The need for effective broker checks within the financial services industry
The financial industry is evolving rapidly – with the advent of Open Banking and advanced Fintech solutions presenting many more sales opportunities to brokers and Independent Financial Advisers (IFA). In addition, we are seeing thousands of new entrants to the enabler communities since the introduction of sweeping reforms to financial and insurance regulations.
As well as opportunities, this presents challenges. Many providers are still reliant on paper based or spread sheet systems to screen and validate their network of enablers, to ensure that they are appropriately qualified and compliant. This poses significant organisational challenges when managing the workflow involved inbringing new enablers safely on board.
How can the industry make these processes simpler, faster and more efficient? A major provider has trialled and launched an IFA and Broker Boarding Solution which is delivering instant results – saving time and money and reducing risk.
Providers need to board new IFAs and brokers quickly and efficiently, with as little friction in the process as possible, and provide them with the best business terms for both parties in order to continue to grow their market share.
With so many changes in the world of financial services and insurance – from the opening up of opportunities for new providers and brokers through the Open Banking Standard, to the digital transformation we are seeing that is impacting organisations and changes enforced in the GDPR – traditional systems of screening candidates for pensions, life insurance, mortgages and other financial services enabler panels, are being stretched to the limit.
Providers need to board new IFAs and brokers quickly and efficiently, with as little friction in the process as possible, and provide them with the best business terms for both parties in order to continue to grow their market share. That’s particularly critical at this time of change, where demand is increasing rapidly and old ways of working are becoming outdated.
Many of the screening systems are not designed to cope with the high numbers of new entrants.
Outdated systems cause problems
Currently there are largely only time consuming and manual screening processes in place for brokers and IFAs, all of which slow down the boarding process. Some are even paper-based, and many require extensive cross referencing of various data sources using spreadsheets. It is a costly way of working.
In addition, many of the screening systems are not designed to cope with the high numbers of new entrants – or the growing problem of candidates without the right qualifications to be compliant, or who are not who and what they claim to be.
Your internal controls effectively monitor and manage your firm’s compliance with anti-money-laundering (AML) policies and procedures.
Compliance and regulatory requirements
The Financial Conduct Authority (FCA) states in its report on financial crime1 that:
“Firms must satisfy us that they have robust governance, effective risk procedures and adequate internal control mechanisms to manage their financial crime risk. Some firms will also have further obligations placed on them by law.”
“By using effective systems and controls, your firm can detect, prevent and deter financial crime.”
Senior management should take clear responsibility for managing financial crime risks and be actively engaged in addressing these risks.”
Subsequent to that report, the FCA’s paper on money laundering and terrorist fraud2 added:
“The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 require you to apply risk-based customer due diligence measures and take other steps to prevent your services from being used for money laundering or terrorist financing.”
“We require all authorised firms subject to the Money Laundering Regulations to meet additional but complementary regulatory obligation to apply policies and procedures to minimise their money laundering risk.”
“Your internal controls effectively monitor and manage your firm’s compliance with anti-money-laundering (AML) policies and procedures.”
...apply risk-based customer due diligence measures and take other steps to prevent your services from being used for money laundering or terrorist financing.”
On the subject of brokers it states:
“Although mortgage brokers, general insurers and general insurance brokers are not subject to our AML rules and the Money Laundering Regulations, they still need systems and controls to prevent financial crime. They are also subject to the Proceeds of Crime Act 2002.”2