Update

UK Regulatory Reform

	Money Laundering - Verification of Identity

The FOA has continued its efforts to address the problems surrounding the delegation of the task (not the responsibility) of verifying identity from an executing broker to clearing broker when part of a tri-partite give-up agreement.
Since the last Update, the FSA has reaffirmed its policy on this issue whilst introducing an additional obligation on the executing broker. This additional obligation stems from the fact that the FSA would expect the executing broker to satisfy itself that, at the start of the relationship, the clearing broker's AML processes and controls are of the required standard and periodic satisfaction that these are being applied in practice, in addition to the requirement that the executing broker's MLRO has access to the identity records.

The FOA continues to believe that it is absurd to require the executing broker to carry out due diligence of this nature on clearing brokers that are authorised, fit and proper institutions and to provide access to the identity records simply so that the executing broker can rely on such institutions to carry out identity verification on common customers.

The FSA suggests that its stance is in line with the FATF consultation paper that reviews the FATF 40 Recommendations and that, in light of this consultation, there is little chance of them entertaining the idea of changing the existing Regulations.
The FOA has written to FATF to make them aware of this particular issue as have the FIA. We will also be meeting the UK Treasury shortly to do the same.

Finally, the JMLSG Guidance Notes will be updated following a consultation period during the 4th quarter this year. If we are unable to affect a change of stance from the FSA, we intend to ensure that the new edition of the Guidance Notes includes clear and comprehensive guidance in this area.

	Management of Agricultural Risk

The Department for Environment, Food and Rural Affairs (DEFRA) has established a working party to look at the feasibility of addressing certain aspects of agricultural risk through the use of market instruments, such as derivatives, rather than through government subsidy. As a member of that working party, the FOA is now looking to establish a small informal working group to address some of the more technical issues arising from the review and to consider the business implications for financial service providers. While there may be a remote long-term potential impact on the CAP (if the product is successful), the primary target is the management of euro currency risk (although the FOA believes that there are other significant areas of agricultural risk which can be addressed).

Any member with a particular interest in this area of activity and who wishes to become involved in the working party should contact Anthony Belchambers.

	Compliance Fora

The Compliance Forum held on 2 August covered compliance monitoring and focused on FSA Rules and Regulations. On 3 September the focus was The Proceeds of Crime Act, Order Routing Controls and Securitised Derivatives.

The next Compliance Forum is scheduled to take place in late October and will be entitled:
Challenging the FSA: What are the rights or regulated firms/approved persons?

If you would like to register your interest for this event then please contact Sally Hughes.