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Regulator alerts small firms on crime compliance procedures

The FSA has warned small companies against relying on procedures to combat financial crime that have been supplied by compliance consultants without tailoring them to their individual business.

This week, the regulator published the findings of its review into small firms’ anti-financial crime systems and controls, which covered anti-money laundering and financial sanctions, data security and fraud controls.

The FSA found the small firms sector is “generally weak in its assessment and mitigation of financial crime risks”. The review started in April 2008 and looked at 159 small firms across retail and wholesale sectors.

The FSA says 52 per cent of the IFAs use consultants to produce policies and procedures but these had generally not been tailored by senior management of the firms. It says that few firms have appropriate due diligence systems to identify or deal with higher-risk customers or situations.

Of 42 IFAs visited, 17 had monitoring systems in place capable of identifying suspicious activity but only nine of these had effective procedures for managing hits on these systems.

The FSA found many small firms do not have appropriate formal vetting and referencing procedures for staff and small firms need to do more to meet their fraud risk obligations.

Head of financial crime Bob Ferguson says: “It is important that small firms understand what their responsibilities are in this area.”

Compliance consultancy, Wolters Kluwer Financial Services UK managing director Dean Curtis says: “Firms should ensure a pragmatic approach is adopted and employees understand the relevant risks to their business. Any policies supplied by a consultant must be implemen-ted correctly.”


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