tmacompliancebulletin

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February 2017

our experience is vast.our knowledge is great. we’ve been around fora long time and we willshare all we know with you.

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This edition aims to provide you with important news in terms of the KEYFACTS LOGO, MORTGAGE MARKET STUDY, EVENTS, FRAUD, GDPR, GI RENEWALS, CUSTOMER OUTCOMES, THE FINANCIAL CRIME RETURN AND LAST BUT NOT LEAST, GENERAL NEWS FROM THE FCA.

AT A GLANCE

Keyfacts logo - act now

FCA Mortgage Market Study - be aware

TMA Breakfast Compliance Workshops – coming soon

FCA Live and Local Events in the North West

Reporting Mortgage Fraud

Fraud Update

Fraud Summaries

General Data Protection Regulations (GDPR)

GI Renewals

Customer Outcomes

Financial Crime Return - deadline reminder

FOS - age related complaints

Deutsche Bank - anti money-laundering controls failings

welcome.

The FCA has stated that firms have until 27th March 2017 to remove the keyfacts logo from any Disclosure Documentation.

KEYFACTS LOGO - ACT NOW

PRIVATE AND CONFIDENTIAL

This decision is as a result of the removal of the template Initial Disclosure Document and Combined Initial Disclosure Document from the FCA Handbook.

We recommend therefore that you take time out to remove this logo from any Disclosure Documentation that you may have. For more detailed information, click here.

fca mORTGAGE MARKET STUDY - BE AWAREAs previously mentioned in January’s bulletin, the FCA are conducting a market study in the mortgage sector and in most cases will be seeking information from you by the way of an electronic survey.

The work is focused on first charge residential mortgages and aims to answer the following two questions:

ONEAt each stage of the consumer journey, do the available tools (including advice) help mortgage consumers make effective decisions?

TWODo commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers?

We understand the survey may have already been issued to some firms so please keep an eye out and respond as requested.

Whilst the survey is voluntary, we strongly recommend that you take time out to respond as this is your opportunity to tell them about the current state of the mortgage market and highlight to the FCA the importance of your role in the advice process.

Following all feedback, the FCA aims to publish an interim report during the summer of this year, setting out its initial thoughts and conclusions which are usually a pre-cursor for more rule changes - watch this space.

COMPLIANCE BREAKFAST WORKSHOPSThroughout 2017 we will be holding a series of Compliance Workshops. The first of these will kick off on Wednesday 22nd March at the Holiday Inn, Wall Island, Lichfield, WS14 0QP.

This event is free of charge and places will be allocated on a first come, first serve basis. Selected lenders and providers will be in attendance, but we’re limiting the event to around 20 advisers to make it more interactive and personal.

Registration is from 9am which includes a full english breakfast and a chance to mingle with your peers and is scheduled to finish by 12.30pm.

The events will be hosted by our Field Compliance Manager, Simon Lovell who will also inform you of the current Compliance issues and solutions. To reserve your place, click here.

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The FCA still have some Live and Local events yet to run - the sessions are aimed at regulated firms in the General Insurance and Mortgage sectors. We recommend that you attend a session, in particular the ‘Positive Compliance: Mortgage - the advice process’ session which will be of relevance to you (current cost £85 including VAT per person per session).

They are visiting the North West in March, which includes Merseyside.

Attend an event where possible.

For full details click here.

The FCA is intensifying its crackdown on mortgage fraud to tackle this serious and widespread problem. It’s essential that, as a mortgage broker, you have sufficient controls in place to prevent your firm being used for committing fraud.

You should also remember you are responsible for reporting any wider suspicions of fraudulent activity, or examples of poor practices resulting in potential fraud you have noticed. This is in addition to your statutory duty to report suspicious activity.

What to report:The following are examples of what you should report:

Instances when it has come to your attention (for example during discussions with clients) that other brokers have been:

> Encouraging applicants to inflate their income or provide false employment details on mortgage applications; or

> Offering clients access to false documents (bank statements, utility bills, wage slips, accountant references, passports etc.) to support mortgage applications.

Concerns about a lender’s Business Development Manager, such as instances where they may have encouraged you to favour certain products where they may not be suitable, or to manipulate clients to fit criteria.

fca LIVE and Local events in the north west

Reporting mortgage fraud

What to include in your report:Please send the FCA as much information as possible and they will treat everything you give them as strictly confidential.

To help, the FCA has created a reporting document that you may want to use. Click here to access it.

