Financial Crime Skilled Person Review of fintech operating in high risk jurisdictions and industries
The Firm was a UK-based payments Firm with a client base operating in High-Risk Industries and out of High-Risk Jurisdictions. They had been subject to FCA scrutiny over a three-year period with concerns raised initially on the adequacy of Customer Risk Assessment, the related risk ratings and the resultant Due Diligence covered and then laterally on quality of Transaction Monitoring and evidence of discounting.
Given the underlying activity of the clients and the jurisdictions in which they operated, the FCA had a concern that the business posed a risk in terms of Financial Crime. Customer activity also raised a concern in terms of the vulnerability risk given the prevalence of human trafficking and exploitation in the sector.
As a result, the FCA instructed the Firm to commission a Skilled Person review (s166) and placed Voluntary Requirement (VREQ) restrictions on the firm — affecting its ability to onboard new customers and posing a potential significant commercial impact on the future of the Firm. We were appointed as the Skilled Person.
Our FC team undertook a programme of work that included conducting interviews with Executive and Senior stakeholders; observing relevant Governance committees; document review of core elements of the Financial Crime framework; operational effectiveness testing of customer files, screening, transaction monitoring, SARs and evaluation of the Firms recent remediation activities.
We undertook a review of the end-to-end Financial Crime framework including Governance, management capability and oversight; risk management (including RAS, BWRA and CRA); resourcing including outsourcing of key roles; three lines of defence model; policies and procedures; due diligence processes; screening processes; and training and awareness.
Given the ownership structure and related company activities we also focused on the existence of controls as it relates to possible Conflicts of Interest.
Our review identified several key areas of enhancement that the Firm needed to make in order to fulfil the regulatory standards. The report and the resulting recommendations allowed the Firm to develop a comprehensive, practical and fit for purpose remediation plan which, if implemented robustly, would enable it to enhance the overall Financial Crime Framework.
As part of this we provided robust recommendations including those focused on some critical governance aspects required to mitigate an inherent conflict of interest that existed in the business.
