Supervisory Visits
Whether your firm is supervised by HMRC or FCA or both, that light you can see is not the end of the tunnel; it's a train.
Firms that offer Money Service Business (MSB) are supervised by His Majesty's Revenue and Customs (HMRC) for anti-money laundering (AML) and counter terrorist financing (CTF). This would cover bureau de change, money transfer houses and the like. If your firm offers one of these alongside other services - the chances are that for matters of financial crime, HMRC is your supervisor.
If your firm is authorised by the Financial Conduct Authority (FCA) for consumer lending, (ie pawnbroking) and doesn't offer any MSB, then you're supervised by the FCA for financial crime prevention.
With me so far?
Supervision has, generally, been quite light touch. I remember HMRC calling me as a Money Laundering Reporting Officer (MLRO) to arrange a meeting. We had a lovely chat and a cup of tea. I even shared the custard creams. All terribly civilized. Earlier this year, a client of mine in Southern England received an unannounced visit from HMRC investigators out of Glasgow. They quizzed staff, took notes and requested copies of specific paperwork both at the visit and as part of follow-up. Asked why they'd come, they replied that this was standard now.
This is to be welcomed. Focused supervision makes for a better sector, which in turn reassures customers. However, such a welcome does assume that you and your firm are doing things according the legislation, regulation and guidance. If you're not, then I imagine these visits would be excruciating and ultimately expensive and damaging.
FCA has, in the past, predominantly been focused on financial institutions. Financial crime headlines have tended to revolve around big number fines levied on household names in banking. However, in recent times more and more smaller firms have come into FCA scope. This Easter, FCA published its annual business plan. (The link takes you the relevant section, from which I quote below.)
"We will increase our use of data to better identify which firms are more susceptible to receiving the proceeds of fraud and ensure that they are doing more to stop the flow of illegitimate funds in its tracks.
Increase the volume of our proactive assessments of firms’ anti-money laundering systems and controls.
Develop further data-led analytical tools to use in our anti-money laundering supervisory work."
All sounds terribly corporate, don't you think?
The way that FCA conducts "proactive assessments" is that it engages third party experts to visit firms on behalf of FCA and report back. Now, just between us, you should know that those experts have been primed to expect work this year. Naturally, such visits will be wide-ranging, and cover off pretty much everything. Policies, procedures, compliance to the relevant handbooks, and obligations such as the new consumer duty. All very jolly.
Whether your firm is supervised by HMRC or FCA or both, that light you can see is not the end of the tunnel; it's a train.
It's not too late. Lime cuts through the codes and jargon and explains the requirements in plain English.
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