Our financial crime compliance and rigorous risk management strategies are the key to ensuring client protection in today's complex regulatory landscape.
Our financial crime compliance and rigorous risk management strategies are the key to ensuring client protection in today's complex regulatory landscape.
To support the UK’s financial regulatory body with its supervision and enforcement functions, the Financial Conduct Authority (FCA) may require a firm to provide a report by a ‘Skilled Person’ or appoint a ‘Skilled Person’ to produce such a report. Once an independent review of the firm has been conducted, a report containing the assessment and recommendations will be produced and submitted to the FCA. This power is known as section 166 of the Financial Services and Markets Act 2000.
Section 166 ‘Skilled Person’ reviews are not routine reviews; they are often initiated in response to specific concerns or identified risks within a firm. The purpose of a section 166 review is to provide an independent assessment of a firm’s practices, its inherent risks and its compliance with regulations. The findings from these reviews assist the FCA in its determination as to whether there is a need for further action, whether that be enforcement, penalties, or a requirement for the firm to make operational changes.
Section 166 reviews are an important and effective regulatory tool to ensure that firms operate in compliance with applicable regulations. They can be a daunting experience for firms to whom they are subject, but it is important to keep a positive outlook. A section 166 review isn’t necessarily negative, it can be a useful instrument that can provide a firm-specific benchmark for best practice in the long term. Mercore Compliance can support your firm throughout the process.
The first stage of a section 166 review is for the ’Skilled Person’ to identify areas of concern requiring further. For example, weaknesses may have been identified in a firm’s anti money laundering procedures.
Once these concerns have been established, the FCA will approve an independent ‘Skilled Person’ to conduct the review. The ‘Skilled Person’ will work closely with the firm to assess various aspects of its operations.
Depending on the nature of concerns identified, the scope of the review can vary significantly. The review scope may include an examination and assessment of compliance procedures, financial records, risk management practices, customer treatment and other operational aspects.
To form an understanding of a firm’s practices and compliance framework, the ‘Skilled Person’ will gather evidence, interview staff and analyse documentation.
The report will typically include a detailed assessment of the subject firm’s compliance with regulatory requirements, risk management practices and internal controls. The report will identify specific areas of weakness or non-compliance and provide recommendations for improvement.
Once the section 166 review has been completed, the ‘Skilled Person’ will submit a report to the FCA, which details their findings and recommendations. This report can lead to a range of outcomes, such as:
The FCA may decide to take no further action if the ‘Skilled Person’ concludes that the firm meets regulatory standards, and no remedial activity is required.
The review may identify areas for improvement without requiring enforcement action. In such instances, the firm is required to implement the changes recommended.
The FCA may take enforcement action against the firm if a serious breach or risk is identified, which can include fines, restrictions on business activities, or revocation of the firm's license to operate.
If your firm is subject to a section 166 review, we can help you navigate the process; we have technical advisors whose focus is to ensure your firm is adequately prepared in advance of the ‘Skilled Person’ review, identify previously unidentified control framework issues, and brief senior management and staff on review processes and possible ‘Skilled Person’ findings.
We have financial crime specialists who can act as liaisons, managing section 166 information requests to ensure your firm provides accurate, complete and suitably positioned responses to the ‘Skilled Person’. We will develop and execute all documentation, plans, processes and client preparation as part of the section 166 review.
Contact us at [email protected] or fill out the form below and we’ll have one of our specialists reach out to you as soon as possible.
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