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FCA expects more proactive compliance staff – Marketwatch

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  • 30/10/2013
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FCA expects more proactive compliance staff – Marketwatch
“Be prepared.” This is Bankhall’s warning to directly authorised firms, and their compliance staff when it comes to the Financial Conduct Authority.

As the financial services support service has noted, the regulator is placing increasing scrutiny on firms’ compliance and money laundering officers. In particular, it is trying to adjust attitudes so firms head off potential risks, rather than just mopping up after the damage is done.

So how can firms ensure their compliance team is up to scratch?

For this week’s Marketwatch, our commentators are:

Mortgage Advice Bureau chief executive Peter Brodnicki, who says the FCA will expect compliance officers to set the tone for the firm

Stonebridge Group managing director Richard Adams, who urges businesses to give compliance officers the tools they need

Legal & General Mortgage Club director Jeremy Duncombe, who recommends firms follow a checklist of systems and controls

Peter Brodnicki, chief executive, Mortgage Advice Bureau

peter-brodnickiThe FCA is really driving the degree to which the compliance officer and their team influence corporate decision making.

While it may appear to be a good choice to outsource and seek help with technical training, risk management and guidance on FCA Handbook interpretation, this will only take a firm so far. For many small or medium-sized firms the costs of doing so can be quite prohibitive.

The FCA is placing a great deal of emphasis on conduct risk and on firms having the right culture irrespective of their size. They are of the view that the compliance officer in partnership with the managing director and the rest of the board (if applicable) set the tone for the firm. They see the compliance officer as their person on the ground making sure it all happens correctly, resulting in good consumer outcomes.

The FCA will expect all approved persons and control function holders (not just the compliance officer) to be up scratch and competent to do the role assigned to them. During visits FCA will want to see evidence of good governance within firms with decisions being made for the right (i.e. good consumer outcomes) reasons.

Richard Adams, managing director, Stonebridge Group

richard-adams-stonebridgeIt is not surprising that the FCA has announced more focus on both compliance oversight officers and money laundering reporting officers. These personnel are after all working on the ‘front line’ when it comes to delivering the outcomes the FCA wants.

The issue of compliance should be at the heart of all firms. We believe a business such as ours lives and dies by the quality of our people in this area. The FCA is insisting firms focus on the skills of their staff, so they are able to review any emerging risks.

The focus now is on prevention and heading off those risks before they can even begin to surface. Staff need to be able to identify and resolve those issues quickly. The FCA also wants to ensure the firm has the systems and processes in place to stop any sort of escalation.

This is an important point. Of course you want the best compliance people working at your firm, but you also need to ensure they have the tools to succeed and access to the right data. This means having appropriate management information, maintaining the highest standards when it comes to reviewing complaints, and the ability to identify market and firm-based trends.

Jeremy Duncombe, director, Legal & General Mortgage Club

duncombe-jeremyOne of the things that can help a business owner sleep soundly at night is the knowledge he’s not going to get an unpleasant visit from the regulator. A good, well qualified but pragmatic compliance officer can make this happen.

But even if you find one of these individuals – someone who is going to smooth the flow of business rather than impede it – they themselves will need back up and support. In recent years the flow of regulatory change has been unrelenting, and just keeping up with that and all the changes to criteria and requirements that lenders have made is pretty much a full-time job. That’s not to mention planning for the Mortgage Market Review and reporting to the FCA how those plans are going.

While we operate a full regime for our appointed representative firms, we also try to help those directly authorised firms who work with us through the Mortgage Club.

We have recently prepared a systems and controls document, built upon our experience, which we believe highlights all the areas that brokers should be able to confirm they have adequate systems and controls in place to anyone who asks – regulator, lender, PI insurer, or whoever.

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