FCA provide guidance on SMF16/17 appointments

Firms should have heads of compliance and money laundering reporting officers (MLROs) who are suitably competent and capable of effectively performing the roles.  It is appropriate to carefully consider how individuals can demonstrate this ahead of seeking regulatory approval.

The FCA have recently issued guidance which should help firms decide if an individual candidate is suitable. Full details can be found here Heads of compliance and MLRO applicant competency and capability | FCA, but in summary :

Training

Most successful applicants have:

  • Completed training courses tailored or relevant to the type of business the firm they propose to work for, before seeking approval.
  • Attended recent and up-to-date training to provide relevant knowledge of the current regulatory rules and expectations.
  • Attended training courses with sufficient length and depth to gain knowledge to carry out the role.

FCA have found courses with an examination or assessment are better in demonstrating that an individual has gained relevant knowledge.

Experience

FCA note that:

  • Applicants do not need to have held head of compliance and MLRO positions before and previously holding the same or similar approved positions does not mean an applicant will be automatically approved.
  • Successful applications have a range of backgrounds and experience. The experience of an applicant who has only previously worked in a front-line role (and in the absence of other training or experience) is often insufficient to demonstrate that they have the necessary skills and knowledge to establish and operate a compliance function.
  • In some smaller firms, the owner and/or chief executive may hold these functions. However, FCA still expect those individuals to have relevant training and experience to ensure their business will comply with the relevant rules and regulations.

Support from third parties

  • Applicant firms have tended not to be successful where the external support services proposed is the firm’s only compliance resource.
  • Even with external support, the individual who is accountable for the compliance and MLRO function should have sufficient knowledge and experience themselves to make relevant compliance decisions for the business.

Capacity

  • The time commitment to the role must be proportionate and sufficient. Applicants who intend to fulfil the role in just a few hours per week have tended to be unsuccessful.
  • Successful applicants tend to be independent from the client-facing side of the business.
  • Successful applicants tend to be those working from the firm’s principal place of business in the UK.
  • Applicants who are not senior leaders within the business, such as external compliance consultants, are often unsuccessful in their application because they may not have the incentives or authority required to be effective in these roles.
  • Even if an applicant believes they have sufficient experience or training, FCA may still request an interview to test this. FCA will also consider the applicant’s response to the questions asked during the application process, where it helps them assess competence and capability.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

Useful guidance for any firms thinking of seeking approval for SMF16/17 positions.

Action Required By You

For information. ATEB can assist with SMF16/17 applications and help firms to demonstrate applicants are suitably competent and capable of effectively performing the roles. Contact us if you would like to discuss how we might help you with this or any other compliance / regulatory aspect.
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About the Author

Richard is a Chartered Financial Planner and a Fellow. He has a long track record of implementing compliance regimes for firms large and small. His expertise and qualifications are broad, including pensions, investments, home finance, consumer credit and general insurance.

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