Compliance News - 22nd July 2011
CC:ME WEEK ENDING 22 JULY 2011
The Financial Services Authority (FSA) has fined Willis Limited £6.895 million for failings in its anti-bribery and corruption systems and controls. These failings created an unacceptable risk that payments made by Willis Limited to overseas third parties could be used for corrupt purposes. This is the biggest fine imposed by the FSA in relation to financial crime systems and controls to date.
Between January 2005 and December 2009, Willis Limited made payments to overseas third parties who assisted it in winning and retaining business from overseas clients, particularly in high risk jurisdictions. These payments totalled £27 million. The FSA investigation found that, up until August 2008, Willis Limited failed to:
- ensure that it established and recorded an adequate commercial rationale to support its payments to overseas third parties;
- ensure that adequate due diligence was carried out on overseas third parties to evaluate the risk involved in doing business with them; and
- adequately review its relationships on a regular basis to confirm whether it was still necessary and appropriate for Willis Limited to continue with the relationship.
These failures contributed to a weak control environment surrounding payments to overseas third parties and gave rise to an unacceptable risk that these payments could be used for corrupt purposes, including paying bribes.
In addition, between January 2005 and May 2009, Willis Limited failed to adequately monitor its staff to ensure that each time it engaged an overseas third party, an adequate commercial rationale had been recorded and that sufficient due diligence had been carried out. Although Willis Limited improved its policies in August 2008, it failed to ensure that its staff were adequately implementing them.
Lastly, throughout the period, Willis Limited’s senior management did not receive sufficient information about the performance of Willis Limited’s relevant policies to allow them to assess whether bribery and corruption risks were being mitigated effectively.
During the FSA investigation, Willis Limited identified as suspicious a number of payments totalling $227,000 which it made to two overseas third parties in respect of business carried out in Egypt and Russia. These were subsequently reported to the Serious Organised Crime Agency.
Willis Limited has taken significant steps to address the failings identified by the FSA and has committed to carrying out a review of past payments made to overseas third parties to identify any inappropriate payments. Willis Limited cooperated with the FSA and agreed to settle at an early stage of the FSA’s investigation. The firm qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £9.85 million.
Source: Financial Services Authority
FSA Website
FSA Website
Hector Sants, Chief Executive Officer of the FSA, has written to Andrew Tyrie, Chairman of the Treasury Select Committee, on the subject of the Retail Distribution Review. The Committee reported on the RDR, the FSA responded briefly pending a fuller (and presumably more considered) response later in the year, and Hector then offered further comment by way of an apology.
Hector stated “It was certainly not the intention of the FSA’s brief statement of 14 July to be seen as a peremptory rejection of any element of the Committee’s report. Rather it was intended simply to ensure that the momentum behind the preparations for the RDR is not lost.” He concluded that there was general agreement between the Committee and the FSA on the importance of firms and individuals completing their preparations as soon as possible.
Source: Financial Services Authority
FSA Website
FSA Website
The FSA, together with the Claims Management Regulator (CMR), FOS and the FSCS, has produced a note for financial services firms, consumers and CMCs to:
- help them understand the role of CMCs in financial services complaints;
- provide information and respond to frequently asked questions; and
- explain the respective roles of the FSA, CMR, FOS and FSCS.
The FSA's rules on complaint handling (set out in the DISP sourcebook) and rules on compensation (set out in COMP) make clear that consumers may raise issues directly with firms, the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS) without incurring any fee or charge.
The rules also allow consumers, should they choose, to be represented by a third party – for example, a claims management company (CMC). FSA has clarified that, regardless of whether a consumer complains directly or through a third party, their complaint will be dealt with in the same way by the firm, FOS and the FSCS.
Source: Financial Services Authority
FSA Website
FSA Website
Market conditions have prompted banks to seek to diversify sources of liquidity. In particular, the FSA has observed an increasing trend of banks seeking to access liquidity embedded within asset portfolios held by insurers by entering into various transactions which are collectively refered to as “liquidity swaps”. This guidance consultation has arisen as a response to these developments.
The key issues are:
· Wrong-way risk - use of own-issued or own-originated securities as collateral
· Limit structures – interdependencies between micro-prudential and macro-prudential risks
· Intra-group transactions – conflicts of interest
· Pillar 2 considerations and capital
Source: Financial Services Authority
FSA Website
FSA Website
Michel Barnier, the European Commissioner for internal market and services, has arrived in London as the heads of state and government of the eurozone were due to descend on Brussels to seek a solution to the Greek sovereign debt crisis. The need for a co-ordinated and united response to Europe's economic woes could not have been clearer.
Top of the Commissioner's agenda was his new proposal on bank capital - the so-called Capital Requirements Directive IV (CRD IV). CRD IV has been a long time in the pipeline and is the vehicle through which the EU will implement the commitments on bank capital and liquidity made in Basel III. Unlike the US, the European Union will apply the same approach to all 8,000 of the EU's banks, no matter how small. As a result the Commission has argued that certain European 'specificities' should be taken into account.
