a 'Dear CEO' letter about ICAAP. For those who don't know, the ICAAP is a process a firm follows to assess the risks it’s facing currently and in the foreseeable future and calculate an amount of capital it should hold as a buffer against those risks.
The letter was a warning that the exercise shouldn't be a quick totting up of sums without any real engagement in the process. It went only to IFPRU investment firms, though BIPRU firms also have to do ICAAPs. Payment and e-money institutions don't have to do an ICAAP but as those who are tackling their re-authorisation application know, PSD2 places strong emphasis on understanding and managing risks.
In six months’ time, the second Payment Services Directive (PSD2) will be implemented in the UK. And while we don’t yet have finalised implementing documents, progress is being made on what the realised directive will look like.
Is your firm prepared for 4MLD?
If not, you only have this weekend to get sorted and while we have had draft versions and a consultation JMLSG guidance in circulation for some time now, the new Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017) are were finally laid before Parliament yesterday, and will come into force on Monday, meeting the 4MLD implementation deadline of 26 June.
All you want is a straight answer. Is this enough? Can I onboard this client? Can I accept this document? Is my EID provider running a tight ship or will I get sunk? Straight-talking fscom anti money laundering expert, Mike Southgate will give the straight answers at the next MLRO Masterclass.
For years, the UK charted a lonely but pragmatic course with its interpretation that deliverable FX forwards are not investment instruments. UK payment and e-money institutions can offer such products without requiring authorisation under the Financial Services and Markets Act 2000 (FSMA) while counterparts elsewhere in the EEA had to be regulated. The implementation of MiFID II in January 2018 will, among other things, confirm the UK’s position but the new definition is a little tighter than what we are used to in the UK and payment and e-money institutions must consider whether they want to remain unregulated.