Under-prepared for ARROW visits?
Our recent survey has revealed that a significant number of regulated firms may be under-prepared for FSA ARROW visits.
Asked how they would prepare for an ARROW visit, 70% of respondents said they would review the FSA website, and 60% said they would review the FSA business plan for key topics, but only 51% said they would run internal workshops and only 43% said they would consider holding mock interviews.
Tim West, a financial services partner at Moore Stephens, says, “There is a wealth of information on the FSA website on key issues and priorities, and in our experience of helping clients prepare for ARROW visits conducting training and mock interviews is invaluable preparation.”
Respondents were generally confident that key documentation was up to date. Risk registers scored highest with 94% having been updated in the last year, followed by business plans (91%), business continuity plans (91%), compliance monitoring programmes (91%), and compliance manuals (85%).
However, the survey showed that the industry may not fully understand what information the FSA will request before an ARROW visit. Some 80% of respondents expected to be asked for Board minutes, business plans, compliance monitoring programmes, business continuity plans, and risk registers/ICAs/ICAAPs. However, only 28% of respondents expected to be asked for Board attendance registers, and only 43% for details of outsourced agreements, both of which often feature in the FSA’s information request list.
The survey also demonstrated that Board agendas fall short of FSA expectations with a surprisingly low number of respondents confirming that complaints (50%), financial crime and money laundering (32%), training and competence (30%), and IT and data quality (28%) were fixed board agenda items.
Tim West commented, "Individuals sitting on the board, performing controlled functions, are collectively responsible for compliance. Firms must be able to demonstrate that they hold regular, board meetings with consistent agendas that reflect the risk environment. The responses suggest a possible lack of understanding of the FSA’s expectations.”
Tim West concludes, “In many respects, the survey findings provide some encouragement on the preparedness of respondents for an ARROW visit. But certain responses also set alarms bells ringing, with potential shortcomings in a number of areas. Some regulated firms may find their next ARROW visit uncomfortable.”