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And whilst we’re on the topic of fraud, here are the top three issues that we are aware the industry is currently experiencing in terms of fraud trends:

FRAUD UPDATE

False documents

Staged employment (or recent employment prior to the mortgage application); and

Convenient pay rises just prior to the applicationHere are some tips therefore to consider...

False documents: Always ask for originals, don’t have them sent to you over email and take time out to check them. Remember, if you are not comfortable with what has been provided, you have an obligation to conduct enhanced due dilligence on the customer.

Staged employment: Applicant starts a new job/changes jobs prior to the application - usually a second job, paid cash, started a few months before the application - often without this income, the loan is unaffordable - if this happens step back and check it out.

Convenient pay rise: Again step back, call the employer and obtain evidence.

Any of these items should prompt your advisers to look more closely at the application. If they don’t they are putting your firm at risk by not carrying out suitable due dilligence with the customer.

TMA have issued some very useful tips and reminders as to how you can ensure you maintain high levels of quality mortgage applications, which as a reminder can be accessed by clicking on the links below:

Know Your Client

Document Checks

Credit Abuse

Plausability

FRAUD SUMMARIES

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eA new EU Data Protection framework, the GDPR comes into force in May 2018. In the course of providing mortgage and protection advice your business will control or process vast quantities of sensitive personal data relating to customers.

Under the GDPR you will have significantly more legal liability if you are responsible for a data breach.

Sanctions - the following sanctions can be imposed:

GENERAL DATA PROTECTION REGULATIONS (GDPR)

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A warning in writing in cases of first and non-intentional non-compliance

Regular periodic data protection audits

A fine up to 10,000,000 EUR or up to 2% of the annual worldwide turnover of the preceding financial year in case of an enterprise, whichever is greater

A fine up to 20,000,000 EUR, or in the case of an undertaking, up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher

Although this is some time away, it’s important to be prepared so please keep an eye out for future bulletins and guidance on this subject as we progress throughout the year.

As a starting point, firms should be reviewing their customer consents and grounds for controlling or processing sensitive personal data and data security controls. Please get in touch if you would like some help and guidance.

Email compliance@tmaclub.com

General Insurance (gi) renewalsIn August of last year, the FCA published a policy statement introducing requirements for firms to provide greater transparency to customers, when inviting renewal of a contract.

The new rules require firms to:Disclose last year’s premium at each renewal

Include text to encourage consumers to check their cover and shop around for the best deal at each renewal

Identify consumers who have renewed with them four consecutive times, and give these consumers an additional prescribed message encouraging them to shop around

Firms will also need to maintain records to demonstrate compliance, including keeping a record of premiums.

The FCA believes that customers do not engage in the renewal process, and would renew without considering if their cover remained suitable or even competitive. As a result, the FCA concluded that displaying a reperesentative premium for the previous year was the most effective action to take.

The new rules comes into force 1st April 2017 and relate to any renewal invitation issued on or after this date.

If your business model involves you actively contacting your customers at renewal, or processing and issuing renewal invites, then these rule changes are highly likely to impact on you.

For more detailed information, please click here or email compliance@tmaclub.com.

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CUSTOMER OUTCOMESRegular and effective reviews of your business are important to help make sure processes and procedures deliver fair treatment for customers. It is important that business culture, strategy and activities are focused on delivering fair outcomes for customers, so it’s vital to explore some areas of your business to help ensure that risks are clearly identified - the FCA expect you to fully understand your business and take ownership of the process to identify risk.

As an example, it’s important that your sales process can stand up against FCA expectations on customer outcomes. For example:

Scope of service - is your Disclosure Documentation clear?

Is your fee structure clear?

Do you have clear boundaries between information and advice?

How do you know your customers well enough?

Fact Finding - do you include soft facts?

Lender Panel - does it meet their needs or do you make their needs fit the panel?

How can you evidence that they’re receiving suitable advice?

Post sale barriers - any restrictions and a consent for future contact?

Compliant Handling Poilcy - do you have one?

TMA is pleased to have available for you a Firm Engagement Visit, which is an easy one stop gap analysis on all of the above issues. The visit also focuses on several other key subjects including:

Hot Topics from the FCA, i.e. the MCD, the recent complaint changes, Performance Management

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Financial crime return - deadline reminderAs mentioned in the previous bulletin, your firm may have to complete the Financial Crime Return (known as REP-CRIM) alongside your usual regulatory reporting requirements.

Currently the FCA don’t gather information from firms about Financial Crime, the risks you’re exposed to, or how you manage those risks, so new rules were introduced which came into effect 31stDecember 2016.

