| Arun Srivastava |
A fine imposed on an insurance firm by the Financial Services Authority last week is a timely reminder for firms to ensure correct staff vetting procedures are carried out, industry lawyers said. According to an enforcement notice last week, insurance firm Besso Ltd. was given a fine of £20,000 for failing to obtain approval for one of its senior managers--who had previous fraud convictions. The FSA said the fine was 30% lower than what the firm would have been fined. The reduction was the result of a review of the FSA’s enforcement practices in the Strachan Review that took effect last year. Similar enforcement actions may be forthcoming, said Ian Mason, partner at law firm Barlow Lyde & Gilbert in London. Mason said firms should follow correct human resources procedures when making new appointments, and obtain FSA approval for employees who work in management or other important positions in a firm. “Although the fine is relatively small, this is an important case,” he added.
Arun Srivastava, partner at law firm Baker & McKenzie in London, agreed that compliance departments should take note of the action. In addition to highlighting the importance of the FSA’s approved person’s regime, Srivastava said it may be wise for firms to review or widen the net of staff that are the subject of checks. This is particularly important if they do a controlled function, he added. The FSA’s enforcement notice stated the seriousness of the failing was reinforced by the fact that the employee is also alleged to have perpetrated various frauds while he was employed within the Besso group. The regulator recognized that Besso’s failure to submit an application for approval in respect of this employee was an isolated example of failure to comply with the requirements of the Financial Services and Markets Act.
Sam Bennett, FSA spokeswoman, could not comment on any enforcement actions in the pipeline. Bennett added that because of the ongoing criminal investigation by the police, she could not provide further detail regarding the Besso employee. Officials at Besso did not return calls by press time.