Outsourcing internal functions to third parties or to group entities in third countries with lower overhead costs, is a cost-effective way to meet the practical elements of UK regulatory compliance. However, it is not possible for a financial services firm to outsource liability for regulatory compliance, even if a third party undertakes the practical steps.
The UK’s Financial Conduct Authority (“FCA”) will reject applications where:
If you wish to outsource internal functions, you must be able to demonstrate that you have (i) appropriate management resident in the UK, (ii) conducted appropriate pre-contracting due diligence on outsource providers, and (iii) put provisions in place for the firm to bring outsourced functions back in-house if compliance standards are not being met.
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