Could do better, reports the Financial Crime team of the FCA on the cohort of commercial brokers who were subject to the recent thematic review on managing bribery and corruption risks (TR14/17).
Recently, financial sanctions is the hot financial crime topic for the insurance sector, but given FCA/FSA enforcement action against commercial intermediaries for systemic failures in managing bribery and corruption risks, corruption within the insurance distribution chain still remains an area of interest for the FCA.
Of late, the FCA's patience has been tested by the banks for failures to manage - arguably the greater financial crime risk - money laundering. No year goes by without a bank facing robust enforcement action or closer supervision for anti-money laundering systemic failures. Such action is against a backdrop of multiple thematic reviews and guidance notes from the FCA on good (and bad) practices in anti-money laundering. The FCA's current level of tolerance by banks to heed direct or indirect messages on how the regulator expects firms to manage financial crime risks is at an all-time low. The FCA's default position is now to take public enforcement action for anti-financial crime systemic failures.
It would not take much for the FCA to turn its attention from banks to the insurance market. In a recent paper by the International Association of Insurance Supervisors on combating bribery and corruption, the IAIS concluded that the "insurance sector is vulnerable to bribery and corruption...."
To guard against regulatory scrutiny, applying the findings of TR14/17 to current systems is a worthwhile exercise. The nub of TR14/17 is the greater use of risk assessments, from business wide assessments to individual relationship risk assessments.
Too often the emphasis is on policies and procedures. This is putting the cart before the horse. Risk assessments are the key. Effective assessments require input from the business, not just the compliance function; assessments should be comprehensive, based on the best available information and continuous, not a one-off, but also should be proportionate given the nature and scale of the firm and the complexity of the distribution chains and the type of business.
We have not yet seen a corporate prosecution under the Bribery Act 2010, but for the regulated sector the FCA does not need the Bribery Act, nor actually to prove bribery, to bring costly, time consuming and very public enforcement action for anti-financial crime system failures.