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00:00:01
Episode 1 - All things CASS with Zak Karim
28 Plays8 months ago
CASS 15/Safeguarding
What we can expect in this years CASS audit
Q&A
Transcript
Intro
Introduction and Podcast Motivation
00:00:14
James Carter
Great. Welcome to the JCR pod. My name is James Carter. I'm the founder of JCR Talent, specialist regulatory compliance recruitment, and I'm here with Zach today. and So thank you for joining us, Zach.
00:00:30
James Carter
The reason why i decided to launch podcast, I know there's plenty of podcasts podcasts out there that I'm sure people listen to and may well have rolled their eyes when they they saw that I was launching one as well. and But there isn't much out there in the way of regulatory compliance.
00:00:49
James Carter
And about 15 months ago, i started a newsletter on LinkedIn and and released monthly articles. And over that space of time, I've got quite good traction and seems like you know people are interested in hearing about other people's opinions in the market based on CAS and compliance and ESG and all of the topics that, you know, you've kind of look at on a day-to-day basis. So I thought, well, why not take that to the next level um and actually bring it into a bit more of an engaging format, hence the
Platform Availability and Personal Connection
00:01:21
James Carter
the podcast. So be available on our YouTube. And also I'm looking at ah loading onto Apple podcasts and Spotify as well.
00:01:30
James Carter
And for those of you who'd like to listen, um, on the way into into work or at lunch. So yeah, let's um let's get started. and Zach, for those of you haven't spoken to Zach before, is a CAS specialist. We met, I think I was thinking earlier how long ago it was. It was probably about nine years ago now, Zach, maybe eight or nine years ago.
00:01:51
Zak
It was about eight, nine years ago, yeah.
00:01:53
James Carter
And I remember um I met you and when you were working with a client over in Essex.
00:02:00
Zak
Yes.
00:02:01
James Carter
And I don't know if I told you this, but I actually, got lost a few times on the way to meeting you and because I had a look on Google Maps and worked out my journey being based up in Manchester.
00:02:06
Zak
up
00:02:13
James Carter
um I often have to do that whenever I yeah whenever i go to to London um and it looked like a pretty simple journey off the train, a short walk and and there we'd be and anyway ended up in a housing estate and Yeah, get getting in all sorts of bother, but I got there eventually. um So yeah, it seems seems, doesn't seem eight or nine years ago, I must say. um But um yeah, obviously we've kept in touch over the years and um yeah, really pleased to have you as the first guest.
00:02:40
Zak
Yeah, look, thanks. Thanks for having me, James. And yeah, I think i've i've I've definitely got a few more grey hair since then. And ah I do i did fondly recall that but moment when we did first meet, because I think we weren't very um privileged with the number of options we had to grab a coffee.
00:02:46
James Carter
Yeah, as have I.
00:02:58
Zak
I think we were quite restricted.
00:02:58
James Carter
That's right.
00:02:59
Zak
We yeah grabbed a coffee.
00:03:00
James Carter
Yeah.
00:03:01
Zak
I think we were there with with a colleague. um And yeah, like you said, it's ah it's flown by. What, eight, nine, almost 10 years has flown by, right?
00:03:08
James Carter
Yeah, absolutely. And um obviously in that time, you've worked with a number of of different clients and um obviously, you know, set up your own business, um which which is which is great.
CAS 15 and Safeguarding Focus
00:03:19
James Carter
um And yeah, I certainly have, you know, found it really useful when we've partnered on content, ah most recently talking about CAS 15 and safeguarding, which is obviously a very hot topic in the CAS world. um So yeah, keen to start off just talking a little bit about that. And I know I've had quite a few messages over the last couple of weeks from um people in the CAS space who are very, very eager to hear your thoughts on this. and So yeah, just if we start off, Zach, just regarding
00:03:51
James Carter
why the rules have been brought in and and who it actually affects.
00:03:56
Zak
Yeah, absolutely. ah So James, you you're you're obviously aware that the CAS regime has been around for a long time and um that's gone through ah few evolutions and it's really matured into a strong regulation from the FCA's perspective. um On the contrary, the safeguarding, there were number of weaknesses that were found when the FCA and performed reviews.
00:04:19
Zak
think they found um an increase in the number of firms that had safeguarding issues. And so they felt like the framework hadn't perhaps evolved with the development in the safeguarding um space, so the payment services and electronic money space.
