FCA has levied a second fine on insurance broker JLT Speciality Ltd for financial crime control failings. The £7,881,700 fine follows a previous fine of nearly £2m in December 2013 for similar failings.
Following introductions from a third party in Panama, the firm placed business in the London reinsurance market for a group reinsurer from Colombia. FCA found that the firm paid over $12m in commission to the Columbian reinsurer’s parent company, which in turn paid most of it to the introducer. The introducer then paid over $3m to government officials at a state owned insurer to help to retain and secure business for entities in the JLT group.
FCA found that the firm and its senior management had made significant efforts to improve its systems and controls framework around and after the time of the first fine, with a focus on third parties such as overseas introducers, and had instructed a Skilled Person to help them. The controls included requiring approval from a specialist team before the firm could engage with overseas introducers. However, it failed to consider whether additional safeguards or approvals were needed where these introducers were engaged by other group entities and subsequently placed in the London market. This meant that key red flag information was not brought to the attention of the appropriate team, that other group entities did not disclose all relevant information about introducers to the financial crime team and the firm did not consider whether additional monitoring and oversight of overseas introducers was appropriate. Additionally, there was no mechanism for reviewing renewals of relationships, which would have presented a further monitoring opportunity.
FCA found the firm breached Principle 3. It found the firm wholly relied on its affiliates to monitor any overseas introducers throughout a 4 year period. As a result, there was an unacceptable risk that a share of the commission the firm made from placing the business could be used for corrupt purposes. This risk materialised in 2013 when the Panamanian introducer offered to help the JLT Columbian entity to “repair” a broken down relationship between the firm and a state owned insurer, which had terminated its agreement with the firm for brokering aviation insurance policies. The introducer demanded significant commission for doing very little, and threatened to have the firm removed from the insurer’s panel if it did not pay more. Eventually the JLT Colombian entity commenced due diligence, but deliberately withheld relevant information. Meanwhile, the London based financial crime team did not follow its own processes, by failing to challenge the use of the introducer and failing to carry out certain checks on it. Ultimately, the firm became aware of the bribery scheme only when there was a prosecution in the US.
JLT reported its failings to FCA in 2017 and provided significant help during FCA’s investigation – and the firm was acquired in 2019 with its trade assets and liabilities sold in 2020, since when it has not traded. It benefited from a 30% discount on what would otherwise have been a fine of over £11m. FCA considered the failings particularly serious not only because the gap in systems and controls led to a significant risk that bribery could be facilitated, but also that the firm’s dealings with the relevant companies began only a few months after FCA had imposed its previous fine.