There are several types of positions across the financial industry which require a financial background check to be completed.
If anyone is responsible for handling accounts, funds, transactions or data, many FCA (Financial Conduct Authority) checks are compulsory, to ensure employers are making correct recruitment decisions. Financial companies regulated by the FCA and PRA (Prudential Regulation Authority) are responsible for making sure employees meet the FCA criteria through screenings. Up until December 2019, the FCA Approved Persons Regime (APR) was the measuring stick for this criteria.
What Does SMCR Mean?
SMCR stands for the Senior Managers and Certification Regime, which replaced the APR. This legislation now extends to all FCA-regulated businesses, with the purpose of protecting businesses from significant harm caused by staff misconduct, fines and any potential negative publicity.
What is the Purpose of SMCR?
Essentially, SMCR conduct rules are there to ensure anyone in senior roles has the integrity, knowledge and skills to act in the best interests of their customers.
The SMCR regulation was initially introduced in 2016, within the banking sector, as a way of enhancing accountability for anyone with a responsible role. In 2019, the FCA extended this regulation to all financial firms.
The purpose of SMCR legislation is to:
- Reduce harm to consumers
- Strengthen market integrity
- Hold responsible individuals accountable
- Giving power to firms and regulators to take action
Who Does SMCR Apply to?
Firms are categorised depending on their size and profile into three primary categories.
- Core Regime Firms - the majority of financial companies fall into this category.
- Enhanced Regime Firms - these are larger and/or more complex firms, to which additional requirements apply.
- Limited Regime Firms - these organisations will be subject to fewer requirements than Core Regime Firms.
Any company which is on the Financial Services Register is accountable for SMCR compliance. These could include any of the following types of FCA-regulated business:
- Financial advisors
- Building societies
- Credit unions
- Electric money and payment institutions
- Claims management organisations
- Investment firms
- Pension providers
- Insurance providers
Why is SMCR Important?
The first part of the legislation (the Senior Managers Regime) states that those in top-level management must be PRA or FCA-approved before taking up a position. They must also be certified annually, and given a yearly statement of obligations.
The other part of FCA SMCR regulation is the Certification Regime, which applies to employees with roles that mean it’s possible to cause harm to firms or customers. While these people do not have to undergo an FCA check themselves, it’s the firm’s responsibility to ensure their employees are ‘fit and proper’ to do their jobs.
Senior managers must complete a criminal record check (DBS check). While it’s not a requirement for those on the Certification Regime, it is usually good practice to ensure they apply for a DBS check, to ensure they do not have any history of criminal activity that might pose a conflict of interest in their job.
Read more about DBS check applications here.
What you Should Know About SMCR
To provide clarity on SMCR rules and measures that have been put in place by the FCA, here are a few important things you should know.
- Individuals are held accountable for breaches that fall into areas of their responsibility, rather than the businesses.
- In the event of a complaint, the FCA must prove that senior managers did not take reasonable measures to prevent a breach from occurring.
- It is up to firms to ensure that adequate, regular financial checks are carried out on employees, before they join the company.
- The extent of financial penalties imposed depend on the severity of the breach.
- The FCA can take action against individuals, businesses or both.
How can My Business Review SMCR Compliance?
Ensuring you are SMCR compliant can be difficult. The first step is to ensure you clearly identify and outline senior management roles and responsibilities, and establish the relevant background checks are conducted.
Background screening on candidates is very important, but you should also ensure you have a solid framework for conducting checks on existing employees as well. Pre-employment screening and employment screening are effective ways you can mitigate risk in your organisation and protect it from potential harm.
FCA Check Company
Eurocom CI can provide specialist FCA screenings to firms that fall under SMCR jurisdiction. All of the financial checks we offer organisations, obey the FCA criteria, which will assess an applicant’s integrity, capability, honesty and financial security.
Our financial background checks have previously exposed conflicts of interests, resulting in companies avoiding potential harm. Our aim is to keep organisations safe.
The SMCR packages we offer clients include checks such as:
- Right to work checks
- Credit checks
- DBS checks
- Employment history
- Financial Services Register
- Identity checks
- Professional qualifications
We also offer bespoke checks for organisations. Get in touch to find out more.