Financial Services, Sectors - Written by on Thursday, December 19, 2013 5:27 - 0 Comments

BREAKING: Merry Christmas: Financial Conduct Authority fines insurance broker £1.8 million for anti-bribery systems failings

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UnknownIn a press release this morning the Financial Conduct Authority published details of its enforcement action against a London based insurance broker.

The action underscores, again if it were necessary the importance attached by the Financial Conduct Authority to financial crime systems and controls for authorised firms and their resolve to sanction firms for perceived failings.

The FCA press release said:

“The Financial Conduct Authority (FCA) has fined JLT Specialty Limited (JLTSL) over £1.8million for failing to have in place appropriate checks and controls to guard against the risk of bribery or corruption when making payments to overseas third parties.

JLTSL, which provides insurance broking and risk management services, was found to have failed to conduct proper due diligence before entering into a relationship with partners in other countries who helped JLTSL secure new business, known as overseas introducers. JLTSL also did not adequately assess the potential risk of new insurance business secured through its existing overseas introducers.

Tracey McDermott, the FCA’s director of enforcement and financial crime said:

“These failings are unacceptable given JLTSL actually had the checks in place to manage risk, but didn’t use them effectively, despite being warned by the FCA that they needed to up their game.  Businesses can be profitable but firms must ensure that they take the necessary steps to control the risks in that business.

“Bribery and corruption from overseas payments is an issue we expect all firms to do everything they can to tackle. Firms cannot be complacent about their controls – when we take enforcement action we expect the industry to sit up and take notice.”

JLTSL’s failure to manage the risks created by overseas payments, which occurred between 19th February 2009 and 9th May 2012, breached the FCA’s principle on management and control.

During this period, JLTSL received almost £20.7 million in gross commission from business provided by overseas introducers, and paid them over £11.7 million in return.

Inadequate systems around these payments created an unacceptable risk that overseas introducers could use the payments made by JLTSL for corrupt purposes, including paying bribes to people connected with the insured clients and/or public officials.

At the FCA’s request, JLTSL also varied its permissions until such time as the FCA was satisfied that JLTSL could adequately mitigate the risk of making payments to overseas third parties.

JLTSL’s penalty was increased because of its failure to respond adequately either to the numerous warnings the FCA had given to the industry generally or to JLTSL specifically.  The fine of £1,876,000 follows JLTSL’s agreement to settle at an early stage of the investigation. As a result, it qualifies for a 30% reduction on the original penalty of £2,684,013.” [our emphasis]

In a press release put out by the broker they said:

JLT Specialty Limited (“JLTSL”), has today accepted the decision by the Financial Conduct Authority (“FCA”) to issue it with a final notice and fine of £1.8m having found that systems and procedures put in place to mitigate the potential bribery and corruption risks associated with JLTSL’s third party relationships were inadequate during the period between February 2009 and May 2012.

The FCA has confirmed that it has found no evidence to suggest that JLTSL permitted any illicit payment or inducement to any such third party during the period, nor that JLTSL intended to permit any such payment to be made.

Further the FCA recognised that JLTSL made significant efforts in the relevant period to improve its systems and controls framework.

JLTSL has since put in place updated policies that have been confirmed by the FCA as being appropriate.” [our emphasis]

Opinion

Compliance complacency in any business is a mistake. The FCA has issued plenty of tough warnings and continues to deliver on its threats. There will be more of the same and authorised firms should ensure their systems to prevent financial crime are robust.  This is NOT a case about bribery but a case about inadequate systems to prevent it. Be warned.

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