An Introduction to JFSC Examinations

The JFSC conduct regular examinations to assess the compliance of registered persons (both entities and individuals) with statutory and regulatory obligations – the relevant laws, orders and codes of practice, as well as the JFSC’s policies and any guidance which they have issued.

The JFSC undertake the following types of examinations:

• Financial crime examinations and supervisory risk examinations – conducted in response to known or emerging risks within a particular entity
• Thematic examinations – conducted in response to a perceived current or emerging regulatory risk

The JFSC have published a guide on the examination process which sets out the different examination stages and timelines.

Good Preparation is Key

Every examination is, of course, different but businesses (and regulated individuals) can make the process smoother and less painful by preparing properly.

We recommend documenting the process for how you will manage a JFSC examination; whilst some aspects may vary depending on the type of examination, there are some set steps which will apply to all examinations. For example, all examinations will require you to provide certain of information and documentation: this may include relevant client records, where client samples are requested.

Preparation for any examination should include:

• Read the JFSC’s Information Request and questionnaire and ensure you understand the scope of the examination.
• Circulate the notification to the board/governing body and relevant employees. We recommend formally tabling the notification to the board/governing body and scheduling a meeting prior to submission of the information/documents.
• Note the dates - the JFSC’s notification will state a date by which information is to be provided, along with the dates of the examination and the period to be assessed by the examination.
• Determine the availability of relevant stakeholders, in particular consider if there are any key absences, whether these can be managed, or whether you will have to ask if the examination could be rescheduled. Block out relevant employees’ calendars!
• Commence planning - larger businesses may wish to consider establishing a formal “working party” to coordinate this work 
• Communicate with relevant employees on how they will be required to assist and/or engage directly in the examination process.
• Determine how information and documentation will be collated:
• consider the time this will take and whether you wish to review the information/documentation prior to submission
• allow sufficient time to collate and reference documents
• provide all versions of documents e.g. BRAs, P&Ps if covering a time period
• Establish if you have any known issues connected with the scope of the examination, consider known CMP findings (open and recently closed), risk issues, any remediation in progress.
• Review the information request responses/documentation prior to submission and confirm the readiness with relevant stakeholders and your board/governing body. Ensure the relevant version(s) of document is provided and, where applicable, index document packs. We also recommend keeping a copy of everything submitted for your future reference.
• Upload the Information Request and any relevant documents, ensuring you have sufficient time to upload these ahead of the stated deadline.

Be prepared that you may identify relevant issues during this preparation process. If you do identify any issues, do not panic but just follow your normal processes for the identification and reporting of errors and breaches and, if applicable, manage any notification to the JFSC, remembering also to disclose identified issues in the examination Information Request.

During the Examination

During the onsite element of the examination, ensure relevant employees have plenty of time available to support the examination, engage with the JFSC officers and provide any additional information or documentation they may request. It may be necessary to reallocate personnel to take over some of the relevant employees’ day-to-day work during the onsite examination.

When the JFSC officers request any additional information or documentation, try to ensure it is provided promptly so that you can demonstrate the adequacy of your record-keeping and that you are being open and transparent with the JFSC. 

As the onsite examination progresses you will (hopefully) be advised of any potential findings/observations the examination team has identified. We recommend starting work to address these as soon as you can. 

The debrief meeting which follows the closure of the onsite activity (usually within 20 working days) should set out any  findings / observations which have been identified. The meeting also presents an opportunity to ask the JFSC officers any questions and update them on any remediation steps/actions already taken.

Examination Reports

If you are issued with a draft report, you will have the opportunity to comment upon the factual accuracy of the JFSC’s findings and observations raised. Where possible, provide evidence to support your comments. It is important to spend time considering a draft report carefully as this is your principal opportunity to influence the content of the examination report and hence the nature and extent of any subsequent remediation and reporting.

The final report will then be issued, and you will likely have 20 working days to submit your remediation plan. 

Remediation Plans

Guidance on remediation action plans has been published by the JFSC and you should ensure your plan clearly and demonstrably meets all of the provisions of the guidance. Importantly, remediation plans must address each specific finding and  all aspects of each finding. Each action should have a realistic target date for completion and should be assigned to an appropriate responsible individual.

In formulating a remediation plan, the business must consider how the remediation work will be resourced, ensuring they are fully completed within the target timeframes whilst also maintaining business-as-usual. We would recommend maintaining a full audit trail of the remediation work, so that you can demonstrate the work undertaken is required at a later date (for example, if the JFSC wishes to verify the appropriateness and completion of the remediation).

Conclusions

Careful preparation for a JFSC examination and the allocation of sufficient suitable resources to its execution can make a huge difference to the success of the examination, turning what can be a stressful and contentious experience into something which, whilst still inevitably disruptive, can be of real benefit to the business.

At Cyan, we have significant experience of leading examinations as former JFSC officers, coordinating responses as former Key Persons and now of helping our clients get through examinations and remediation work as smoothly as possible. If you’d like to discuss how we could help you, please get in touch.