Release Date: 16th June 2022
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined JLT Specialty Limited (JLTSL) £7,881,700 for breaches of Principle 3 of the Authority’s Principles for Businesses between 21 November 2013 and 6 June 2017. These breaches pertained to JLTSL’s failure to maintain adequate risk management systems to counter the risks of bribery and corruption.
Reasons for the Fine:
- Inadequate Risk Management Systems: JLTSL failed to implement sufficient controls and due diligence when dealing with Overseas Introducers engaged by other JLT Group entities.
- Previous Penalty and Failed Improvements: Despite a previous financial penalty of £1,876,000 in 2013 for similar breaches and subsequent efforts to improve controls, JLTSL did not extend adequate safeguards to engagements involving other JLT Group entities.
- Failure to Consider Red Flags: JLTSL did not properly assess and monitor relationships with Overseas Introducers, missing critical red flags and opportunities to mitigate bribery and corruption risks.
- Bribery and Corruption: JLTSL’s deficiencies allowed another JLT Group entity to engage in bribery, involving payments to government officials to retain business, leading to a US$3,157,000 bribery scheme.
Key Takeaways:
- Comprehensive Due Diligence: Firms must conduct thorough due diligence and risk assessments for all third-party relationships, especially when multiple entities are involved.
- Holistic Risk Management: Risk management systems should encompass all business activities, including those involving other group entities, to ensure consistency and thorough oversight.
- Monitoring and Oversight: Continuous monitoring and oversight are crucial, including reviewing payments and ensuring compliance with due diligence processes.
- Response to Red Flags: Firms should have robust processes to escalate and address red flags promptly, ensuring that potential risks are mitigated effectively.
- Regulatory Cooperation: Firms should cooperate fully with regulatory investigations and implement recommended controls to prevent future breaches.
Conclusion:
JLTSL’s failure to maintain effective risk management systems and its inadequate oversight of third-party introducers resulted in serious breaches of regulatory principles. This case underscores the importance of comprehensive due diligence, effective monitoring, and robust risk management systems to prevent financial crime. The FCA’s penalty highlights the need for firms to ensure stringent compliance with regulatory standards to safeguard market integrity and protect against corruption.
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