OfI:FS Expansion: SMCR Screening for International Firms

The UK's Office for Investment: Financial Services is intended to support international financial-services firms establishing or expanding operations in the UK.

For firms entering a regulated market, however, business expansion also brings responsibilities around governance, authorisation and the suitability of people appointed to senior or regulated positions.

Where the Senior Managers and Certification Regime applies, firms need appropriate processes for assessing the fitness and propriety of relevant individuals.

For international appointments, that process can become more complex because employment, regulatory and professional histories may span several jurisdictions.

What Is the Office for Investment: Financial Services?

The Office for Investment: Financial Services, commonly referred to as OfI:FS, was established to support international investment into the UK's financial-services sector.

It provides a point of contact for firms considering establishing or expanding UK operations and forms part of wider efforts to encourage inward investment into financial services.

The Financial Conduct Authority has also identified support for international firms entering the UK as part of its work with government and the Office for Investment.

For firms considering UK expansion, this can help with understanding the regulatory environment and establishing appropriate routes into the market.

It does not remove the obligations that apply once a firm or individual falls within the relevant regulatory framework.

Where SMCR Fits Into UK Expansion

The Senior Managers and Certification Regime is designed to strengthen individual accountability within regulated financial-services firms.

Depending on the firm's regulatory status and the role involved, relevant individuals may include:

• Senior Managers
• Certification staff
• certain board or governance appointments
• individuals performing other functions subject to fitness and propriety requirements

The requirements are not identical for every employee or every financial-services business.

Firms need to determine which regulatory provisions apply to their organisation and which positions fall within the relevant regime.

For a detailed explanation of the framework, see our guide to SMCR screening and FCA vetting.

Fitness and Propriety Remains the Firm's Responsibility

Background screening can provide factual information relevant to a fitness and propriety assessment.

It does not itself determine whether an individual is fit and proper.

The employing regulated firm remains responsible for making that judgement in accordance with the applicable FCA requirements.

The FCA's principal considerations include:

• honesty, integrity and reputation;
• competence and capability; and
• financial soundness.

A screening provider can help verify information relevant to those areas, but the significance of any finding depends on the circumstances and responsibilities of the role.

Why International Appointments Can Be More Complex

Executives joining a UK operation may previously have worked in financial centres across Europe, North America, Asia, the Middle East or other jurisdictions.

That can mean relevant information is distributed across multiple systems and regulatory environments.

Depending on the appointment, screening may therefore involve:

• overseas employment verification;
• professional qualifications;
• regulatory registrations;
• previous disciplinary findings;
• directorships and corporate interests;
• sanctions and watchlist searches;
• criminal-record information where lawfully available;
• relevant insolvency or financial information; and
• other role-specific public records.

There is no single international database that provides a complete professional or regulatory history.

The availability, reliability and lawful accessibility of information vary between jurisdictions.

Regulatory References for International Hires

Regulatory references may also form an important part of recruitment under SMCR.

For relevant appointments, firms are required to take reasonable steps to obtain appropriate references covering the required previous employment period.

Where a candidate has worked overseas, obtaining equivalent information may be less straightforward.

Different countries have different regulatory systems, disclosure requirements and employment-reference practices.

A previous employer may also be subject to rules that differ from those applying in the UK.

The recruiting firm should therefore distinguish between:

• FCA-prescribed regulatory-reference requirements;
• ordinary employment verification;
• overseas regulatory enquiries; and
• additional background checks carried out as part of its own risk-based screening programme.

Those are related processes, but they are not interchangeable.

Checking Regulatory History

For senior or regulated appointments, employers may need to understand an individual's previous regulatory history.

That can involve checking relevant official registers and regulatory records in the jurisdictions where the candidate has worked.

Potential findings might include:

• previous regulated functions;
• current or historic registrations;
• publicly available disciplinary action;
• restrictions or prohibitions;
• relevant enforcement findings; and
• inconsistencies between declared history and official records.

A database match should not automatically be treated as relating to the candidate.

Names, dates, employers and other identifying information should be considered before a finding is attributed to an individual.

Financial Soundness Should Be Considered in Context

Financial soundness is one element of the FCA's fitness and propriety framework.

That does not mean financial difficulty automatically indicates dishonesty, misconduct or regulatory unsuitability.

Where financial screening is relevant and proportionate, it may identify factual matters such as:

• County Court Judgments;
• bankruptcy or insolvency information;
• Individual Voluntary Arrangements where recorded; or
• other relevant public financial records.

The regulated firm must determine what significance, if any, those findings have for the particular position.

Financial information should not be used as a simplistic prediction of future behaviour.

Qualifications and Professional Credentials

International expansion often involves transferring experienced executives or recruiting individuals with specialist financial-services qualifications.

Where particular qualifications, licences or professional memberships are important to the role, those credentials can be independently verified.

Checks may include:

• academic qualifications;
• professional examinations;
• current memberships;
• regulatory licences;
• technical certifications; and
• other role-specific credentials.

Verification is particularly useful where institutions or professional bodies are located outside the UK and the employer is relying on those credentials when making the appointment.

Screening Should Reflect the Function

An international firm establishing a UK operation may recruit across a wide range of functions.

It would not normally be appropriate to apply the most extensive screening package to every employee.

A Senior Manager may warrant a different scope from an administrative employee, technical specialist or junior member of staff.

Screening should therefore be configured according to factors such as:

• regulatory status;
• seniority;
• authority;
• access to financial assets;
• access to sensitive information;
• responsibility for clients or markets; and
• applicable legal or regulatory requirements.

This role-based approach also helps avoid collecting information that is not relevant to the appointment.

SMCR Screening and Wider Pre-Employment Checks

SMCR screening can sit within a broader pre-employment screening programme.

For an international appointment, that may allow a firm to coordinate:

• regulatory references;
• employment-history verification;
• identity and Right to Work checks;
• qualification verification;
• DBS checks where legally appropriate;
• financial screening where justified;
• international regulatory enquiries; and
• sanctions or other relevant public-record checks.

Conflict International provides SMCR Screening & FCA Vetting Services for regulated firms requiring support with individual senior appointments or ongoing screening programmes.

Our role is to verify and report factual information relevant to the agreed scope.

The regulated firm remains responsible for its fitness and propriety assessment and regulatory decisions.

Supporting International Financial-Services Recruitment

The UK's efforts to attract international financial-services investment create opportunities for firms establishing new operations and moving experienced people into UK-regulated roles.

That expansion does not make every appointment subject to identical screening requirements.

Instead, firms should identify the regulatory status of each relevant function, establish which checks are necessary and complete appropriate verification before the individual assumes the responsibilities concerned.

For candidates with international histories, sufficient time should also be allowed for enquiries across jurisdictions where records may be less accessible or take longer to obtain.

Discuss Your SMCR Screening Requirements

Conflict International supports FCA-regulated firms and international financial-services businesses requiring background screening for relevant senior and regulated appointments.

We can coordinate UK and international verification according to the role, jurisdictions involved and agreed screening requirements.

Complete the enquiry form below to discuss your SMCR Screening and FCA Vetting requirements.