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The GFSC’s Regulatory
Approach (PRISM)
and Risk Trends
Presentation to STEP
12 September 2016
Neil Pailing & Eamonn Finnerty
Copyright of Guernsey Financial Services Commission
Presentation Overview
• GFSC Regulatory Approach
• Risk Trends
• Insight into Enforcement Cases
Copyright of Guernsey Financial Services Commission
Why do we need Risk Based Supervision?
• Optimised allocation of resources based on a combination of the impact of a firm on the Bailiwick and its risk probability.
• Ensure that we have the right engagement levels with supervised entities.
• Increased structure, consistency and transparency for supervisory activities.
• Alerts to help supervisors detect any deviation from normal activity.
• Help supervisors make structured judgements about the risks a firm poses.
• Ensure risks are mitigated, with progress tracked.
Copyright of Guernsey Financial Services Commission
PRISM
2nd September, 2016
PRISM
OperatingPlatform
OnlineServices
DataManagement
Risk BasedSupervision
Copyright of Guernsey Financial Services Commission
Online Submissions
Copyright of Guernsey Financial Services Commission 5
Definitions
• Impact – The degree of damage that a licensee, fund,
registered entity or group, could cause to its consumers,
the financial system in the Bailiwick and elsewhere, the
Bailiwick economy and the public were it to (a) fail; or
(b) fail to observe proper standards of conduct.
• Probability risk - Is the likelihood of a problem
occurring.
Copyright of Guernsey Financial Services Commission
Supervision under PRISM
Riskmitigation
Programme
Internal challenge-
RGP
Assess riskprobability
Engagement level
Impact category
• Check outcomes• Re-assess firm
Trig
ger
Thematics
Copyright of Guernsey Financial Services Commission
Impact and Engagement Levels
Engagement Level
High
Medium High
Medium Low
Low
Firm Impact
Continuous Assessment
Full Risk Assessment
Risk Assessment
Thematic &
Trigger
based
supervision
Copyright of Guernsey Financial Services Commission
Probability Risk
Strategy /
Business
Model Risk
Governance
Risk
Conduct RiskOperational
Risk
Financial
Crime RiskCredit
Risk
Market
RiskCapital
Risk
Liquidity
Risk
Insurance
Risk
Environmental
Risk
Copyright of Guernsey Financial Services Commission
Risk Mitigation Actions – Top 5
Risk
Mitigation
Actions:
Financial
Crime
Risk
Mitigation
Actions:
Operational
Risk
Mitigation
Actions:
Governance
Reactive Supervision
• Applies to all firms, particularly pertinent to the
supervision of low impact firms
• Some examples of triggers:
• From the firm – regulatory return
• From a customer – complaint
• From other external sources
• From Financial Crime Supervision & Policy
Division – e.g. following an AML/CFT visit
Reactive Supervision – Top 5 Types
Fiduciary Duty in
respect of Tax advice
Client Money/Assets
Data Security RATS/ Pensions
Outsourcing Trustee
Investment Duty
Financial Resources
Requirement
Client Take On
Copyright of Guernsey Financial Services Commission
Potential Thematic Reviews
17
15%
23%
31%
8%
8%
15%
Enforcement Case Outcomes
Licensee Fine
Individual Fine & Prohibition
Licensee Fine & Conditions
Licensee Fine & Conditions &Individual Fine and Prohibition
Licensee Fine &Individual Fineand Prohibition
No Sanctions Imposed
18
39%
15%8%
38%
Completed Enforcement Cases Per Sector
Insurance
Investment
Banking
Fiduciary
19
8%
23%
31%
38%
Types of Enforcement Cases
AML/CFT
Conduct
Corporate Governance &AML/CFT
Corporate Governance &Conduct
Observations
• Really ‘know your client’
• CDD at the heart of the business
• Embedded compliance culture
• Risks understood, measured, managed and mitigated
• Collective understanding and knowledge in business
• Good governance is key
Any questions?
21
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