REG Reviews
REG Reviews – December 2021
1st December 2021
REG Reviews
1st December 2021
This month we look at the urgent call for digitalisation in the insurance industry and developments in the Natwest anti money laundering case.
Read this along with our usual update from REG and the REG Tech sector.
In last month’s REG Reviews we reported National Westminster Bank Plc (NatWest) pleaded guilty at Westminster Magistrates’ Court to criminal charges brought by the FCA under the Money Laundering Regulations 2007.
Now for the first time the FCA has pursued criminal charges for money laundering failings fining NatWest £264.8 million.
Between November 2021 and June 2016 NatWest failed to monitor suspect activity by Fowler Oldfield, a Bradford-based jewellery wholesaler, which deposited £365m over a five-year period, including £264m in cash.
Some of the bank’s employees, who were responsible for handling these cash deposits, reported their suspicions to bank staff responsible for investigating suspected money laundering, however no appropriate action was ever taken.
Suspicion was raised when significant amounts of Scottish bank notes were deposited throughout England, deposits of notes carrying a prominent musty smell, and individuals acting suspiciously when depositing cash in NatWest branches.
In addition, the bank’s automated transaction monitoring system incorrectly recognised some cash deposits as cheque deposits.
Due to the above Fowler Oldfield was able to deposit up to £1.8 million in cash per day with NatWest.
A separate investigation by West Yorkshire Police has led to 11 people pleading guilty to charges relating to the cash deposits and three cash couriers being charged.
A further 13 individuals are awaiting trial at Leeds Crown Court on 25 April 2022 in relation to the activities of Fowler Oldfield.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA released the following statement:
“Anti-money laundering controls are a vital part of the fight against serious crime, like drug trafficking, and such failures are intolerable ones that let down the whole community, which, in this case, justified the FCA’s first criminal prosecution under the Money Laundering Regulations”
Early in December REG Technologies hosted its first Networking Event since Covid restrictions began. It was great to be back meeting our connections face to face in our new Lime Street office. Thank you to those who attended, from the positive response we are sure you had a great time!
To make sure you don’t miss out, please contact info@reg.uk.com if you would like to receive details of future events.
The Financial Services Compensation Scheme (FSCS) has declared that MCE Insurance Company Limited has failed. The Gibraltar-based company sold motorbike, private car, van and commercial vehicle insurance products in the UK through broker MCE Insurance.
FSCS confirmed that the broker is not part of the administration process. MCE’s chief executive officer Julian Edwards told Insurance Age on November 22nd that the company’s insurance arm had been put into run-off following difficulties.
Two days later, November 24th, MCE Insurance criticised the Gibraltar Financial Services Commission (GFSC) for applying capital add-ons to Green Realisations No 123 (GR), formerly MCE Insurance Company, which it stated has led to an “orderly and solvent” filing for administration.
Gibraltar Financial Services Commission (GFSC) said it “strongly denies” the allegations made against it by MCE Insurance. In late November MCE accused the regulator of applying capital add-ons to financial structures that it had previously “either proposed and or approved, then subsequently worked with MCE to implement”.
Brokers will no longer be required to make a significant contribution to the Financial Services Compensation Scheme (FSCS) retail pool for the 2021/22 financial year.
According to an announcement published on 11 November by the FSCS, it will no longer be calling for a supplementary levy or invoicing the retail pool this financial year.
In its latest forecast, the total levy for 2021/22 has been revised down to £717m from £833m.
The Government’s second consultation regarding its regulatory framework review has left many insurance trade bodies with mixed feelings.
Announced this year but initially launched in October 2020 was the Government’s aspiration for an open, green and technologically advanced financial services sector.
Aiming to be globally competitive and act in the interest of communities and citizens allowing for the creation of jobs, supporting businesses and powering growth across the UK.
In a step towards achieving this, the Treasury is now consulting on detailed proposals for reform of the financial service’s regulatory framework, building on its initial consultation which closed on 19th February 2021.
Why the need for the review? the main factor in the catalyst for review was the impact of Brexit on the current model. The Future Regulatory Framework (FRF) Review is now set up to consider how the existing framework should be adapted to ensure its sustainability and suitability for the UK’s new position outside the EU.
The FRF Review objectives are as follows:
The insurance industry is said to be lagging in the digitalisation era. A rising demand created by the pandemic has urged insurers to ramp up digital efforts which turns out was the push they needed to break free from traditional broker-based insurance. The digital insurance landscape had an estimated worth of US$102.2 billion at the end of 2020. By 2026 it Is projected to blow up to US$169.2 billion (approx. £125.80 billion). According to ACORD there are still less than a third of the world’s biggest insurers ready to fully embrace digitalisation, with nearly 15% of these not even started integration into their business.
Want to improve your knowledge on digitalisation and how REG can help? follow this link to read more: https://reg.uk.com/digitalisation-the-future-for-insurers/
The Financial Conduct Authority (FCA) has launched a consultation aimed at improving the appointed representatives (AR) regime and tackling harm from this model.
“We are seeing a wide range of harm across all the sectors where firms have ARs. This harm often occurs because principals don’t perform enough due diligence before appointing an AR, or from inadequate oversight and control after an AR has been appointed.” – FCA
FCA data analysis has found that, on average, principals generate 50 to 400% more complaints and supervisory cases than non-principals across all sectors where this model operates, demonstrating that there are more issues arising from principals and ARs than from other directly authorised firms.
– Who should be aware of the changes?
– FCA’s proposals
Though the feedback of the proposals is not due till March 2022, the upcoming deadline for responses is 17th December 2021. Read our white paper review of the regime, the challenges and the solutions.
According to the latest sigma study conducted by Swiss Re Institute, the leading wholesale provider of reinsurance, the global insurance industry will reach a new record in premiums by mid-2022.
It is forecasted that this amount will exceed US$7 trillion.
Though it was predicted that this would occur mid-July, it is now believed that the record is projected to come earlier reflecting rising risk awareness, increasing demand for protection and rate hardening in non-life insurance commercial lines.
Swiss Re Institute’s sigma study further forecasts that global GDP growth will be strong in 2021, at 5.6% slowing to 4.1% and 3.0% in 2023.
Improve your risk awareness by reading and gaining knowledge on the and take some action against them by booking a free demo! https://reg.uk.com/bad-things-come-in-threes/
A London insurance broker is no longer liable for part of a £31.3 million loss suffered by Dutch bank ABN Amro in a commodities finance arrangement that came unstuck.
In a December 2 judgement, the UK Court of Appeal reversed a High Court ruling last year that found trade risk specialist Edge Brokers was liable for £3.3mn owed by two underwriters to ABN Amro.
The two underwriters, Ark Syndicate Management and Advent Capital Holdings, had initially argued successfully that they were kept in the dark about an add-on to the policy taken out by ABN Amro and should not be required to pay out.
