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London Markets 1 > CHAPTER 7: Regulatory Processes, systems and controls > Flashcards

CHAPTER 7: Regulatory Processes, systems and controls Flashcards

1
Q

How can insurers get regulatory information?

A

Lloyd’s have a centralised department in it’s corporation to manage regulator relationships.

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2
Q

What do regulators require to show compliance with regulations?

A

They require data evidence, which comes from the reporting done to regulators.

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3
Q

What does Lloyd’s use for interpreting data?

A

Lloyd’s use codes for more generic information (risk location, applicable taxes, direct or reinsurance etc..)

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4
Q

What is solvency?

A

The balance between assets and liabilities.

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5
Q

What is Solvency II?

A

EU Regulation, introducing new solvency requirements for insurance firms, with the following aims:

  • Better regulation
  • Deeper integration of EU insurance market
  • Enhanced policyholder protection
  • Improve competitiveness of EU insurers
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6
Q

What can be considered one of the most important systems and controls in place?

A

Training and education of staff.

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7
Q

What is a simple definition of a sanction?

A

A ban, can take many forms.

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8
Q

Why are sanctions imposed?

A
  • Political Pressure
  • Enforce respect for democracy
  • Enforce respect for human rights
  • Maintain and restore peace in a country/region
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9
Q

Name some financial sanctions.

A
  • Freezing assets of a company or individual
  • Prohibiting the transfer of funds to a sanctioned country
  • Freezing the assets of a whole government
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10
Q

Who are the OFSI?

A

The Office of Financial Sanctions Implementation in HM Treasury. Responsible for the implementation and administration of international financial sanctions in effect in the UK.

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11
Q

What responsibilities to OFSI have?

A
  • Domestic legislation on financial sanctions
  • Implementation and administration of domestic and international financial sanctions
  • Providing advice to treasury ministers
  • Working with the the UN and EU on financial sanction regimes
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12
Q

Who has to follow EU regulations imposing and/or implementing sanctions?

A

These sanctions are part of EU law, so directly effect any entities in the member states. They also affect all persons and entities doing business in the EU.

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13
Q

What are trade sanctions and who manages them?

A

Trade sanctions can include travel bans and/or a ban of import or export of certain cargoes.

Trade sanctions are managed and monitored by the Department for Business, Energy and Industrial Strategy (BEIS)

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14
Q

What are the US sanctions on Cuba?

A

May not provide accounting, marketing, sales or insurance services to a Cuban company or foreign company for their Cuban business.

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15
Q

What is an example of problems had with sanctions?

A

Dealing with piracy ransoms. The UIK and US have Somalia on their sanctions list and numerous groups/individuals. This can make it hard to know if a ransom payment can be made.

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16
Q

How do insurers find out about sanctions?

A

On the websites for HM Treasury and US department of the Treasury, OFSI and Office of Foreign Assets Control.

Lloyd’s insurers can also check the Lloyd’s website.

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17
Q

What is an export control?

A

A restriction on certain exports.

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18
Q

What is the export control order?

A

Requirement for a licence if:

  • There is movement of arms or military goods between two overseas countries (not in the UK)
  • Involvement of any UK person including UK entities which might be involved only by insuring such goods

The licences have 3 categories: A, B and C.

19
Q

What are the categories for the export control order licences?

A

A: Gallows, guillotines and electric chairs
B: Rocket launchers etc capable of being operated by three or less people
C: Military goods not falling into A or B

20
Q

What is an embargo?

A

An embargo is a trade ban

21
Q

What is the Data Protection Act 2018 (DPA 2018)?

A

Came into effect in 2018 to coincide with the general data protection regulation (GDPR) and the law enforcement directive (LED)

It aims to modernise data protection laws for the future.

22
Q

What are the main elements of the DPA 2018?

A

General Data processing
- implement GDPR standards
- Ensure certain data can be processed whilst maintaining confidentiality
…
Regulation and enforcement
- Enact additional powers for the information commissioner

23
Q

Who does GDPR apply to? Give definitions of them.

A

It applies to controllers and processors.

A controller says how and why the data is processed. The processor acts on the controller’s behalf.

24
Q

What information does GDPR apply to?

A

Personal information and any information that can be identifying.

25
Q

What are the data protection principles?

