Focus On Financial Crime

Earlier this month the FCA issued a Dear CEO letter arising from a number of recent assessments of how well Annex 1 firms are complying with Financial Crime regulations. “Annex 1” refers to a group of businesses who engage in activities that require them to be supervised by the FCA specifically in relation to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations of 2017 (often referred to as MLRs) – even though they are may not otherwise be regulated by the FCA.

The letter raised concerns that they were seeing similar, repeated failures when they were looking at these firms, with recurrent problems including “discrepancies between firms’ registered and actual activities, financial crime controls which had not kept pace with business growth, a failure to risk assess their own or their customers’ activities properly and inadequate resourcing and oversight of financial crime issues and requirements”. The letter goes on to set out the regulators expectations of what happens next: recipients will need to complete a gap analysis against each of the key problems highlighted within the next six months, and then quickly work to close any identified gaps and share the analysis across the firm.

If your firm is affected, Kind Consultancy can help. We are Governance, Risk and Compliance specialists with a track record of successfully helping Financial Services businesses with their Financial Crime needs. Let’s dig in on some of the specific issues the regulator is looking at and set out how Kind can assist.

  1. “Lack of Financial Crime controls to keep pace with business growth”.

The Dear CEO letter cites multiple cases where “Financial Crime policies, controls and procedures have not kept pace with the size and complexity of the business”. This also speaks to a lack of engagement from senior management on Financial Crime issues – these factors aren’t being thought about at every stage of expansion.

  • Kind have worked with a number of businesses engaging in rapid expansion, including newly funded start-ups through to established international businesses moving into new territories, and we are well versed in running robust search and selection campaigns in tight timeframes for Financial Crime projects where we have sourced top talent across all levels of seniority – and have deployed interim teams at short where an Interim Manager or contract team are needed immediately while a permanent person is found.

2. “Business Wide Risk Assessments (BWRA)”

The FCA notes that in some firms they looked at the BWRA was “completely absent” and in others, a BWRA was completed but “the quality [was] poor”, lacking detail and clarity. In some cases, there was a failure to identify Money Laundering, Terrorist Financing and Proliferation Financing failures. Firms should be revising and updating their BWRAs to ensure compliance with MLROs and to reduce the risk of Financial Crime.

  • Kind can supply organisations with an independent “Critical Friend” to complete an in-depth business wide risk assessment, giving you a clear view of all the risks your firm is exposed to and, if desired, helping to or taking the lead on designing the controls and changes needed to mitigate the identified exposures.

3. “Due Diligence, Ongoing Monitoring and Policies & Procedures”

The firms assessed were found by the regulator to have Customer/Client Due Diligence and Ongoing Monitoring policies and procedures that were vague and lacking in detail, creating ambiguity around the actions that staff should be taking. In some cases, there was insufficient guidance on when customers should be subject to the regular Customer Due Diligence (CDD) process or the Enhanced Due Diligence (EDD) process.

  • Kind has a very strong track record of supplying top-tier Governance talent to Financial Services firms of all kinds and sizes to rewrite and upgrade these policies – and to then help embed them in the business, ensuring genuine understanding and buy-in from all staff.
  • Kind has previously deployed large-scale teams of KYC and EDD analysts to carry out due diligence on New to Bank Clients and Existing Clients that have become high risk as part of a Refresh project for a major international bank.

4. “Governance, MI and Training”

The FCA findings cite multiple firms having under-resourced Financial Crime divisions and a lack of proper training on Financial Crime issues for staff. Some organisations were not providing role specific training, some were missing key topics and some staff were found to have generally very low levels of Financial Crime awareness.

  • Kind Consultancy works with multiple Financial Crime experts who have run tailored, large-scale training programmes for Challenger Banks, Consumer Credit firms and other Financial Services businesses who had identified a lack of Financial Crime awareness. Our experts will operate on-site with your staff, delivering a detailed Financial Crime training programme covering everything employees need to know in order to excel at all aspects of their job with Financial Crime exposure. We’ll be happy to customise all aspects of training to fit your specific organisation’s products, business model and size.
  • In terms of under-resourced teams, Kind is perfectly positioned to help with this. Financial Crime recruitment has been a core activity for us since our inception, and we have an extensive database of some of the best Financial Crime talent in the industry, at all levels of seniority. Whatever aspect of your Financial Crime team needs to raise headcount, Kind will be able to quickly find the best possible candidates to fill the gap. Through our vast network and skill set we can apply a mixed methodology to go out and identify the very best talent for your role that is inaccessible through traditional recruitment, making a confidential approach to head hunt the best possible people.

