Latest news
Here you’ll find any current alerts plus summaries of our latest compliance bulletins to clients. If you’d like to read the full text (including advice on how this affects your business and what to do next) please call or email us on the contact details below and we’ll be happy to send you a copy of our most recent bulletin. Of course, to get copies of our bulletins on a regular basis you’ll need to become an ICS client.
For more information about the ICS service call us on 01892 539600 or email enquiries@insurancecompliance.co.uk
Latest news - 8 February 2012
FSA individual firm reviews underway
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All firms which advise (or have permission to advise) are included, from sole traders upwards (except for the very largest brokerages)
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Starts with workshops (entitled Business Risk Awareness Workshops - BRAWs) followed by face to face or telephone interview or online/paper-based assessment
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Interviews in February for North West; workshops next month in West Country; West Midlands to follow
- Looking at corporate governance, culture and controls which should lead to effective risk management and prudential control
- For more information click here
Hot TopICS 2012-01 (Published 31/01/2012)
The FSA has decided that it is the right time to engage again with regulated firms – including general insurance brokers. Whilst TCF remains an important element of the FSA’s requirements for regulated firms, the emphasis is now on how firms identify, and take steps to manage, potential risks within their business.
The FSA has announced it will travel through the country, region by region, holding workshops and interacting with ALL small advising firms in a number of different ways: face to face at a regional centre, visits to firms or telephone, electronic or postal questionnaires.
This exercise is already underway in the North West and begins in March in the West Country, with the West Midlands to follow; firms will be wise to expect contact from the FSA and to prepare accordingly. If the FSA does not contact you with an invitation to attend a workshop, ICS’s advice is to be pro-active and contact the FSA yourselves; our understanding is this is the approach which the FSA is expecting firms to take.
The Timetable
The FSA will hold these events around the country, going from region to region. The programme has already started in the North West and the FSA has indicated the following timetable for 2012:
- West Country (excluding Wales) from January
- West Midlands from May
- Scotland and N Ireland (will include Carlisle and Lancaster postcodes) from September
ICS has not, as yet, been advised of any locations or timings beyond that date.
The process consists of three different stages, as follows:
- Business risk awareness workshops
- Regulatory reviews
- Follow-up work (including a verification exercise)
The FSA says that the review is an opportunity for firms to...
For the full text of this Hot TopICS, which includes information about the areas to be covered at the business risk awareness workshops and the reviews themselves as well as additional information relating to FSA verification work and potential supervisory issues, please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-19 (Published 22/12/2011)
Financial Crime – Part 3 – Financial Sanctions and Asset Freezes
This is the third in ICS’s series of updates on the subject of financial crime. In this edition we focus on the UK’s sanctions regime which freezes the UK assets of individuals and businesses (known as ‘targets’) which are subject to financial sanctions. HM Treasury maintains a full list of such targets (the HMT list) which firms can find via this link: http://www.hm-treasury.gov.uk/fin_sanctions_index.htm
While the FSA is not explicitly responsible for a firm’s compliance with financial sanctions restrictions, the requirement for a firm to organise and control its affairs responsibly and effectively would implicitly include the need to have appropriate processes in place to take into account the financial sanctions regime. The lack of adequate systems and controls alone can be sufficient for the FSA to enter into enforcement mode.
Sanctioned Parties (Targets)
The HMT list, which is freely available on the Treasury’s website (and thus is in the public domain –“tipping off” does not therefore normally apply), includes both individuals and businesses, a majority based abroad, but with some based in the UK.
The HMT list may be downloaded in a number of formats, for example Excel. In addition, there is a free e-mail subscription service that notifies firms of any additions, deletions or amendments to the list.
Please note that the UK Treasury list is not the only one in existence; amongst others, the EU and the USA have lists, and depending upon where business is conducted, other lists could also be used or required. For example, US Insurers may require the Office of Foreign Assets Control (OFAC) list to be used by intermediaries.