The most dramatic change in approach in CRD IV, compared to previous directives, is that part of the rules will be implemented as a regulation. This will require a uniform law across all EU member states. The Commission argues that this is necessary if the new European Banking Authority is to be able to play its part in supervising cross-border credit institutions. The Commission has said that the level of capital which is set in what is known as "pillar one" (of three) should be absolute, without the opportunity for member states to go higher or lower in their legislation. It sees this as essential to ensure that there is no regulatory competition within the EU.
However the UK has openly criticised this approach, as the Bank of England (and potentially the Treasury in response to the Independent Commission on Banking) may want to mandate higher capital requirements.
The BBA believe the proposed rules do allow for enough flexibility. CRD IV allows for supervisors to add on capital to specific institutions if it sees risks, or across the piece if there is concern about macro-prudential risks in the economy, for example credit bubbles.
The Commissioner will also have on his agenda his planned proposal on crisis management and resolution of banks, along with a review of the Markets in Financial Instruments Directive (MiFID), which regulates market infrastructure. As London remains Europe's centre for banking and trading, these proposals will have a significant impact in the UK. The BBA has stated that they are therefore very pleased to be welcoming back the Commissioner to discuss his plans further.
Source: British Bankers Association
BBA Website
Gross mortgage lending totalled an estimated £12.6 billion in June. This represented a 16% increase from the £10.8 billion lent in May but was 3% lower than June 2010 (£13.0 billion), according to new data from the Council of Mortgage Lenders. This is the highest monthly total since July last year (£13.3 billion).
Gross lending for the second quarter of 2011 was therefore an estimated £33.5 billion, an 11% increase from the first three months of this year (£30.1 billion) and a 3% decrease from the second quarter of 2010 (£34.4 billion).
Lending in the first half of this year totalled £63.7 billion. This is only slightly below the first six months of 2010 (£64.1 billion).
CML Chief Economist Bob Pannell observed:
"The UK economy continues to experience disappointing economic growth, strong consumer price pressures, falling disposable incomes and an uncertain jobs market.
"This backdrop weighs negatively on purchase decisions relating to home ownership. By contrast, landlord activity appears to have picked up recently and, with evidence of strong rental demand, this should help to underpin activity over the coming months.
"UK households have made progress in bringing down debt burdens over the past year or so, but this largely stems from the restricted levels of new mortgage lending, unsecured write-offs and nominal income growth. Households in aggregate are not repaying their mortgage debt more quickly.
"Recent emotive headlines on repossession prospects appear overplayed, given that the state of our economy does not warrant large interest rate rises for the foreseeable future. But we do expect to see moderately higher arrears and possessions through the second half and into 2012, as we have previously forecast."
Source: Council of Mortgage Lenders
“We know where you are this summer - think twice about disclosing your holiday plans online” – advises the ABI. As the school holiday season begins, the ABI has warned the estimated 35 million people in the UK who use social networking sites not to disclose their summer holiday plans online, as criminals are increasingly going online to target unoccupied homes.
It has been estimated that over a third of social network users in the UK regularly give details of when they will be away from their home. In one case, after falling out with the family, a man attempted to ransack their home after seeing from their Facebook pages when they would be away on holiday. And in the US, police uncovered a criminal gang who targeted Facebook users, and broke into 50 homes after checking when the owners were away on holiday.
During the peak holiday season last summer insurers dealt with 752 home burglary claims every day – more than in any other period of the year. The ABI’s top tips to avoid becoming a victim of summer holiday burglars are:
It has been estimated that over a third of social network users in the UK regularly give details of when they will be away from their home. In one case, after falling out with the family, a man attempted to ransack their home after seeing from their Facebook pages when they would be away on holiday. And in the US, police uncovered a criminal gang who targeted Facebook users, and broke into 50 homes after checking when the owners were away on holiday.
During the peak holiday season last summer insurers dealt with 752 home burglary claims every day – more than in any other period of the year. The ABI’s top tips to avoid becoming a victim of summer holiday burglars are:
· Avoid giving details on social networking sites of when you will be away on holiday.
· Keep personal information to a minimum, and do not accept friendship requests from people you do not know.
· Make sure your home is secure when you leave it. Doors, windows and outbuildings, such as sheds and garages, should be locked.
· Make sure that items such as ladders and garden tools, which can be used to force entry, are locked away.
· Consider having some lights on timer switches.
· Ask a trusted neighbour, friend, or relative to keep and eye on your home for anything suspicious, and give them your contact details.
Nick Starling, the ABI’s Director of General Insurance and Health, said:
“Unoccupied summer homes are already more vulnerable to burglary, without advertising online that you are away. With criminals increasingly going online to access personal details, avoid divulging personal information, such as your holiday plans, online. Simple, common sense steps around ensuring your home is secure and not advertising that you are away will greatly reduce the risk of unwelcome visitors while enjoying your summer break.”
“Unoccupied summer homes are already more vulnerable to burglary, without advertising online that you are away. With criminals increasingly going online to access personal details, avoid divulging personal information, such as your holiday plans, online. Simple, common sense steps around ensuring your home is secure and not advertising that you are away will greatly reduce the risk of unwelcome visitors while enjoying your summer break.”
Source: Association of British Insurers
ABI Website
ABI Website
