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Bill Howarth, Chief Executive, International Compliance Association (ICA)

Senior Management Responsibilities

The focus on senior management responsibilities has been a primary issue for financial services since the implementation of the Financial Services and Markets Act 2000, with the FSA frequently highlighting this area as one on which they place significant emphasis. The involvement of senior management, their approach and how this affects the effectiveness of systems and controls within businesses is a thread which has regularly emerged in relation to a wide range of discussions, initiatives and actions across the industry, underlining the importance of the senior management role in this regard. Topics such as corporate governance and internal controls have been set alongside subject specific industry initiatives such as the fight against fraud and other forms of financial crime, closely aligning the role and approach of senior individuals with the success of industry based projects. For example, SYSC3.26R requires firms to "take reasonable care to establish and maintain effective systems and controls....... for countering the risk that the firm might be used to further financial crime." In this respect the firms' senior management should be proactive in taking responsibility for identifying and assessing fraud risk and the adequacy of existing controls, and ensure that, if necessary, appropriate additional controls are put in place¹. The senior management should take its lead from the lessons we have learnt from the past and the desire not to repeat the mistakes made by others, with the emphasis strongly on ownership, responsibility and control. The effectiveness of senior management, or otherwise, is a significant contributory factor utilised in the risk assessment of a firm by the regulator, with demonstrably effective management controls providing assurance of the firm's ability to operate in a compliant manner. Those in roles of significant influence, or controlled functions, can be in no doubt that whilst particular tasks and roles may be delegated, ultimate responsibility cannot. This should focus the minds of senior management clearly on the regulatory requirements and implications of their role.

Whilst ultimate responsibility lies with senior management it has become imperative that the appointment of competent and appropriately trained staff will be a key component in any robust risk strategy. Consequently, fundamental to building systems within an organisation is the need to have key personnel in the right roles.

Occupational standards of competency in compliance and anti-money laundering

The need to determine competency and fitness and properness of staff was a prime driver in a project that is currently underway and conducted by the Financial Services Skills Council (FSSC) in association with the International Compliance Association (ICA). For the first time performance standards for those working in Compliance and Anti-Money Laundering are being developed.

These new standards:

• tell you about the competence required to meet the demands of a job;
• describe what people must be able to do consistently well in their jobs;
• provide you with the outcomes of using knowledge and skill and the criteria for judging the quality of performance.

Use of the standards

Senior managers will be able to use these standards to:

• set competence requirements for recruitment and promotion;
• provide a basis for job specification and job evaluation;
• offer a benchmark for use when appraising performance;
• allow training needs to be identified;
• enable businesses to demonstrate that regulatory requirements have been met;
• provide a basis for high quality qualifications.

Defining competence and effective performance

The performance standards are intended to add to, not replace or compete with, an organisation's approach to defining competence. They provide a further dimension to effective performance - achievement against national and international competence benchmarks. They can be used as a framework for those organisations that have not yet developed their own competence systems or have not yet formally codified their own practice standards.

A number of businesses in the industry have already selected relevant Performance Standards, and used them as a basis for clarifying company standards, policies and procedures. Employers will be able to use the FSSC Standards menu to select and profile the competence requirements of different jobs within their firm.

The Standards therefore define competent performance. A test of the Standards is whether they apply to the range of senior and junior roles in compliance and anti money laundering.

Standards and qualifications

FSSC have designed a framework of qualifications based on the Standards of Competence. Within this framework awarding bodies will design and put forward for mapping against the Standards a coherent series of qualifications, reflecting the different roles and levels of responsibilities within the compliance and AML functions.

Qualifications are proposed for compliance and AML at two distinct levels:

Level 4:		Professional - targeted primarily at AML and compliance managers and senior professionals
Level 3:		Support professionals - targeted at managers/team leaders and some specialists

The qualifications are organised around a set of core units (which all candidates must achieve) and option groups, which allow candidates to select units most appropriate to the responsibility of their particular jobs.

The standards have been designed with a global perspective so that they are readily usable by international organisations, regulators and governments as a guide in structuring the drive for competency and fitness and properness within the industry.

To view the standards go to: www.fssc.org.uk

References

1. FSA, Firms' High-Level Management of Fraud Risk, February 2006, page 3

Biography

William Howarth is the Chief Executive of the International Compliance Association (ICA). ICA is a global professional organisation dedicated to supporting the best compliance, AML and financial crime prevention practices in the financial services and allied sectors.

In recent years, as a director of Central Law Training - Europe's largest provider of post qualification legal training - Mr Howarth has developed, designed and delivered the STEP Global education system. He is currently responsible for global compliance and anti money laundering initiatives and is still actively involved in the delivery of the Manchester Business School MBA for Wealth Managers.

Mr Howarth has written extensively in the field of trusts, estates and international law and has lectured around the world. Through his experience as a senior examiner and assessor for universities and professional bodies globally over an extensive period, he has initiated the ICA Quality Assurance systems to comply with the highest international standards. He is also the general editor of the ICA course manuals and materials.

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