Financial Crime enhancements and removal of restrictions for an asset management firm
Our client was a UK based investment management firm, which provided UK retail clients with Model Portfolio Services through their financial advisers. They also used Appointment Representatives to provide UK advisory firms and their UK retail clients with technology to document advisory processes and to give them access to and facilitate investment processes.
The Firm had been subject to ongoing scrutiny from the FCA over the robustness of its Financial Crime (FC) Framework. This culminated in a feedback letter from the FCA outlining multiple areas of concern including feedback on its Business Wide Risk Assessment; MLRO reports; Client Risk Assessments and Due Diligence Documents; Compliance Monitoring Program Document; Due diligence on Assets.
The Firm had made some remedial actions, but the FCA were concerned about the quality and robustness of these changes and instructed the Firm to commission a Skilled Person review (s166) and placed Voluntary Requirement (VREQ) restrictions on the firm.
Our FC team undertook a review of the Firms full FC framework including conducting interviews with Senior stakeholders; observing Governance committees; reviewing core elements of the FC framework; operational effectiveness testing of customer files, screening, transaction monitoring, SARs, and training provided.
Our review resulted in a large number of recommendations some of which were material in nature (enhancing the CRA, updating Due Diligence processes, remediating the entire base of client files). Given the FCA concern over prior remediation activities we also evaluated and opined on the quality and achievability of the resulting remediation plan.
The nature of the client’s business was complex to understand given the multiple parties involved (Firm, Appointed Representatives, Custodians, Platforms, IFAs, and End clients), so for clarity we also incorporated process charts into the report that outlined the flows of instructions, information and cash.
The Firm commenced with the remediation activities. Given the VREQ and its impact on their commercial viability, they were keen to progress with evaluation of these where they felt the original recommendation had been fulfilled.
A sequenced plan was agreed with the FCA so that some be evaluated earlier to give initial comfort (leading to a partial lifting of the VREQ) and then others later. We conducted the initial review over the festive period to help with the timings and the pressures the Firm faced. Upon completion of our full review the FCA decided to fully remove the restrictions on the Firm.