A

All personal data should be:

  • Processed lawfully and fairly
  • Collect for a specified, legitimate purpose
  • adequate, relevant and limited to what is needed
  • accurate and up-to-date
  • Kept in a form that permits identification
  • processed in a manner that ensures appropriate security
26
Q

What requirements are there for consent?

A

Must be freely given, specific and informed.

Must be some form of opt-in.

Must be separate from other terms and conditions.

27
Q

What rights are created/strengthened by GDPR for individuals?

A

The right to…:

  • be informed
  • have access
  • rectify
  • erasure
  • restrict processing
  • data portability
  • object
  • rights in relation of automated decision making and profiling
28
Q

What is a SAR?

A

A Subject Access request. Under GDPR individuals have a right to find out if an organisation is using or storing their personal data.

An individual can submit a SAR to an organisation, verbally or written, and the organisation usually has 1 month to respond.

If they fail to respond the individual can complain to the company in the first instance, if they are dissatisfied they can complain to the information commissioner’s office.

First information copy is free, subsequent copies the company may charge an administrative fee for.

29
Q

What is the definition of money laundering?

A

The process by which criminals attempt to disguise the origin of the money and/or assets they have earned through criminal activities.

30
Q

What is the process for money laundering?

A

Placement - putting the money into something
Layering - creating complex transactions to make it difficult to track the money
Integration - Criminals get access to the money by “withdrawing it” through a legitimate way, i.e taking a salary from a company.

31
Q

What are the sources of law and regulation regarding money laundering?

A
  • Specific laws defining what represents a criminal offence
  • Money Laundering regulations for a stated range of firms
  • FCA rules and guidance
32
Q

What are the UK laws in regards to money laundering?

A
  • The criminal Justice Act 1988 - made it a criminal offence to launder money in respect of drug trafficking and terrorism
  • The criminal Just Act 1993 - made it a criminal offence to launder money from other serious crimes
  • Proceeds of Crime Act 2002 (POCA)
33
Q

What is the Proceeds of Crime Act 2002 (POCA)?

A

Extends the range of offences for money laundering:
- Concealing, transferring, converting or removing criminal property.
- Making arrangements in respect of criminal property
- Acquiring, using or possessing criminal property
It also established
Additionally, it established:
- Offences for failing to report suspected money laundering
- Offences for tipping off about a money laundering disclosure

34
Q

What are the sanctions for money laundering?

A

For actual money laundering there is a maximum of 14 years in prison and/or an unlimited fine.
For not reporting or tipping off money laundering the maximum sentence and/or an unlimited fine.

35
Q

What is the Serious Crime Act 2007? (SCA)

A

Extended a range of serious crime prevention orders and amended POCA. Abolished POCA’s Assets Recovery Agency and transferred the activities to National Crime Agency (NCA).

36
Q

What is the Money Laundering, Terrorist Financing and Transfer of Funds (information on the payer) Regulations 2017?

A

Regulations that prevent money laundering in the finance sector. They require the creation and maintenance to prevent and control money laundering. Regulations apply to relevant persons/firms.

37
Q

What is the definition of Financial Crime?

A

Defined in the Financial Services and Markets Act 2000 as: Fraud, dishonesty, misconduct in, or misuse of information relating to, a financial market, handling the proceeds of crime or financing terrorism.

38
Q

Who are the Joint Money Laundering Steering Group (JMLSG)?

A

A group made up of leading UK Trade associations, Aim to promote good practice in countering money laundering.

39
Q

What is the role of a firm’s “nominated officer” in respect of money laundering?

A

Someone who is nominated to receive disclosures in respect of money laundering or financial crime. This person is usually the same as the MRLO.

40
Q

What are the responsibilities of the MRLO?

A
  • Take responsibility for the firms compliance with FCA rules
  • Acts as a focal point for all anti-money laundering activity
  • …
41
Q

What does a firm need to check for client verification (for both a firm and an individual)?

A

Firms must take all practical measures to check identity of new clients. ID for individuals should be photographic.
The identification requirements for a firm are:
the full name, registered number, registered office and business address.

42
Q

How long should records be kept in regards to money laundering?

A

5 years

43
Q

What is the Bribery Act 2010

A

Notes four main offences:

  • Bribing another
  • Being bribed
  • Bribing a foreign public official
  • Failure to prevent bribery
44
Q

What is the Foreign and Corrupt Practices Act 1977?

A

US legislation that prohibits bribery of foreign government or political officials.

London Markets 1 (9 decks)

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