From CompliNEWS | Financial Service Intelligence Watch
Finding the right fit: key considerations for FSPs when hiring a representative
Financial Service Providers (FSPs) often face the challenge of hiring the right Representative. Imagine believing you’ve found the ideal candidate with years of industry experience, only to discover they don’t meet the Fit and Proper requirements as outlined in Board Notice 194 of 2017 and the Financial Intelligence Centre (FIC) Directive 8. Such oversights can lead to regulatory complications, potential fines, and even business disruptions.
The Risks of Not Checking Fit and Proper Status
Masthead Compliance Officers have noted numerous instances where FSPs onboard Representatives without
thorough checks. This oversight can lead to:
• Regulatory scrutiny and potential fines.
• The need to manage the risk of unauthorised advice, which can be costly and time-consuming.
• The possibility of the Representative being a liability rather than an asset.
• Implications of Non-compliance.
If a Representative doesn’t meet the Competence requirements of Board Notice 194, the FSP might need to supervise them or reassign them until they fulfil the criteria. More critically, if such a Representative advises clients without supervision, the FSP could face penalties from the Financial Sector Conduct Authority (FSCA) or be held accountable for complaints by clients.
The onus of verifying a Representative’s Fit and Proper status lies with the FSP’s Key Individual. Failure in this responsibility can lead to debarring, necessitating the appointment of a new Key Individual and potentially jeopardising the business’ continuity.
Directive 8 and its Implications
The FIC’s Directive 8, issued on 31 March 2023, mandates FSPs to screen both potential and current employees for competence and integrity. This directive aims to mitigate risks associated with money laundering, terrorist financing, and proliferation financing. Non-compliance can result in sanctions under the FIC Act.
FSPs must ensure that candidates meet the Competence requirements of Board Notice 194. This includes possessing recognised qualifications, passing the Regulatory Exam for Representatives, undergoing Class of Business and Product Specific Training, and staying updated with Continuous Professional Development.
Directive 8’s Requirements
Directive 8 necessitates:
• Risk assessment related to money laundering, terrorist financing, and proliferation financing.
• Competence evaluation through employment history, qualifications, and references.
• Integrity checks, including criminal record assessments.
• Screening against the Targeted Financial Sanctions list.
• Verifying Credentials and Determining DOFA.
It’s crucial to validate the information provided by candidates. This includes verifying qualifications, checking references, and determining the Date of First Appointment (DOFA) with the FSCA.
While the hiring process might seem daunting, due diligence is paramount. Ensuring that a Representative meets
all requirements not only safeguards the FSP from potential legal and financial pitfalls but also ensures that the
business continues to operate smoothly and efficiently.