Skilled Person Report to assess a firm’s Financial Crime and CASS systems and controls
Our client was a UK based investment management firm engaged in providing retail and outsourced financial services. They had two models in operation: a direct to the consumer model, and ‘model B’ where they had a relationship with investment Firms and services those Firms end-clients.
It was this Model B that the FCA were particularly focused on, as, based on market information they had about some of those investment Firms, the FCA had concerns over the robustness of our Firms onboarding due diligence processes. They instructed the Firm to undertake a de-risking exercise, instructed the Firm to commission a Skilled Person review (s166) and placed Voluntary Requirement (VREQ) restrictions on the firm with respect to their Model B clients.
Our review was run over multiple phases and required us to test and provide a view on the adequacy and effectiveness of the Firm’s: Financial Crime (FC) risk appetite; governance, systems and controls, and risk management, with a particular focus on FC; client data integrity; client onboarding, due diligence and monitoring, and; to review the Firm’s CASS arrangements.
We established two teams with a focus on FC and CASS and undertook reviews that included conducting interviews with Senior stakeholders; observing Governance committees; reviewing core elements of the Firms FC and CASS frameworks; conducting operational effectiveness testing of customer files, screening, transaction monitoring, SARs and cash reconciliations.
The Firm was facing pressure from their Model B clients as the VREQ meant their individual businesses were in places frozen and some of them were starting to exit. As a result, this meant that the Firm was (understandably) applying scrutiny and challenge to our observations and recommendations as they emerged and hence the deliverables needed to be robust and evidence based.
The review identified a number of material gaps in the Firms FC and CASS procedures and controls. We developed a series of outcome focused recommendations which, if remediated and resolved via a focused approach, would allow the Firm to demonstrate a fit for purpose framework.
