'Many eyes' approach to sanctions compliance
The many eyes approach to sanctions compliance in the Lloyd's market is not just for managing agents but useful guidance for all.
With the New Year, the Lloyd's International Regulatory Affairs team, led by Andy Wragg, has issued new guidance on sanctions compliance looking at systems and controls. Although directed at Lloyd's managing agents, the bulletin is also being sent to brokers for their information, which is regulator code for read and apply it, please.
There is a general view that responsibility for screening, and to some extent applying the sanctions regime, rests with both brokers and managing agents. Accordingly, if there are more than a pair of eyes checking for sanctions, then it should improve the market.
The guidance sets out sensible and practical guidance on system and controls compliance. Of note, the first item on the agenda is a risk assessment. We have said before, when designing and implementing any financial crime system (from anti-corruption through to sanctions) the starting point is a risk assessment. Before Christmas, the FCA published its findings on the anti-corruption controls within a cohort of commercial insurance brokers, the majority from Lloyd's, which surprisingly found there is still a lack of risk assessments. If you get the risk assessment and the screening right then the rest of your anti-financial systems should fall into place.
For the insurance market the main corporate financial crime risk - money laundering (and historically the main focus of the FCA) - does not pose a significant risk to insurers and intermediaries, but sanctions do. This new guidance goes to mitigate that risk.