The Financial Services Authority (FSA) has started to hand out more fines for risk management weaknesses sending a clear signal to financial services firms that they need to improve internal controls. This increase in fines marks a change in emphasis by the FSA to become more prevention-focused.
Last year more than half of FSA fines were either directly or partially due to risk management failures and weakness, up 55 percent from 2010, according to research from the Chartered Institute of Internal Auditors (IIA). These fines were related to breaches of the FSA's Principle Three, which requires firms to have proper controls and risk management systems in place. According to the IIA, breaches of Principle Three cost firms £38.5 million in 2011. Areas where the FSA has reviewed for weak risk management systems include: anti-money laundering (AML) controls, the ring-fencing of client assets through to the provision of advice on products to customers, according to the IIA.
Phil Gray, a
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