Syed Rahman of Rahman Ravelli outlines the Financial Conduct Authority’s plan for controllers and beneficial owners.
The Financial Conduct Authority (FCA), in agreement with the Prudential Regulation Authority (PRA) is proposing that controllers and beneficial owners should have to obtain criminal background checks from the Disclosure and Barring Service (DBS).
This requirement to contact the DBS (or the equivalent body in relation to persons not in England or Wales) will apply to applications for authorisation or registration to the FCA and for notices of an intended acquisition or increase in control (change in control).
When submitting the relevant application or change in control, it will need to be accompanied by confirmation that a DBS check for controllers has been undertaken within the last six months. The FCA may request a copy of the DBS certificate, with this being done at its discretion on a case-by-case basis.
Consultation on this matter has now closed and the FCA is expected to issue its final rules before the end of the year. If the rules are implemented as proposed, the new requirements will apply to all new applications or notifications submitted from the start of next year.
In July this year, the FCA published its quarterly consultation paper, which included the proposal relating to the provision of criminal background checks on owners and controllers at the authorisations gateway.
At present, the FCA takes a risk-based approach to criminal background checks – only conducting them when specific concerns have arisen in relation to an individual’s fitness and propriety. This is unlike the approach taken by other anti-money laundering and counter-terrorist financing bodies, such as HM Revenue and Customs and the Gambling Commission, which regularly carry out such checks.
The Financial Action Task Force (FATF) has advised the FCA to consider greater use of criminal background checks on owners and controllers of financial institutions in an effort to prevent criminals’ ownership or control of such organisations.
