The Financial Conduct Authority (FCA) recently published a report on the outcome of its thematic review of wholesale insurance intermediaries, ‘Managing bribery and corruption risk in commercial insurance broking’ (TR14/17).
Reporting the findings of its investigation into anti bribery and corruption (ABC) measures adopted by 10 Lloyd’s brokers (five of whom were the subjects of an early review conducted in 2010), the regulator took the view that, despite making progress in areas such as remuneration, gifts and hospitality policies, the majority of intermediaries have yet to manage ABC risk adequately across the board.
Around half the firms under review, the FCA notes, had yet to extend their assessment of ABC risk right across their business operations, both trading and non-trading, so as to identify areas of high risk exposure and allocated resource appropriately.
The regulator found that whilst risks associated with individual relationships had generally been considered, intermediaries needed to adopt a more holistic approach that ‘joined the dots’ more generally. The thematic review also raised concerns as to the degree of relevant expertise and understanding demonstrated by senior managers assigned responsibility for managing bribery and corruption risk.
Following, as it does, the high profile fine imposed on leading global brokers Aon in 2009, the FCA’s latest pronouncements appear to offer a more explicit statement of the regulator’s specific expectations on ABC. As those expectations begin to crystallise, it would probably also be true to say that they are starting to look more demanding.
The report does, however, express the criticism that too much of the training delivered on bribery and corruption risk is sporadic, one-off, and/or poorly documented.
As has often been the case with the FCA’s, and previously the FSA’s, treatment of general insurance brokers, there are also grounds for questioning whether its expectations – in terms of their implications for intermediaries’ process and control costs – are truly proportionate with the risks posed.
On the specific topic of training – something clearly dear to my firm’s heart as a provider of specialist training services to the insurance sector – the FCA has some interesting things to say.
The overall view appears to be that standards of ABC training have improved since the 2010 review. The report does, however, express the criticism that too much of the training delivered on bribery and corruption risk is sporadic, one-off, and/or poorly documented. The FCA makes clear that it is looking for evidence of testing and effectiveness for all training delivered. Above all it seeks evidence that training is being targeted at areas of high ABC risk rather than rolled out piecemeal without proper reference to meaningful risk assessment.
Interestingly, there are two training measures cited in the examples of good practice section towards the end of the 21-page report. Specifically these refer to one broker ‘creating a one-page ‘aide memoire’ for staff, listing key points about anti-financial crime and whistleblowing process to which staff could easily refer’, and to another ‘appointing a compliance expert within each business area who provides ABC advice to staff.’
These examples make encouraging reading, given that they coincide with face to face training currently being delivered within the broker market. It’s always good to hear back from the regulator about something going right!