5. “Absence of a clear audit trail for Financial Crime related decision-making”

Finally, the last identified weaknesses were around audit. Some of this concerned changes that existing Senior Management need to make, but it also highlighted that some large firms had failed to “establish an independent audit function” and they expected such a function to “examine and evaluate the adequacy and effectiveness of the [Financial Crime] policies, controls and procedures adopted”.

  • This is an area Kind can assist with – we have helped multiple clients both by creating permanent Internal Audit teams and by supplying trusted contract expertise to run Audit projects, giving organisations a detailed breakdown of how all aspects of their Financial Crime work is operating.

Financial Crime Case Studies

AML & CTF Training

Recently we were approached by a challenger bank to provide training for their Operations and Senior Management team on Anti Money Laundering and Counter-Terrorism Financing. We connected them to one of the most trusted Financial Crime SMEs on our Agile bench, and together we put together an intensive training programme. The training covered a wide array of Financial Crime topics, building up the client’s understanding and then explaining their specific responsibilities relating to each issue. The client was very pleased with the training, and has retained us to regularly provide training to their organisation, with the content continually enhanced to incorporate new regulations and developments.

Financial Crime SMEs

We have also worked with a Retail Bank who we supplied with a team of Financial Crime SMEs (Subject Matter Experts) to carry out Enhanced Due Diligence on new clients who had been red flagged by the front line team. Our team then assessed the legitimacy of the customer, either giving the go-ahead to onboard the client, escalating internally or in the most extreme cases, raise with external agencies and offboard the client.

S166 – KYCs

We were contacted by a large global retail bank who had been issued a Section 166 notice in their UK operation. We deployed 35 KYC analysts to carry out Enhanced Due Diligence on existing customers to identify gaps within the KYC process. This was then fed back to the organisation, and Financial Crime SMEs were brought in to improve existing controls and frameworks and rewrite policies. Kind then introduced Trainers to the business to upskill permanent members of staff and ensure that BAU operations were of a high quality.

International KYC & AML Project

As a final example of recent Financial Crime work, we worked with clients further afield looking to tap similar UK Compliance expertise. One of our clients, a multinational bank, had suffered a serious Financial Crime failure in one of their European divisions and wanted to bring in trusted KYC and AML resource from the UK for a large scale project identifying and addressing the gaps. With pre-screened, pre-qualified contractors who were part of our Kind Agile Solutions bench, we were able to quickly put forward a large team of seasoned KYC and AML experts and have them at work fast. Many of that team would go on to be permanently retained by the business as they were so pleased with the work, and the client has not faced any subsequent public Compliance issues.

Talk to Kind

Even if your firm is not part of the Annex 1 group, this is a good reminder that the FCA is very focussed on Financial Crime right now, and “inadequate resourcing and oversight of financial crime issues and requirements” is something all Financial Services businesses should be wary of, taking preventative measures as part of a pro-active approach. From 2021 to 2022 the total value of fines issued by the FCA came to over £600,000,000 and over two thirds of those were related to Financial Crime and AML. This is an ongoing focus area for the regulator across all of Financial Services, and no organisation can afford not to take it seriously – for example, the Dear CEO letter of May 2021 similarly highlighted Financial Crime and AML framework failings in retail banks, asking them to undertake comparable gap analysis exercises and mitigate identified weaknesses. The message is clear that regardless of what part of the Financial Services landscape you’re operating in, this needs to be a top regulatory priority.

For a confidential conversation about how Kind Consultancy can help, get in touch on 0121 643 2100 or via

Head of Compliance & MLRO : Case Study

Kind Consultancy was approached by an international investment fund active in multiple locations across Europe and North America. Previously, their UK operation had completely outsourced its Compliance function. They were looking to expand their UK base, including creating an in-house Compliance team, beginning with a Head of Compliance and an MLRO.

