James Ewing, Head of Assurance, Risk and Planning, Banking Standards Board and Maximilian Weidlich, Policy Associate, Banking Standards Board
This is the third blog in a series on International Challenges to Certification, as required for UK firms under the Senior Managers and Certification Regime. In this blog we explore some of the approaches firms with a global reach might take to ensure that they embed fitness and propriety (F&P) assessments across different jurisdictions. For more information on the types of challenges firms face around sourcing F&P information, please see the second blog in this series. For a description of the roles that require certification in a global group, read the first blog in this series.
Sustaining the cycle of F&P assessments on at least an annual basis may present complexities for firms operating in the UK with overseas-based employees in roles requiring certification. These include:
- the degree of engagement with and the ability to influence the local business;
- layering the requirements of the Certification Regime over any local regulatory requirements; and
- local structural changes disrupting established processes.
While all firms may face these complexities, they may be particularly acute for UK branches of overseas firms who may have less or no direct control over other parts of the business which have employees working in roles requiring certification.
To manage these complexities, the effective operation of the Certification Regime across a global group might require a more centralised approach than might otherwise be taken in a purely UK market (where it may be desirable, depending on a firm’s business model, to delegate much of the F&P assessment to line management[1]). For example, firms could:
- look for opportunities for information gathered for local regulatory purposes to be fed into the UK F&P assessment process;
- identify where group onboarding standards can be relied upon to provide the assurance required;
- consider how frequently a wider communication exercise may be necessary to ensure that employees and line managers are aware of the need to notify the UK function with responsibility for the Certification Regime if the regulation is likely to apply tothem; and
- undertake engagement on an annual basis with local business lines including:
- confirm local structural arrangements and any consequential changes in the line management chain;
- review who may have come in to or gone out of a role requiring certification based on whether the 30-day threshold is met in a rolling 12-month period (or who is likely to do so);
- review the range of equivalent information and determine whether there remain any gaps that are of sufficient concern that they need to be treated as a certification risk; and
- review any additional controls that are in place to determine whether they are still necessary and appropriate.
Reviewing arrangements to assess F&P across a global group
Given the regulatory requirements surrounding the application of the 30-day rule within a rolling 12-month period[2], firms may wish to consider reviewing the arrangements for assessing the F&P of their overseas population on an annual basis. The table below lists non-exhaustive example questions that firms may use when reviewing arrangements to assess F&P across a global group.
[1]Although it is unlikely, for example, that it would be practical to delegate screening checks such as credit reference checks or criminal records checks to a line manager.
[2]See SYSC 27.5.3, https://www.handbook.fca.org.uk/handbook/SYSC/27/5.html#D100.
[3]This is unlikely to be necessary annually, however firms should decide how frequently they wish to undertake such a review.
