What to Consider with Adverse SMCR Screenings

If you’re an HR professional working within a large organisation, you’ll likely have heard of SMCR.

Although the vast majority of these background checks come back as clear, it’s essential to understand precisely what it means for your organisation should you come across candidates with adverse SMCR history.

What is SMCR?

The Senior Managers and Certification Regime is the UK Regulators’ approach to improving culture, governance and accountability within the financial services sector.

The SMCR aims to reduce consumer harm and strengthen market integrity by creating a system that holds individuals accountable.

Who Does the SMCR Apply to?

The SMCR was first introduced in March 2016 to create a greater level of accountability for those in roles with financial responsibility.  It was also expanded to dual-regulated insurance providers in 2018.

The SMCR has been applied to all FCA-regulated organisations since December 2019, including investment managers, product distributors, insurance brokers and consumer credit providers.

However, due to the COVID-19 pandemic, the implementation deadline for some requirements of SMCR were extended until March 2021 to give firms more time.

What Should Happen With SMCR Adverse Screenings?

Although FCA checks generally come back clean, if your candidate returns an adverse finding for an SMCR-controlled role, you need to follow recommendations set by the FCA.

The FCA’s recommendations include guidelines for managers and employees. We’ve expanded on these recommendations below.

Non-Disclosure of Adverse Findings

This will depend heavily on whether the applicant has knowingly omitted information about their past conduct, but also on the severity of the initial offence.

Omitting information can mean that a non-severe offence (that may not have relevance to the applicant's current role) is taken much more seriously, whereas it may not have mattered if they were simply upfront about it.

Reckless non-disclosure is taken equally seriously. Determining why someone may have omitted information is near impossible, so an applicant simply not being bothered to fill out their application form correctly will be dealt with in the same way as one who sought to deceive.

Criminal Convictions

There are a number of factors regarding criminal convictions that the FCA and firms are required to take into account when assessing someone under the SMCR fit and proper persons test.

Each case must be judged independently, based on criteria including: 

  • The severity of the crime(s) committed 
  • The number of convictions 
  • The time since their last conviction 
  • The relevance to the role

The importance of judging each case independently is echoed by the fact that the SMCR test is entirely exempt from the Rehabilitation of Offenders Act 1974, which means that no convictions have to be ignored after a set period.

It’s also essential to remember that the mere existence of a criminal conviction should not be taken as a black mark against a candidate’s integrity and reputation, since there are simply too many conflicting variables that go into any and every conviction.

For example, picture an employee arrested 25 years ago for trespassing at an environmental protest. Who’s to say that this would make them a bad employee? Cases like this are why it’s imperative that managers take the time to investigate, gather evidence, liaise with the applicant and assess their findings against the three FCA key pillars.

Non-Criminal Issues

Although our primary focus has been criminal convictions, there may also be non-criminal issues that prove troublesome. 

For example, a company would need to consider how it may impact the firm's reputation if it were revealed that its managing director had previously managed a firm that went bankrupt due to its negligence.

Effects On Reputation

It’s essential to ask yourself what effect a disclosure could have should it come out in the wash later. What would consumers think if they knew a managing employee was previously convicted of fraud or money laundering?

Not all convictions will be related to the financial sector but may still have dire consequences for the firm's reputation, for example, if an employee held a conviction for a violent offence.

Advice From An Expert Background Screening Agency

For SMCR advice and implementation to help your HR team make the pre-employment screening process straightforward and integrate seamlessly with any other background checks, get in contact with Eurocom CI

Eurocom CI are an experienced background check provider that can perform a wide range of pre-employment checks using enterprise-grade technology. This includes digital ID verification, BPSS, credit checks and AML (anti-money laundering) checks, among many others. Furthermore, we provide you with a software solution that lets you manage all ongoing background checks in one place.