00:04:35
Zak
And I'm sure everyone's aware that that space has massively changed over the last 10 years, right? And the number of firms operating in that space, the amount of money that goes through payment services firms and institutions has completely ah transformed over the last 10 years. and And naturally, the FCA have come to a view that they need to strengthen that and and what better than to leverage something that currently exists. So the CAS regime was the natural place to look at when it came to finding a regulation that was more suitable and more appropriate for the risks associated with the safeguarding space, the payment money space and the electronic money space.
00:05:16
Zak
um So the cash regime has now been and very much is is going to be sort of adapted and adopted in the payment services world
Impact of New Regulations on Firms
00:05:24
Zak
going forward. And and that's what there saw the sort big change is.
00:05:28
James Carter
Okay. Well, it it does some remind me of when I started off recruiting, which was um yeah coming up to nine years ago, and it was just as the FRC assurance standard came in.
00:05:40
James Carter
And um yeah, it was one of those really where ah most of the industry were looking at where they needed to strengthen and, um and ah you know, sort structural changes internally, looking at what framework was already in place and kind of levelling up from there, really. would Would you say that it's kind of similar in that respect from a payments perspective?
00:06:02
Zak
It's a good parallel, James, in all honesty. The FRC came in and that was the the of as short the assurance standard that the FRC put together ah back in 17, I think it was originally, um the first Virgin Act piece.
00:06:16
Zak
ah That came in and that required a lot of work from cash-regulated firms. and And similarly, this regulation, whilst it's not through the FLC, as you're aware, it's through the FCA, ah it's still it's going to have that level of impact for for the firms that are impacted. So the firms that this will apply to are authorised payment institutions, e-money institutions, um small e-money institutions and large ones as well, and credit unions that issue e-money within the yeah UK under the payment services and electronic money services, electronic money,
00:06:51
Zak
app regulations. um So for those firms, certainly it's going to be huge change and and and they'll have to look into how they change their processes, their framework, their governance, pretty much they that end-to-end process that they've currently got and um make it more suitable for what is going to be a more demanding regulation.
00:07:10
James Carter
Absolutely. And what do you foresee being the main challenges for those who are having to um obviously implement a new way of working and essentially a new a new function um in in in you know in between line one and two?
00:07:27
James Carter
um Yeah, what what do you think will be the main sort of headaches that people will um have to overcome?
00:07:33
Zak
It's a good question, James. I think yeah as human humans, we are creatures of habit. We don't like change, do we, as much as change is a constant and we can't we can't move away from change and it's it's a necessity almost.
00:07:39
James Carter
Yeah.
00:07:47
Zak
There will be big changes and naturally with those big changes, trying to understand whether the where where this sort of this this safeguarding team, the almost cat-style team, where they sit, so first line in between first and second. So from a reporting function perspective, there would be some changes.
00:08:07
Zak
ah Culturally, i think, when you have a more demanding regulation, when you have the auditors looking into your into your space within the the payment services firms with a sort of you know deeper lens, a broader lens, ah the regulators going to be a lot more interested in what's going on within the firm as well.
00:08:27
Zak
And they will get certain reporting on the back of this monthly reporting that they'll get, almost like a CMOS style monthly reporting that they'll they'll be getting. um So with that change,
00:08:38
Zak
you know you're going to see senior management suddenly will have to be more interested if they weren't already more interested in this space and trying to understand it at board level, at the various committees that senior management sit on.
00:08:51
Zak
And so that top-down approach, that top-down culture will have really come across and go through the firm and those changes at the granular level from a process all the way to the top in terms of the culture and the way this risk is perceived and treated.
00:09:07
James Carter
Yeah, I guess one of the big things will be and creating the resolution pack um because we've not seen many of the sort of CASRP spot checks in recent years, but I know few years ago they were you know they were they were more more more common. and Do you think that could potentially be More of those on on the horizon. um you know do you think the regulator will will look at doing some RP spot checks maybe some point next year um to ensure that they're as as you know as comprehensive as they should be?
Regulatory Culture and Resolution Packs
00:09:45
Zak
the The RP is actually a good um good indicator. It's almost like a good barometer in terms of you know what's the culture like, what's how seriously has a firm taken on this regulation.
00:09:56
Zak
And the nature of the RP is that it doesn't require, it's not very intense or heavy or very technical in terms of doing a sort of simulation test or or just doing a quick um you know review on the RP.
