Isle of Man Financial Services Authority committed to ‘Making a Difference’

The Isle of Man Financial Services Authority (FSA) has underlined its commitment to supporting the Island’s reputation as a successful place to do business by strengthening its core activities and embracing technology to create the right environment to foster a thriving and sustainable economy.

Its Annual Report for 2023/24, titled ‘Making a Difference’ and published on 23 December, captures the progress that has been made by the regulator in meeting its objectives of protecting consumers, reducing financial crime and maintaining confidence in the finance sector through effective regulation.

“‘We are embedding a programme of transformational change at the Authority to ensure we operate as effectively as possible into the future,” said FSA Chief Executive Officer Bettina Roth. “We are committed to continuous improvement and instilling a culture of high performance. Collaboration remains central to our ambitions, and it is essential for the regulator, industry and government to work together on behalf of the Island, particularly during such unpredictable times.”

The FSA said its focus is on embedding its updated supervisory approach and organisational structure, as well as enhancing data collection and analysis. It is targeting resources in line with a firm’s size, the type of activities it conducts and its potential to disrupt the Island’s financial system.

The aim is to deliver better outcomes by driving a consistent and proactive programme of supervisory engagement. This work is underpinned by the increased use of data and innovative ways of working, with a view to achieving greater automation, straight-through processing, and exception reporting.

During the reporting period, the Authority established an Innovation Hub in collaboration with the Department for Enterprise’s Digital and Finance Agencies. The Hub provides a way for firms to engage with the Authority to identify what new products or services may require from a regulatory perspective. It offers informal engagement, pre-engagement discussions and subject matter expert meetings to support innovators.

In February 2024, the FSA also announced a collaboration agreement with start-up firm Regsearch to leverage AI capabilities for the benefit of the Isle of Man’s business community.

The Authority said its aim is to work collaboratively with industry and government in the best interests of the island. This includes efforts to demonstrate the long-term effectiveness of the island’s anti-money laundering and countering financial crime (AML/CFT) regime ahead of its next MONEYVAL evaluation.

A key development has been the implementation of a new risk analysis tool, STRIX AML, which is now the repository for AML/CFT data collected and held by the Authority. This assists in producing a multi-faceted AML/CFT risk rating across the entire cohort of firms to inform the Authority’s AML/CFT engagement plan.

All government agencies took part in a diagnostic exercise conducted by an independent third party to review the Island’s AML/CFT framework, which fed into a government-wide action plan to improve AML/CFT effectiveness. As part of this plan, the FSA has consulted on proposed amendments to the AML/CFT legislative framework and progressed plans to implement the ‘Travel Rule Code’, which mandates certain information is attached to a virtual asset transfer.

In 2024/25, the FSA plans to consult on two Bills to amend existing regulatory legislation. Drafts of both Bills are currently being considered and revised before consultation can take place.

• Retirement Benefits Schemes (Amendment) Bill, which will update the regulatory framework for pension service providers.
• Financial Services (Miscellaneous Provisions) Bill, which will update the Financial Services Act 2008, Insurance Act 2008, Collective Investment Schemes Act 2008 and Designated Businesses (Registration and Oversight) Act 2015.

During 2023/24, a total of four civil penalties were issued on firms, resulting in a total of £1,581,811 being levied through successful enforcement actions, including the use of settlement agreements, a substantial increase from the £307,292 in 2022/23. Under the Authority Funding Model, from 1 April 2023 discretionary civil penalty income is offset against the Authority’s enforcement costs for the financial year in which the penalty was received.