Offences
Whilst it is an offence to provide funds to any persons on the HMT list and to provide financial services to designated terrorists, there is a general licence (for which no bespoke licence is required) under the Terrorist legislation (but not under any country-specific sanctions) to allow financial services to be provided to allow those individuals to insure themselves, and to allow insurers (and intermediaries) to provide services for short periods following a claim (for example, provision of a hire car). Certain other financial services which are not relevant to intermediaries (such as the provision of legal aid) are also allowed under a general licence.
Providing funds to any person on the list is a breach of sanctions, and a licence must first be obtained from the Asset Freezing Unit. Any breaches must be notified to the Unit.
Risk Assessment
Whilst failing to carry out screening checks is not in itself an offence, trading with an individual or business which is sanctioned is an offence.
To avoid the suggestion that firms are unconcerned about the risk of breaching sanctions, firms should risk assess the areas of their businesses which might be susceptible. This Hot TopICS includes a series of self-assessment questions designed to assist firms to evaluate their financial sanctions arrangements...
For the full text of this Hot TopICS which includes self-assessment questions relating to overall systems and controls, screening of customers and the processes in place in the event of a match with the HMT list, please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-18 (Published 20/12/2011)
One of the fundamental tenets of the Treaty on European Union,
enshrined in Article 6, was the right of equal treatment between men and
women. This Article recognised and brought into legal effect the
Charter of Fundamental Rights of the European Union.
Within this
Directive, Article 5 prohibited all insurance contracts concluded after
21/12/07 using sex as a factor in calculating premiums and benefits.
However an exception applied where sex (but not pregnancy or maternity)
is a determining factor in the assessment of risk which is based on
relevant actuarial and statistical data.
Following a legal
challenge from a Belgian consumer group, and in a judgment issued in
March 2011, the European Court of Justice deemed this "opt-out" to be
incompatible with European law from 21/12/12, in an outcome with serious
implications for insurers, advisers, intermediaries and customers. The product areas most likely to be affected are:
- Motor insurance
- Term life insurance
- Private medical insurance
- Critical illness insurance
- Annuity products
- Travel insurance
For the full text of this Hot TopICS, which includes background to the ECJ judgement and an overview of the possible implications for consumers please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-17 (Published 29/11/11)
Financial Crime – Part 2 – Systems and Controls
This is the second in our series of updates on the subject of financial crime, prompted by the thematic work carried out by the FSA in the area of financial crime during which the regulator identified poor levels of compliance. In this Hot TopICS we concentrate on the systems and controls which firms should have in place to mitigate the risk of financial crime occurring. The areas covered are:
- Governance
- Structure
- Risk assessment
- Policies and procedures
- Staff Recruitment, vetting, training and awareness
- Oversight and monitoring
Under each of these headings you’ll find a set of self-assessment questions designed to help you evaluate where you stand with financial crime systems and controls. In many cases, we’ve asked for evidence to back up your answers as this approach is in line with the FSA’s tactic of requesting proof to verify any statements or answers given in response to its questions. Firms should be aware that deficiencies in your financial crime systems and controls could be reflective of issues which might be of concern to the FSA.
Like all aspects of a business, anti-crime procedures will only work effectively if there are appropriate arrangements in place, given credibility by management’s support. The FSA are very experienced at spotting half-hearted and ineffective attempts to organise systems.
Governance
Corporate governance is a term which refers broadly to the rules, processes or laws by which businesses are operated, regulated and controlled. Well-defined and enforced corporate governance provides a structure which, at least in theory, works for the benefit of everyone concerned by ensuring that the business complies with accepted ethical standards and best practices as well as with formal laws.
Senior management is expected to take clear responsibility in managing financial crime risks. Financial crime should generally appear on the firm’s risk register and management should develop and monitor systems and controls to mitigate the risk.
