Sectors - Written by Barry & Richard on Wednesday, March 26, 2014 7:48 - 0 Comments
F is for Fail. Three strikes &…firm with ABC controls gets slammed by FCA and fined.
Last week the Financial Conduct Authority fined Besso an insurance firm for poor anti-bribery systems and controls.
It had some and had even paid solicitors to advise it on them.
The FCA view. Not good enough.
In a withering Final Notice issued the FCA said: “The anti-bribery and corruption systems and controls that it had were expected to be commensurate with that relatively low level of risk. However, Besso failed to meet even that standard. [our emphasis].
Besso did have controls.
Besso paid a law firm to advise it and provide suggestions for policies and procedures and Besso’s program evolved and improved over time.
What went wrong?
Besso is a medium-sized broker in the wholesale insurance market, whose business did not the FCA found, overall, pose a high bribery and corruption risk.
In its notice the FCA catalogued the warnings given to Besso.
Its failure to heed those warnings ultimately led to the fine for a system and control failure.
Strike One – the FCA warning
The FCA highlighted that in November 2007, that it sent a ‘Dear CEO’ letter to all wholesale insurance broker firms, including Besso. The letter affirmed the FCA’s expectations in relation to payments to Third Parties and stated it ‘expected firms to review their business practices to ensure they were not involved in, or associated with, illicit payments.’
Despite this warning shot to the industry, Besso only started to make significant changes to its policies and procedures in 2009, two years later.
Strike two – another FCA warning
The FCA cited its fines against Aon and Willis in 2009 and 2011 and its thematic review of commercial insurance brokers and how they were addressing the risks of becoming involved in corrupt practices such as bribery.
Strike three – yet another FCA warning
The FCA considered that Besso’s approach to dealing with bribery and corruption risks remained inadequate ‘even after two visits by the Authority to inspect its relevant systems and controls.’
After the first visit in 2009 the FCA identified significant weaknesses fed them back to Besso. But two years later when after a follow up visit and while acknowledging that Besso had carried out significant work to address the issues identified, the FCA considered that Besso had not adequately remedied its shortcomings.
The FCA concluded that Besso:
“(1) had limited bribery and corruption policies and procedures in place between January 2005 and October 2009. It introduced written bribery and corruption policies and procedures in November 2009, but these were not adequate in their content or implementation;
(2) failed to conduct an adequate risk assessment of Third Parties before entering into business relationships;
(3) did not carry out adequate due diligence on Third Parties to evaluate the risks involved in doing business with them;
(4) failed to establish and record an adequate commercial rationale to support payments to Third Parties;
(5) failed to review its relationships with Third Parties, in sufficient detail and on a regular basis, to confirm that it was still appropriate to continue with the business relationship;
(6) did not adequately monitor its staff to ensure that each time it engaged a Third Party an adequate commercial rationale had been recorded and that sufficient due diligence had been carried out; and
(7) failed to maintain adequate records of the anti-bribery and corruption measures taken on its Third Party account files.”
Again the FCA has delivered on its promise to focus on financial crime systems and controls. In this example, after a shaky start Besso introduced controls, policies and even online training. The FCA view.
In a press release the FCA said:
“Firms must play their part in preserving the integrity of the UK financial system, including taking all steps necessary to prevent financial crime. Where we find firms failing to do so, we will take action.”
The Final Notice will be uncomfortable reading for some.