The Financial Conduct Authority (FCA) holds the authority to seek an external viewpoint on a regulated firm’s activities by engaging a third party known as a ‘skilled person.’ This power, stemming from the Financial Services and Markets Act (FSMA), allows the FCA to commission two types of skilled person reviews: S166 reports and S166A appointments for collecting and updating information.
Appointing a Skilled Person
When appointing a skilled person, two approaches exist. In the first, the regulated firm suggests a skilled person firm for FCA approval, which, once sanctioned, proceeds to contract with the skilled person firm. Alternatively, the FCA might directly contract with a skilled person firm. This process involves a tender phase to select the most suitable entity based on various technical, resource-related, and commercial aspects. Notably, the regulated firm is responsible for covering the costs of these skilled person reviews.
The FCA has established a Skilled Person Panel, used for directly commissioned S166 reviews. This panel, segmented into 12 subject categories or ‘lots,’ remains effective until March 31, 2026. While regulated firms have the option to engage a supplier listed on this panel, it isn’t mandatory. Instead, firms can nominate any suitable supplier for FCA consideration.
Rising Cases in Retail Banking and Payments
Recent data from the FCA indicates a shift in the utilisation of skilled person reviews in the retail banking and payments sectors. The FCA’s published figures for Q1 2023/24 (April – June 2023) showed no S166 reports were commissioned in the banking/payments sector. However, in the subsequent quarter (Q2 2023/24, July – September 2023), a total of 18 cases were reported, with the majority, eight cases, observed in the retail banking and payments sectors. These reviews mainly focused on areas related to financial crime, controls, risk management, and business conduct, prompting firms to proactively evaluate their practices in these domains.
How Neopay can help
In light of the FCA’s intensified focus, it becomes crucial for firms to maintain high compliance and regulatory standards. Neopay is equipped to assist by conducting regular audits to identify and rectify gaps, offering valuable recommendations to fortify a firm’s compliance structure. It’s imperative for firms to closely scrutinise their retail banking and payment operations, aligning them with regulatory expectations and potentially avoiding the repercussions of a failed skilled person review.
For comprehensive guidance and audit support to fortify your firm’s compliance framework, reach out to our team.