Firms would be wise to record management activity – perhaps by means of board minutes or by regular reports to the board. The following questions should help a firm to assess the robustness of its corporate governance arrangements…
For the full text of this Hot TopICS, which includes information and questions covering company structure, risk assessment, policies and procedures, staff recruitment/vetting/training/awareness and oversight and monitoring please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-16 (Published 11/11/11)
New rules on selling Payment Protection Insurance (PPI) and Income Protection (IP)
The Competition Commission’s ‘Payment Protection Insurance Market Investigation Order 2011’ introduced a whole raft of measures which affects all forms of Payment Protection Insurance (PPI) including short term Income Protection (but excluding retail PPI).
While the Order took effect from 6 April 2011, the main obligations are being introduced in two phases to coincide with the annual government common commencement dates (April 6 and October 1) for new legislation and regulations and to allow sufficient implementation time for providers. Some of the information requirements will therefore come into force on 1 October 2011 and the remainder on 6 April 2012.
Purpose
The purpose of this Hot TopICS is to advise any clients involved in the sale of PPI or short term IP of the changes from 1 October 2011, to show the thinking is behind the control over the sale of “riskier” products to consumers and to remind clients that it is not just the FSA which oversees brokers’ and intermediaries’ activities.
The Order will be policed by the Office of Fair Trading (OFT); however, the FSA has also revised the Insurance Conduct of Business Sourcebook (ICOBS) to impose additional requirements on firms selling protection products such as PPI. It is not unreasonable to suppose that the regulators, in stating that they will become more involved in product regulation in the future, will use these new rules as a template for the kind of actions they could take to control the selling of other products which they consider potentially unfair (for example, add-on insurance products).
Detailed requirements
The list of measures is as follows:
- A prohibition on selling PPI at the point of sale of the credit until after seven days after the credit sale or, if later, seven days after the supply of a personal PPI quote (‘point of sale prohibition’);
- An obligation to provide a personal PPI quote, setting out the cost of PPI along with details of the cover provided;
- An obligation to provide information in marketing material about the cost of PPI and ‘key messages’, for example making it clear that PPI is optional and available from other providers;
- An obligation to provide information to the OFT and the Consumer Financial Education Body (CFEB) for monitoring and publication;
- A recommendation to the CFEB that it uses the information provided to it to populate its PPI comparison tables;
- An obligation to provide information about claims ratios to any person on request;
- A prohibition on the selling of single-premium PPI policies;
- An obligation to provide an annual review setting out the cost of PPI and including a reminder of the consumer’s right to cancel;
- Compliance reporting requirements, including the commission of independent ‘mystery shopping’ exercises by the largest providers.
For the full text of this Hot TopICS, which includes information about which classes of business are affected plus explanations of the effect of the requirements, please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-15 (Published 2/11/11)
Treating customers fairly (TCF): A new beginning?
It could be argued that once TCF is fully embedded within a business it need no longer be considered as a separate issue because it becomes the natural way of doing business; recent activity by the FSA may suggest that it is moving towards this view. Evidence for this change in emphasis lies in the new small firms’ regional assessment programme which has just been announced.
Firms may remember back to 2007 when the FSA announced its plans to implement a programme of TCF visits, intended to cover all small firms. The main purpose of this activity was to assist firms with TCF; however, one did not need to be a cynic to assume that another reason might be to identify firms which were not compliant. That programme of visits was intended to last three years and to cover all small firms on a region by region basis; clearly this goal has not been achieved, as many firms have still not been visited.
New regional assessment programme
The new regional assessment programme which the FSA has announced follows on from a pilot scheme conducted earlier this year covering 55 small firms. While the FSA is keen to stress this activity is a continuation of its original TCF programme of visits it’s interesting to note that it is organised by the Supervision Department of the FSA rather than the Small Firms Division. In addition, TCF has been dropped from the branding and the original roadshow format has been replaced with smaller workshops which will concentrate on areas such as corporate governance, systems and controls and the responsibilities of Approved Persons.
For the full text of this Hot TopICS please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-14 (Published 7/10/11)
Financial Crime: A Guide for Firms - Part 1
The FSA has undertaken much thematic work on financial crime and has noted deficiencies in the level of compliance. As a result it is intending to publish a comprehensive guide covering financial crime issues. The FSA is at pains to state that this guidance is non-binding and that there is no requirement for firms to “comply” with the Guide’s contents. However, the FSA does expect firms to be aware of the guidance, and – where appropriate – consider how to translate this into more effective policies and controls.