Working on an exclusive, retained basis, we helped our client to build the job brief, incorporating our knowledge of the current Compliance and Financial Crime landscape in the UK. We then conducted a detailed search and market mapping exercise using a mix of methodology. Our team reached out to people in our existing network who we knew had the specialist skill set our client was looking for. Next, we identified passive candidates we believed would be perfect for the role and made confidential approaches.

Our final shortlist contained only the very best senior Compliance and Financial Crime professionals who had the expertise to take on strategic, leadership roles in a new department. We focused on individuals who had previously held SMF16 and SMF17 functions, or who were of a calibre that we trusted to be ready to step into an FCA-approved role. We also were careful to pre-screen any candidate on the shortlist to consider their personality and culture fit within our client’s existing senior team, making sure their long-term career goals were aligned with the business’s plans.

After interviewing our candidates, the client successfully appointed their preferred candidate and was extremely happy with the quality of people provided. We’ve remained close to both the Head of Compliance and MLRO post placement and have subsequently provided them with more junior staff to build out their new teams.

Want to learn more about how Kind Consultancy helps clients across Financial Services and Banking? Check out our other Case Studies.

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Section 166 – KYC : Case Study

In our Case Study series, we talk you through how Kind Consultancy handled a recent project, to give you a taste of just some of the tailored methods we use to deliver exactly what our clients’ need.

The Client

Kind Consultancy are a long-standing supplier to a Big 4 consultancy. They reached out to us for support on a project with one of their clients, a large retail Financial Services organisation, who had been issued a Section 166 Notice.

The Approach

Kind supplied a team of 10 highly experienced and knowledgeable KYC Analysts who had previously worked with firms who had been issued Section 166 Notices, drawn entirely from the Kind Agile Solutions bench of pre-qualified industry-best contract professionals. Using KAS allowed us to have people with the necessary skills and knowledge on site fast, enabling the client to begin the potentially lengthy review process as soon as possible.

The Result

The team quickly and efficiently worked through a substantial document review project and helped the project leader to identify areas for potential remedial actions. The end client then retained the team to help deliver the necessary changes and improvements, and the regulator decided no further action needed to be taken against the firm.

[Read the full series of Kind Consultancy Case Studies to learn more about the different ways in which we have helped our clients to succeed]

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Preventing Financial Crime

For their 2015/16 Business Plan, the FCA have added financial crime to their list of the top seven risks facing the finance industry, replacing house price growth. It’s not particularly surprising, 2014 was a bad year for high profile, high visibility financial crime cases and the industry is under public and media pressure to do more. In January, the Director General of the National Crime Agency described the British financial system as “particularly attractive” for criminals due to “the high transaction volume, developed financial services industry and [the] political stability of the UK” and that “the involvement of a small minority of complicit, negligent or unwitting professionals in the financial, legal and accountancy sectors, also facilitates money laundering – and unfairly damages the reputation of the large majority of professionals in those sectors.”

The ‘negligent’ and ‘unwitting’ are in the FCA’s firing line, with their Business Plan making repeated mention of the need for “systems and controls” to protect against financial crime, and they promise to implement an enhanced anti-money laundering supervision strategy including continuing their Systemic Anti-Money Laundering Programme which assesses AML and ABC controls at major firms. They’ll also continue to visit smaller firms they believe to be at risk of being exposed to financial crime, a strategy that remains important following their report late last year that found “many small banks and commercial insurance intermediaries fail to effectively manage financial crime risk”. They’re also planning to embed better arrangements and support for whistleblowers and to take a more active role in monitoring pension fraud.

Here at Kind, we’ve partnered with a global risk consultancy firm to help provide financial crime prevention solutions for our clients. If you’re concerned about adapting to new regulations or are worried that your processes may make you susceptible to financial crime, contact me or call the office (on 0121 643 2100) for a more detailed conversation on the solutions we offer and how they can be tailored to suit your needs.

[Sources: 1, 2, 3. Photo by Alan Cleaver]

Lynsey Moore
(This article originally appeared on Lynsey’s LinkedIn)

This post is from 2015 but Financial Crime continues to be a key issue – read our most recent piece on the FCA’s plans for this year and beyond

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