Arbuthnot Latham & Co., Limited

Building mutually profitable relationships through a meeting of minds

Preparing for FSA Visits and what todo in between

David Moland, Group Head of Compliance Arbuthnot Latham & Co., Limited

20th October 2010

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Who am I?

• Deputy Chairman of the CISI Compliance Forum Committee

• Compliance professional for 11 years

• Experience gained working for Lloyds TSB, FSA, Credit Suisse and Arbuthnot Banking Group

• Current Role – Group Head of Compliance covering Private Banking, Investment Banking & Retail Banking

• Direct and current experience of ARROW assessments and Theme Visits

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Objectives

• What are the FSA’s objectives on ARROW visits?

• How does ARROW fit with ongoing supervision

• What to do in between visits

• How to be ready for a theme review

• How to measure success – and outcomes to avoid

FSA’s Objectives

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• These will depend on the themes of the day, examples may be………………

• To set your regulatory period, to set your ICG

• To require the firm to carry out actions via the Risk Mitigation Programme

• To get a feel for how well the firm is managed and controlled

Ongoing Action

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• Preparation starts as soon as last ARROW is complete

• Clear issues raised in the letter and RMP

• Continue to manage the relationship (KIV change of supervisor)

• Always remember that your next visit could be only days away

• Look out for Themes, Dear CEOs etc

Preparing for ARROW (1)

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REMEMBER, you know when it is going to be!

Brief Senior Management (6 months)

1. Introduction

2. Risk Assessment Process

3. Current FSA Risk Assessment

4. Hot Topics / Expected Focus

5. Other Possible Topics

6. How to Conduct the Meetings

7. Next Steps

Preparing for ARROW (2)

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• Meeting with Group Board & Group Audit Committee (5months)

• Face to face meeting with Directors (4 months) – get them engaged

• Key action document analysis (3 months) – cover the obvious & topical issues

Preparing for ARROW – document request

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• Check your understanding of what they require

• Presentation is important!

• Try not to send documents that will result in the FSA asking further questions

• Get the Directors to read and review what you are going to send

• Provide copy documents to each Director / Interviewee

Note – we had 10 working days to do this!

Case Study 1

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You are the newly appointed Head of Compliance at a firm that is on a three year

regulatory cycle, which ends in six months time. You decide that you want to start

your preparation for the next ARROW visit. You are going to do this by sending a

written briefing to all the Directors.

What are you going to include within this briefing and what if anything are you going

do prior to sending the document out?

CHATHAM HOUSE RULES

Theme Visits

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• If you are lucky you will get a months notice, but will probably only have 10 days to satisfy

any document request

• Treat with same importance as an ARROW assessment

• You will not have time to prepare in the same way as ARROW

• Demonstrates the importance of having documents in place already and building a

relationship with the FSA

• Get the Directors / Senior Management engaged – a theme is not a gentle chat many

have ended in Enforcement for at least one of the firms selected

Case Study 2 – Theme Visits

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You are the Head of Compliance at a small firm and you have just received a call

from the FSA advising that they are going to carry out a themed visit on AML.

You have only been at the firm for three months and you at the early stages of

reviewing the controls in place at the firm. Your first thought is (*!!*):

If only I had been here longer what would have helped me?

Having gone through these moments of reflection, what action would you now take?

CHATHAM HOUSE RULES

FSA visits in general

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• Review documents again prior to the visit

• Carry out mock interviews (one month before)

• Brainstorm topics for discussion (one week before)

• Agree with FSA whether someone can sit in on interviews

• Debrief interviews if you don’t have someone sitting in

• Make the most of the feedback session but be aware things change, especially with

Theme Visits

Ad hoc requests and CEO letters

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• Treat with same importance as a visit

• Get Directors to review

• Take action even if FSA do not ask for a response

• Look out for best practice papers (Data Security, Pension Transfers, Sanctions)

Case study 3 – How to measure success – and outcomes to avoid

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• What would you consider to be a successful visit?

• From whose angle are you measuring success?

• How would you measure this?

• What would be considered to be bad outcomes?

• Can you challenge the outcome?

Conclusion

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• Compliance have an important role to play in all interactions with the FSA

• In an ideal world, have all policies, procedures etc in a state you would be happy to

send to the FSA tomorrow

• Preparation is important

• Get Senior Management engaged

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Any Questions?

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