Are IFA networks taking Treasury sanctions seriously? Sanctions Search survey reveals major IFA apathy
May 9 2012
Are IFA networks taking Treasury sanctions seriously?
Vox pop survey by SanctionsSearch.com reveals ‘cavalier’ attitude to the law as the majority of IFA networks appear to be lax on financial sanctions checks
A RECENT telephone survey (see note 1) of independent financial advisers by SanctionsSearch.com has revealed that the majority – 8 out of ten – small firms are unaware of key government legislation relating to money laundering and terrorist activity.
“Most firms rely heavily on the guidance they receive from their networks,” said Chris Clare, director of SanctionsSearch.com.
“But what we are finding is that the major networks appear not to be protecting their smaller IFA clients – which in our view leaves them very vulnerable to punitive fines for not adhering fully to the law,” he said.
“Firms are under the impression that if the network has not told them to screen against the sanctions list they cannot be prosecuted for failures as a result – which is clearly incorrect and frankly asking for trouble,” added Clare.
“The fact is anyone involved in dealing with a customer is able to commit the criminal offence which underpins this legislation, an offence which can result in 7 years in prison.
But worryingly, adds Clare, “the network can probably wriggle out of its obligation as it did not deal with the client.”
“It is a matter of deep concern that networks are taking such risks with professional IFAs’ liberties by exposing them to this level of risk. That said, it is the individual’s responsibility to ensure he or she is not breaking the law.”
Research by SanctionsSearch.com has also revealed that some major IFA networks believe they are exempt from sanctions legislation altogether.
“This is clearly incorrect – just look at the Royal Bank of Scotland being fined last year (2011): we are very concerned that a small firm is going to be hit with a heavy fine or directors fined and imprisoned for breaches – all because the majority of networks are failing to get on board with this”
As The Treasury regularly updates its sanctions list, Sanctions Search asked IFAs what methodology they had in place for on-going screening.
“The results were patchy at best, and we found that where there is an attempt to comply, a lack of understanding of the rules and the risk leaves the firms carrying out woefully inadequate checks on their data, most notably re-screening after Treasury updates” said Clare.
SanctionsSearch.com is designed with small firms in mind, with membership costing £20 per year.
This includes 100 search credits top up credits only £10 per 100 – and so is within the budget of every small firm.
SanctionsSearch.com re-screens all client data after each and every HMT update, a fundamental part of the compliance process, completely free of charge.
“There have been 26 HMT updates from January to the end of March this year: being able to re-screen all our clients data free of charge takes all the hassle away from them and adds yet more value to the product.”
SanctionSearch.com has proved so effective that the British Insurance Brokers Association (BIBA) rolled out the sanctions checking system to all its members in January.
It is also widely used by many mortgage brokers, law practices, accountancy firms and estate agencies.
Note (1) telephone research conducted by SanctionsSearc.com over the period March 1 – April 1. Sample 100 calls to UK IFAs and networks: 82 out of 100 could not answer key question ‘are you aware of latest updates to Treasury sanctions list? Therefore 8 out of 10 IFAs unaware of key updates and are leaving themselves vulnerable to prosecution