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Attestations – A Cautionary Tale

by: (Financial Crime Compliance Course Director) on

Once again the subject of attestations is making headlines, this time in relation to a £227m fine  imposed on Deutsche Bank by the Financial Conduct Authority.

Attestations are being increasingly used by the FCA to obtain “a personal commitment from an approved person at a regulated firm that specific action has been taken or will be taken” and the use of these as a supervisory tool is certainly in line with the FCA’s intent to make senior management more accountable.

Although they have no specific legal basis (neither the Financial Service and Markets Act 2000 (FSMA) nor the Financial Services Act 2012 give the FCA the right to require senior managers to attest), they are increasingly forming a significant part of the FCA’s supervisory tool kit and senior managers would be ill-advised to refuse a request for an attestation.

exam tipsWhat this means in practice is that those who sign attestations must do so honestly and with confidence – understanding what they are signing and being willing to be held responsible for any breaches or inaccurate information as they could potentially fall foul of a Principle 11 offence of not dealing with the Regulator in an ‘open and cooperative way’ or, more seriously, a s177 FSMA offence of providing false, misleading or reckless information to the Regulator.

On 4 February 2011, Deutsche Bank received a request from the FCA for an attestation as to the adequacy of the systems and controls in place for its LIBOR submissions. (The same was requested of all banks that contributed to the LIBOR setting process due to the widespread concerns in relation to LIBOR at this time and the need for banks to ensure the integrity of their LIBOR submissions).

According to the Final Notice Deutsche Bank provided the following:

In response to the [Authority’s] letter of 4 February 2011, the Compliance department have conducted spot checks on a random sample of LIBOR submissions across a number [of] currencies. In addition DB monitors all email and instant messaging communications of all front office staff. The focus of this surveillance is DB’s market conduct, such that key words and phrases within the monitoring tool are designed to flag potential market conduct issues. Any potential issues can be escalated and investigated as necessary.

In light of the above, I consider, together with the senior management [names of Senior Manager B and Senior Manager C provided]…. that DB currently has adequate systems and controls in place for the determination and submission of DB’s LIBOR fixings.

Unfortunately the facts attested to were false and according to the FCA, the person signing the attestation knew this at the time of signing.

The lesson learned here – attempting to pull the wool over the eyes of the Regulator and presuming that signing an attestation will be the end of a matter is not only dishonest, but incredibly naïve.  Be very careful what you sign because you will be held to account.

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