Skilled Person reviews are commissioned by the FCA or the PRA when they are concerned by a firm’s compliance with regulation. They involve an independent third party, often an accountancy firm or consultancy, to help identify failings in areas such as anti-money-laundering controls or regulatory reporting.
The number of these reviews is likely to continue to rise as regulators step up their scrutiny of controls at financial services firms. The FCA and the PRA have recently written three sets of letters addressed to the CEOs and Chief Actuaries at certain classes of regulated firms indicating they are expecting to start using Skilled Person reviews to investigate concerns over poor corporate culture, inadequate whistleblowing channels and inaccuracy of information provided to regulators.
Regulators are increasingly pushing firms to make sure data given to the FCA and the PRA is correct. The PRA recently imposed a record £44m fine on a global bank for providing inaccurate information to the PRA on its capital and liquidity position.
Leigh Treacy, Head of Financial Services Advisory at BDO, says: “The first rise in reviews for almost half a decade shows that regulators are now putting firms under even more scrutiny.
“The FCA and the PRA have made it abundantly clear that they expect firms to implement their recommendations in their latest guidance letters as soon as possible and that Skilled Persons reviews will follow.
“These reviews are an essential part of the regulator’s tool kit. They allow the regulators to rapidly scale up their activity without having to drop other urgent issues from their list of priorities.”
The number of Skilled Person reviews commissioned by the FCA relating to financial crime rose to 14 in 2018/19, up from 11 in 2017/18*.
Fiona Raistrick, Financial Services Economic Crime Partner at BDO, adds: “Regulators have been increasingly using these reviews to crack down on companies where there is a higher risk of money laundering activities.
“Online trading firms have come under particular pressure from regulators in this area. The FCA has urged them to tighten transaction monitoring to help reduce their exposure to potential money laundering and fraud.”
Skilled Person reviews can help firms address failings without the FCA or PRA having to impose heavy penalties on them. Following the reviews a list of actions is prepared that the financial services firm has to follow.
*Source: FCA and PRA
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