The purpose of the new report is to ensure that the FCA receives regular and comprehensive data about the firms systems and controls in preventing financial crime.

A firm must submit the Annual Financial Crime Report using the appropriate online system accessible from the FCA website.

Please therefore access your GABRIEL account and/or any recent FCA GABRIEL emails for anyreference to this requirement as your deadline may be 27th March 2017.

Click here to see what the new ‘REP-CRIM’ Annual Fiancial Crime Report looks like.

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Conduct Risk

Systems and Controls

T&C

Sales ProcessYou will receive a formal report with a record of our discussion, useful guidance material for your future reference and any recommendations that may be made by a Field Compliance Manager - the visit will take place at your home or office and generally takes between 3 to 5 hours depending on the size of your firm, so this is well worth your time.

As a regular reader of this bulletin, we are pleased to offer you a discounted rate of £299+VAT (usually £399+VAT) for our Firm Engagement Visit package.

This special deal will also include access to our document library which includes a suite of usefulcomplaint handling documents and will be available for a limited time only.

To ensure you don’t miss out, please register your interest by emailing compliance@tmaclub.com.

Financial ombudsman service - age related complaintsA little over a year ago, the FOS highlighted the complaints they’d received from people who feltunfairly treated because of their age. Many of these people had unsuccessfully tried to change or apply for mortgages.

PRIVATE AND CONFIDENTIAL

At the other end of the scale, they also shared the problems they see involving people under the age of 25.

Although PPI is still by far the issue people complain to them about the most, it barely features at all among younger consumers’ complaints.

Click here to see an interest infographic of their complaints by generation.

Performed inadequate customer due diligence

Failed to ensure that its front office took responsibiliy for the CB&S division’s ‘Know Your Customer’ obligations

Used flawed customer and country risk rating methodoligies

Had deficient AML policies and procedures

Had an inadequate AML IT infrastructure

Lacked automated AML systems for detecting suspicious trades

Failed to provide adequate oversight of trades booked in the UK by traders in non-UK jurisdictions

As a result of these failings Deutsche Bank failed to obtain sufficient information about its customers to inform the risk assessment process and to provide a basis for transaction monitoring.

Deutsche bank fined £163m for serious anti-money laundering controls failingsThe FCA has fined Deutsche Bank AG (Deutsche Bank) £163,076,224 for failing to maintain anadequate anti-money laundering (AML) control framework during the period between 1st January 2012 and 31st December 2015.

This is the largest financial penalty for AML controls failings ever imposed by the FCA, or itspredecessor the Financial Services Authority (FSA).

Deutsche Bank exposed the UK financial system to the risks of financial crime by failing to properly oversee the formation of new customer relationships and the booking of global business in the UK. As a consequence of its inadequate AML control framework, Deutsche Bank was used by unidentified customers to transfer approximately $10 billion, of unknown origin, from Russia to offshore bankaccounts in a manner that is highly suggestive of financial crime.

The FCA found significant deficiencies throughout Deutsche Bank’s AML control framework. The FCA specifically found that, during the relevant period, Deutsche Bank’s Corporate Banking and Securities Division (CB&S) in the UK:

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The failings allowed the front office of Deutsche Bank’s Russia-based subsidiary (DB Moscow) toexecute more than 2,400 pairs of trades that mirrored each other (mirror trades) between April 2012 and October 2014.

As a result, Deutsche Bank breached Principle 3 (taking reasonable steps to organise its affairsresponsibly and effectively, with adequate risk management systems) of the FCA’s Principle forBusinesses.

The FCA emphasises the importance of having a strong AML control framework through its proactive supervisory programmes on AML.

Firms are regularly reminded of the importance of safeguarding the UK Financial System from financial crime and how to comply with AML requirements. Click here for a full report.

Thank you for taking the time to read this bulletin.We hope you found it useful.

We’d really appreciate any feedback you have.Email compliance@tmaclub.com

Would you like to try a new Compliance Package?For more details email hello@tmaclub.com or click here to see our revised

compliance proposition.

tell us your thoughts

PRIVATE AND CONFIDENTIAL

you have to learn the rules of the game.then play better than anyone else.”albert einstein

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TMA, Shire House, Birmingham Road, Lichfield, Staffordshire, WS14 9BW www.tmaclub.com.Registered office: Newcastle House, Albany Court, Newcastle Business Park, Newcastle Upon Tyne, Tyne & Wear, NE4 7YB.

TMA is the mortgage club of First Complete Ltd.