Proposals to introduce criminal background checks on owners and controllers of FCA authorised firms

On 8th July 2024, the FCA published a consultation paper (CP24/11) which included new proposals to introduce a requirement to conduct criminal records checks on controllers of FCA authorised firms. This requirement will apply at the gateway, which means that firms will need to do this upon submitting an authorisation application for a new firm, or a change in control application for an existing firm.

The driver for this seems to be a FATF recommendation, with the underlying goal being to reduce the risk of criminals gaining control of FCA authorised firms, and/or committing further crimes in the future from within the UK financial system.

Rather than the FCA undertaking these checks, the process will be for applicants to undertake these checks themselves and attest this to the FCA when submitting their application. The results will only need to be provided “on request” to the FCA, which is similar to the existing process for conducting checks on SMFs (i.e. senior managers, such as Directors).

Where an authorised firm is undertaking this check, a Standard DBS Check is required, which covers both spent and unspent convictions. In some cases, an unauthorised firm or person will need to do this, in which case a Basic DBS Check will be required, covering only unspent convictions. The checks must be dated within the last 6 months, and where persons are based outside of England or Wales then a local equivalent to a DBS Check will be required.

There will be some exceptions to this process. For example, controllers of ARs are out of scope, and where controllers are based in jurisdictions where criminal records checks cannot easily be undertaken, then allowances will be made. In addition, where time sensitive Change in Control applications are required (such as in the case of bank bailouts), then allowances will also be made to avoid delays to this process.

The consultation closes on 12th August and subject to any feedback received, the proposal is that the new requirement will apply to all applications submitted from January 2025 and will not apply retrospectively for in-flight applications.

Previous
Previous

FCA issue final rules on investment research payment optionality

Next
Next

Changes to the FATF and UK list of high risk third countries