Are you ready for an IOMFSA fitness & propriety assessment?

Introduction

In a recent Dear CEO letter, the Isle of Man Financial Services Authority (the Authority) highlighted the recruitment landscape for Heads of Compliance and Money Laundering Reporting Officers (MLROs).

Noting the tightening of the employment market in recent years, the Authority pointed out the challenges Regulated Entities can face in finding suitable candidates for these critical positions.

Consequently, there has been an uptick in instances where Fitness and Propriety (F&P) assessments fail to meet regulatory expectations.

Navigating fitness and propriety requirements in regulatory compliance

The Authority has emphasised the paramount importance of F&P requirements, especially for individuals in key roles like Head of Compliance and MLRO. These requirements serve as a cornerstone of regulatory provisions, primarily aimed at safeguarding various interests:

• Customer Protection: Central to F&P requirements is the protection of customers of regulated entities. Ensuring that individuals in key positions are fit and proper minimises the risk of harm to consumers.
• Preventing Financial Crime: F&P requirements also serve to prevent regulated entities from being controlled or managed by individuals engaged in financial or other criminal activities. This measure mitigates the likelihood of inadvertent involvement in financial crime.
• Preserving Reputation: Furthermore, adhering to F&P standards is essential for upholding the reputation of jurisdictions like the Isle of Man. It signals a commitment to integrity and responsible governance within the financial sector.

Evaluating applicants

When assessing applicants, the Authority considers factors beyond minimum standards, including.

• relevant experience,
• risk environment,
• impact considerations,
• and business complexity.

Objective measures like firm size, customer base, and compliance track record inform flexibility levels.

Evidence of support for individual development, like tailored training plans, may influence decisions.

This flexibility allows qualified individuals to take senior roles in firms prioritising compliance cultures.

Conversely, deficiencies or regulatory contraventions may require appointing individuals with more sector experience. The Authority urges early engagement to explore options and ensure compliance with standards.

Key expectations

The Authority has delineated its primary expectations of firms.

• Every firm is expected to carefully assess and follow the Training and Competency Framework.
• Each firm is required to consider and adhere to the Regulatory Guidance for Fitness and Propriety.
• Should a firm encounter difficulty in meeting the legislative requirements, as outlined in the Regulatory Guidance for Fitness and Propriety and/or the Training and Competency Framework, it is encouraged to actively communicate with the Authority at the earliest opportunity for assessment.
• All firms need to engage in thorough succession planning to identify potential areas of risk or concern and take appropriate measures to address and minimise those risks or concerns.

Summary

In summary, despite ongoing recruitment hurdles, the Authority remains steadfast in its dedication to assisting firms in fulfilling regulatory responsibilities.

Clear guidance, cooperative endeavours, and initiative-taking involvement are essential for navigating the dynamic compliance environment.

While the Dear CEO letter focuses on Heads of Compliance and MLRO’s, Firms should be satisfied that all senior positions align with the Framework and Guidance provided by the Authority.

The Authority has clearly stated its primary expectations, and firms must adhere to these expectations as they progress.

How we can help you

Grant Thornton Isle of Man, supported by the UK and Irish Firms are strategically positioned to aid your organisation in evaluating and enhancing its F&P framework.

Leveraging our experience and expertise, we stand ready to assist you in evaluating your existing controls and developing enhanced internal processes.

Our adept team consisting of former regulators, supervisors, compliance leads and MLRO’s in multiple jurisdictions can support you in instituting a program aimed at implementing robust controls, assurance reviews and safeguards effectively and efficiently.

We provide bespoke best-in-class, training and competency frameworks, to meet your organisation's needs.