Financial Crime review and enhancement of an emerging markets investment bank
A UK-based global emerging markets investment bank required an FCA mandated Skilled Person assessment of their Financial Crime (FC) Framework. Pathlight was appointed as the Skilled Person. The FCA had raised concerns over the Firms FC framework due to factors including senior management oversight; jurisdictional areas of business; a lack of clarity over other related companies and staff turnover in key roles (including the MLRO).
The FCA required a review that looked into the operational effectiveness of the Firm’s FC policies and procedures and systems and controls and the effectiveness of the Firm’s FC governance and compliance arrangements (including any third line of defence arrangements, senior management oversight and culture and tone from the top).
The Firm had been undertaking a broader remediation exercise (including FC aspects) supported by one of the Big 4 and the review needed to take progress of this into account.
When appointed we noted the FCA had put in place a longer than usual timelines for delivery of the report. Given the Firm were ‘mid remediation’ on some of their activities we agreed with the Firm and the FCA to delay the start of the review so as to allow the Firm to complete some of these activities. It would have been counter productive to review and raise recommendations on some areas the Firm was already in the process of fixing.
Our FC team undertook a programme of work that included conducting interviews with Executive, INED 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 transactions with related entities, and evaluation of the Firms recent remediation activities.
We sequenced the programme to conduct work as and when the Firm was ready so that the activities were undertaken in an efficient and cost sensitive way.
There were also a range of resourcing changes at the Firm during the review (some full time and some interim) including the Head of Compliance and MLRO, hence we needed to work with the Firm to ensure the relevant stakeholders were up to speed as it progressed.
Whilst working within the requirements of the Skilled Person process we maintained an ongoing dialogue with Firm so there were no undue surprises, allowing the Firm to be in the best place to plan for remediation of the recommendations that came out of our review. This was critical in light of the staffing changes referred to above and also that during the course of the review the Firm self identified some areas that required further remediation.
Working with the Firm and the FCA we were able to provide assurance over the current structure of the FC framework and that, where there was work to do, the Firm had a realistic and practical plan in place.
