As published on step.org/industry-news, Monday 15 May, 2023.
The Isle of Man Financial Services Authority (the Authority) has published a document setting out its new risk-based approach to supervising the regulated finance sector.
The framework will attempt to focus the Authority's resources on the greatest threats to its objectives. It says these objectives are protecting consumers, reducing financial crime and maintaining confidence in the sector through effective regulation. In future, its supervisory activity will be more proportionate to each firm's impact as determined by its size, the type of activities it conducts and its potential to cause disruption to the jurisdiction's financial system.
Anti-money laundering (AML) supervision will be aligned to the level of risk to which each firm is exposed. Firms that pose the highest risk of money laundering or terrorist financing will receive the most attention, with a stronger focus on thematic projects and outreach for lower risk firms. However, firms in which the Authority identifies a significant regulatory issue can be referred to a dedicated enhanced supervision team or the enforcement division, regardless of their impact or financial crime risk.
The Authority has reorganised its internal structure into four supervisory divisions to deliver the new strategy. Regulated firms assessed as high- or medium-impact will undergo a 'robust and proactive' programme of supervisory engagement to clarify the risks posed and how these are being managed. Low-impact regulated firms will be supervised through a greater emphasis on data automation and exception reporting, using risk indicators to target supervisory engagement at firm or sector level. Governance panels will be convened regularly to review impact and risk ratings, referrals to enhanced supervision or enforcement and consistency.
'We believe we can deliver maximum value by focusing our resources on the firms that have the capacity to cause the greatest disruption to the economy should they fail or operate in an unsafe manner', commented the Authority’s Chief Executive Officer Bettina Roth.