Anti-Money Laundering
Countering Terrorist Financing
Fighting Fraud
Data Security
Combating Bribery and Corruption
Financial Sanctions and Asset Freezes
Countering Weapons’ Proliferation Financing
The FSA will be issuing the document entitled “Financial Crime: a Guide for Firms” later this year or early next and it is ICS’s intention to issue a series of Hot TopICS to cover each of these areas, and provide clear advice on how to implement the FSA requirements. This first Hot TopICS deals with general issues and the background to the document; future Hot TopICS will look at the various categories of financial crime to provide firms with a comprehensive summary of their duties and responsibilities; we will also explain areas where a 'risk-based' approach to tackling financial crime is appropriate and point to practical solutions to these issues.
For the full text of this Hot TopICS please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-13 (Published 9/9/11)
Advertising and Financial Promotions – an up-to-date perspective
The standard of financial promotions is a priority element of the FSA's retail market strategy and its work in this area is part of the overarching treating customers fairly initiative. The numbers of financial services companies forced to amend or withdraw advertising material following FSA intervention has increased this year. In the first quarter of 2011 66 advertisements were withdrawn or amended compared to 50 in the same period in 2010. The total last year was 262 - up from 199 in 2009.
The FSA’s replacement body, the Financial Conduct Authority, will have wider powers to name and shame businesses whose promotional material it considers likely to be misleading as well as to order the withdrawal or amendment of promotional material for a financial product. Whereas, under the existing regime, the FSA can only warn firms that it might discipline them for misleading promotional material... For the full text of this Hot TopICS please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-12 (Published 23/8/11)
Employers' Liability Tracing Office
FSA rules now require organisations owning Employers’ Liability (EL) liabilities for UK employers (including active and run-off EL insurers) to publish information about EL policies. The aim is to help those who have suffered injury or disease in the workplace to identify the relevant EL insurer quickly and efficiently. Any insurer who has, or has had, authorisation to write general insurance in the UK is required to comply with FSA regulations on tracing EL policies either through data published on their own website or becoming a member of a tracing office which meets the FSA standards, such as the Employers' Liability Tracing Office (ELTO).
Intermediaries will probably have already seen Insurers asking for extra information in order to populate this database. In most cases, standard minimum information is required. The rules on employers’ liability tracing only apply to insurers however, as their agents, brokers will be required to gather relevant data from policyholders so it is important to be clear exactly what you need to record, how and when... For the full text of this Hot TopICS please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-11 (Published 18/7/11)
Introducers
This Hot TopICS addresses the knotty issue of introducers which, once again, has been brought into sharp focus as a result of the FSA’s work on price comparison websites (see ICS previous Hot TopICS HT2011-10). It aims to provide firms with a guide to the various categories of introducer and the pitfalls to avoid. It is essential that regulated firms know the origin of all business introduced to them and whether or not such sources should be regulated. In ICS’s experience it is not uncommon for a firm to be incorrectly receiving introductions from unregulated sources, either because it has misunderstood the regulatory requirements or because its systems and controls have failed to identify the source of business as being covered by regulation. Such mistakes put a business at regulatory risk...For the full text of this Hot TopICS please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk
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Hot TopICS 2011-10 (Published 13/7/2011)
Price comparison sites and permissions
The FSA has published (in June 2011) proposed guidance which – subject to consultation (ending 8th August 2011) – will require Aggregators and companies who white-label price comparison tools on their own sites to introduce stronger systems, controls and procedures to ensure that sales are made in a way which is compliant with the FSA’s requirements and other relevant rules. The Consultation has wider relevance, in that it sheds new light on the FSA’s views relating to “arranging”, “arranging with a view” and “advising” (for a detailed explanation of what these terms mean in plain English, we have included a list below)...For the full text of this Hot TopICS please call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk