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Chapter 3 - Main classes of business in the London Market > Chapter 7 - Regulatory processes, systems and controls > Flashcards

Chapter 7 - Regulatory processes, systems and controls Flashcards

1
Q

What management tools are used by businesses to comply with regulations?

A

Systems and controls

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2
Q

Who do the FCA and PRA regulate?

A

The whole UK insurance industry - not just the London Market

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3
Q

What are directives? Who has to follow them?

A

Centralised legislation on the insurance industry from the FCA. They affect all countries in the EU.

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4
Q

Who updates the insurance industry on regulations? Lloyd’s and other means.

A

In Lloyd’s, it is a centralised department within the Corporation which focuses on relations with the UK Government. Otherwise, bodies such as the LMA, IUA, LIIBA also send info to members.

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5
Q

Who reports to the regulators on behalf of Lloyd’s? Where do they get this info? What info is it?

A

Lloyd’s reporting to regulators is managed centrally. However they get their information through data from managing agents. This includes info such as non-life, solvency, insurance mediation, reinsurance and accounting.

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6
Q

Why do Lloyd’s use codes? What do they show (4)?

A

Use codes as it is easier to review the various information. In Lloyd’s, codes show (i) location of broker (ii) location of risk (iii) tax payable (iv) whether direct/reinsurance

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7
Q

What does level of solvency mean?

A

The balance between how much your assets weigh out your liabilities

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8
Q

How does the PRA apply solvency to different classes of insurance?

A

Some insurers have to pad out the extent assets exceed liabilities depending on the class. This is to avoid impact of large claims.

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9
Q

What is Solvency II? Where does it apply? Why was it created?

A

Solvency II is an EU regulation which introduces economic risk-based solvency requirements across all EU states. Its aim is to enable better coverage of the real risks run by insurers.

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10
Q

What are the aims of Solvency II (5)?

A
  • Better regulation
  • Deeper integration of EU insurance market
  • Enhanced policyholder protection
  • Improve competition amongst EU insurers
  • Standardise the existing 14 directives with 1 legislation
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11
Q

What company-level measures form the system and controls to enforce regulation (6)?

A

Training
Easily accessible info for employees
Operating controls, warnings, blocks
Peer reviews
System reports
Authority limits

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12
Q

Why might sanctions be imposed (4)?

A

Political pressure
Enforce respect for democracy
Enforce human rights
Maintain peace in a country

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13
Q

What are the types of bans that can be imposed?

A

Financial and trade embargoes

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14
Q

What are the types of financial sanctions?

A
  • Prohibiting transfer of funds
  • Freezing assets of a company/government/individual
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15
Q

What is the Office of Financial Sanctions Implementation (OFSI)? What are its responsibilities?

A

OFSI is part of the HM Treasury. Responsible for implementation and administration of UK’s financial sanctions. It posts info on its website to alert users to sanctions imposed by the EU, UN and UK.

Responsibilities
- domestic legislation
- operational advice
- implementation of international financial sanctions
- working with the Foreign and Commonwealth Office
- working with international partners
- licensing exemptions to sanctions where permitted

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15
Q

What is the Office of Financial Sanctions Implementation (OFSI)? What are its responsibilities?

A

OFSI is part of the HM Treasury. Responsible for implementation and administration of UK’s financial sanctions. It posts info on its website to alert users to sanctions imposed by the EU, UN and UK.

Responsibilities
- domestic legislation
- operational advice
- implementation of international financial sanctions
- working with the Foreign and Commonwealth Office
- working with international partners
- licensing exemptions to sanctions where permitted

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16
Q

What entity monitors trade sanctions?

A

Department for Business Energy and Industrial Strategy (BEIS).

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17
Q

What are trade sanctions?

A

Travel bans and bans on import/exports of goods

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18
Q

What’s the USA’s position on ransoms?

A

USA issued executive order that banned any entity with US links from making ransom payments if listed as a Specially Designated National (SDN)

19
Q

Which entities (UK and USA) provide sanctions info?

A

OFAC (USA), OFSI (UK) , HM Treasury and US Treasury

20
Q

What did the Export Control Order do? What are the 3 categories? What’s the rules for each?

A

Updated previous legislation on export controls relating to military goods. Need licenses for three categories.

Cat A - electric chairs, gallows, guillotines
Cat B - Rocket / missile launchers / grenades (3 or fewer people)
Cat C - Military goods that do not fall into A or B

Cat A - require license from UK gov if to be insured
Cat B & C - only license if going to an embargoed country.

21
Q

What is the Data Protection Act 2018?

A

UK only Act accompanying the EU’s GDPR for how UK makes provisions to the GDPR

22
Q

What is the aim of the General Data Protection Act 2018?

A

EU regulation to replace existing regulation. Modernises data protection laws to keep them relevant for years to come.

23
Q

What does the DPA 2018 say on
- Data processing
- Regulation and Enforcement

A

Data processing
Sensitive data can continued to be processed on a confidential basis
Restrictions on rights to access/delete/hold data
Sets age for parental consent

Regulation and Enforcement
Powers to Information Commissioner who regulates data protection laws
Allows the Commissioner to fine on data controllers/bring criminal proceedings

24
Q

What is the Information Commissioner’s role?

A

To fine/take criminal proceedings to those in the UK breaching data protection regulation

25
Q

What 2 parties does GDPR apply to? What’s the difference?

A

Controllers and processors

Controllers - says how/why personal data is processed
Processors - acts on controllers behalf

26
Q

What data does GDPR apply to?

A

Personal data (including tech data eg IP address)

27
Q

What are the data protection principles?

A

Process data lawfully
Collect data for purposes only
Limited and relevant data
Accurate and up to date data
Permits use of data for period of time
Appropriate security on data

28
Q

What does GDPR say about consent?

A

Consent must be freely given - positive opt-in, not preticked boxes or inferred from silence

29
Q

What rights does the GDPR give individuals?

A

Right to
be informed
access
rectification
erasure
restrict processing
data portability
to object
not have automated decision making/profiling

30
Q

What’s a System Access Request (SAR)?

A

What an individual uses to request to see their personal data on file on a company

31
Q

Where does an individual complain if they do not get a response to a SAR?

A

FIRST: the organisation. SECOND: The Information Commissioner

32
Q

Who does an organisation report a data breach to?

A

The relevant supervisory authority and perhaps the individuals involved

33
Q

What are the risks to firms if they breach data protection under GDPR?

A

Fines to pay compensation & reputational damage

34
Q

What is money laundering?

A

Laundering money through the financial system to make illegitimate funds look legal

35
Q

What are the 3 stages of money laundering?

A
  1. Placement - putting cash into the system and converting cash into other assets
  2. Layering - creating a series of complex transactions to hide its origin
  3. Integration - accessing ‘clean’ money. Creating a company/drawing a salary etc
36
Q

What are the 3 types of laws/regulation concerning money laundering?

A
  1. Acts which are for general application
  2. Specific money laundering regulation
  3. FCA rules & guidance which applies differently to different types of firms
37
Q

What are the two UK money laundering legislations?

A

Illegal to launder money in respect of

Criminal Justice Act 1988 - re drug trafficking and terrorism
Criminal Justice Act 1993 - re other serious crimes

38
Q

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

A

An act to extend the range of offences for money laundering. It first establishes the principal offences but added two new ones:

(1) offences for failing to report suspected money laundering
(2) tipping off people about money laundering investigations

39
Q

What entity is in charge of recovering proceeds of criminal activity relating to money laundering?

A

the National Crime Agency NCA

40
Q

What did the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 201 do?

A

Money laundering prevention regulation. Requires creation & maintenance of systems to prevent money laundering in the UK financial system

41
Q

What’s the FCA’s role in financial crime? What authority does it have?

A

Identifying current and emerging crime threats, ensuring systems in place to mitigate them. Uses thematic reviews and tests whether companies are meeting their legal/regulatory requirements.

It can impose penalties for market abuse/manipulation

42
Q

Who in a company is responsible for money laundering? How often do they report?

A

The Money Laundering Reporting Officer (MLRO)
Reports annually on systems
Appointed under the FCA rules

43
Q

Whats the MRLO role?

A

Responsibility for the firms AML activity
Reports to the NCA

44
Q

What did the Bribery Act 2010?

A

UK legislation harmonising existing legislation on the topic. Two new offences - bribing a foreign official and failure to prevent bribary

45
Q

What does the US legislation Foreign and Corrupt Practices Act 1977 do?

A

prohibits bribery of government officials

Chapter 3 - Main classes of business in the London Market (7 decks)

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