FCA fine ADM Investor Services
What has happened?
In October 2023, the FCA fined investment brokerage firm ADM Investor Services International Limited (ADMISI) £6,470,600 for ineffective financial crime controls.
What are the key points in relation to this fine?
The nature of ADMISI’s business and client base presented potentially high levels of money laundering risk because of its business model, the geographical location of its customers, the proportion of its business involving high-risk clients, and because it had Politically Exposed Persons as clients. It has market coverage extending, but not limited to, energy, base metals, foreign exchange, and cocoa.
The FCA had raised concerns with ADMISI in 2014 about its AML systems, including the absence of a formal process to classify customers by risk. The FCA expected ADMISI to make improvements.
However, during a 2016 firm visit, the FCA found significant failings remained. In particular:
- The firm’s AML customer risk assessment was basic and did not enable an assessment of a customer’s financial crime risk. It did not conduct a firm-wide money laundering risk assessment. There was little evidence of adequate ongoing monitoring in the form of periodic customer reviews.
- Policies were outdated and referred to old legislation.
After the 2016 visit, ADMISI agreed to FCA requirements, including one not to take on business from high-risk customers in order to lessen the threat of the firm being used to launder money or finance crime. By the end of October 2016, ADMISI had introduced AML policies and procedures to address the concerns identified. After further remedial action, the requirements were lifted in January 2018.
These shortcomings were in breach of Principle 3 of the FCA’s Principles for Businesses and persisted even after the firm was warned about the need to improve its systems.
Key learnings for firms from this case are:
- Business-Wide Risk Assessment - Firms must have in place a detailed business-wide risk assessment accompanied by a methodology. The risk assessment should include an assessment of the firm’s geographical, customer, product, transaction risk, and more.
- Customer Risk Assessment - Firms must classify their customers by risk, with a sufficient and evidenced-based risk rating methodology.
- PEPs - Firms must decide whether Politically Exposed Persons fit within their risk appetite and must specify this within their policy documents.
- EDD - Firms must have appropriate enhanced due diligence measures in place for higher-risk customers.
- Transaction Monitoring - Transaction monitoring should be conducted on a live and ongoing basis, using a risk-based approach.
- Periodic Reviews - Ongoing customer monitoring and periodic reviews should be appropriate to the risk and kept up-to-date.
- Policies and Procedures - All policies and procedures should be reviewed and updated annually, and when there is an update to regulation. Horizon scanning should be conducted regularly to keep on top of updates.
- MLRO Report - The MLRO must produce an acceptable report on an annual basis that identifies, manages, and monitors risks.
- AML Training – Firms should ensure AML training is conducted and training records are maintained.
- Audit - Firms should ensure their internal audit function is effective or have an external auditor examine their entire AML framework.
- Responsiveness to the FCA - If contacted by the FCA, firms should respond promptly and make the necessary amendments to their systems and controls as a priority.
How can Thistle Initiatives help?
Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulation. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.
Are you looking for help with your financial crime arrangements, or more general regulatory questions? Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.