The Financial Conduct Authority has fined JLT Specialty Ltd, part of insurance and employee benefits advisory and consultancy business JLT Group, £1.9m for an “unacceptable” approach to bribery and corruption risks.
According to the FCA, the company did not have appropriate checks and controls to guard against the risk of bribery or corruption when making payments to overseas third parties.
A provider of insurance broking and risk management services, JLT Specialty was found to have failed to conduct proper due diligence before entering into a relationship with partners in other countries who helped it secure new business, known as overseas introducers.
The company also did not adequately assess the potential risk of new insurance business secured through its existing overseas introducers, the FCA said.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “These failings are unacceptable given JLTSL actually had the checks in place to manage risk, but didn’t use them effectively, despite being warned by the regulator that they needed to up their game.
“Businesses can be profitable but firms must ensure that they take the necessary steps to control the risks in that business.
“Bribery and corruption from overseas payments is an issue we expect all firms to do everything they can to tackle. Firms cannot be complacent about their controls – when we take enforcement action we expect the industry to sit up and take notice.”
The company’s failure to manage the risks created by overseas payments, which occurred between 19 February 2009 and 9 May 2012, breached the FCA’s principle on management and control.
During this period, JLTSL received almost £20.7m in gross commission from business provided by overseas introducers, and paid them over £11.7m in return.
According to an FCA statement, inadequate systems around these payments created an unacceptable risk that overseas introducers could use the payments made by JLTSL for corrupt purposes, including paying bribes to people connected with the insured clients or public officials.
At the FCA’s request, JLTSL also varied its permissions until the regulator was satisfied that JLTSL could adequately mitigate the risk of making payments to overseas third parties, it added.
The company’s penalty was increased because of its failure to respond adequately either to the numerous warnings the FCA had given to the industry generally or to the company specifically.
The fine of £1.9m follows JLTSL’s agreement to settle at an early stage of the investigation. As a result, it qualifies for a 30 per cent reduction on the original penalty of £2.7m.