00:10:08
Zak
So it's it's a useful way of a regulator or anyone for that matter to just understand how that regulation has been embedded and just to get a a good flavor of that.
00:10:13
James Carter
Thank you.
00:10:22
Zak
um So it could be a technique that the regulator uses, absolutely, potentially. and And like i said, because it's not as... resource intense in terms of the the review that's required on the back of it.
00:10:36
Zak
It will be effective and efficient way of of assessing how firms have adapted and adopted to the change.
00:10:46
James Carter
and And from an audit perspective, um I know, you know, that's obviously going to be that first audit is going to be really, you know, pivotal to to the the you know the businesses that had to make those changes. And it probably will be a bit of a shock, really.
00:11:05
James Carter
First of all, from a cost perspective, we know how expensive the cash audit can be. um But ah yeah, what do you think the auditors um are most likely to to focus on in that first year?
00:11:17
Zak
um yeah The audit will be a big shock, absolutely. i think the level of scrutiny from once there were requirements under the PSR EMR regulations and um the FCA's approach document certainly wasn't as stringent and and the changes to the rules would make that audit a lot more demanding.
00:11:37
Zak
um and and And one of the key areas would be reconciliations. Absolutely. I think reconciliations is always key for every firm. How much money you have that you should have versus how much money you actually have. And and and going from a a sort of more relaxed environment to a daily reconciliation would be will be very demanding. um And on the back of the reconciliation, all the processes on either the side of the reconciliations will then come under a lot of scrutiny as well, because again, those will need to be ramped up and the controls will need to be ramped up around both sides of the reconciliations and the controls to make sure that the reconciliations can stand up to the rigour.
00:12:18
James Carter
Okay. And then just CAS as a whole, really, um what what do you think, ah from an audit perspective, is going to be the main areas that auditors
Audit Challenges and Focus Areas
00:12:30
James Carter
focus on?
00:12:31
James Carter
um From speaking with some of my some of my network, um it's going to be likely be IT controls. um that's That's been the the main one over the last couple of years. Obviously, you've got third-party oversight, which has always been very much a ah focus.
00:12:50
James Carter
um But yeah, is there anything else that you think the auditors will will likely focus on this year?
00:12:56
Zak
think certainly i t IT. IT continues to be a big area. Again, naturally as the world evolves around IT and firms are really uplifting their IT infrastructure and reliance on IT and naturally the dependence on IT is increasing. So IT will continue to be a very important area.
00:13:15
Zak
um I think another area that has been an important area for the FCA yeah and has remained a top priority for the FCA is culture.
00:13:23
James Carter
Uh-huh.
00:13:23
Zak
and and the caste culture and the and the sort of governance and culture aspects of it. And and that that is, once it's not a a sort of isolated way of looking at culture or there isn't an isolated way of looking at governance, it's sort of holistic and across the firm.
00:13:41
Zak
um there Certainly, the auditors will continue to look at that and assess that and evaluate that and see whether there is um the appropriate and adequate a culture that's required in such firms.
00:13:54
Zak
um Whether it be but for on the back of the new regulation or existing firms, I think culture and governance remains to be, ah along with IT, the two sort of key areas to auditors will continue focusing on.
00:14:07
James Carter
I guess from a culture perspective, it's one of those that's that's company-wide really, isn't it? And I guess that's the challenge. When you work directly in the CAS team, and yeah looking at CAS on a day-to-day basis, it's probably from ah a CAS oversight perspective, it's probably a little bit easier to measure and sort of manage. Whereas the culture piece, that's from operations through to you know compliance to audit, you know finance, like you know that that has to be measured throughout. And I guess that is a challenge for a lot of businesses. Is is that something that you found, Zach?
00:14:44
Zak
Yeah, yeah you've you've you've hit the nail on the head, James. The culture culture piece takes a long time as well. right so It's not something that, like you said, it's not within your immediate control. You can change the culture within your team, your organization, in terms of the areas that you're in charge of. But certainly, culture is much broader than that.
00:15:04
Zak
And so those those changes can take years. right um Sometimes it's organic, sometimes it's a trigger because new senior management have come in, there's a new CEO, there's a new COO, or someone of that um you know new CRO or someone of that um high C-suite level has come in and really wants to change what they've seen.
00:15:27
Zak
um And so you know the the the culture piece can take two, three years, sometimes even longer. But you need to have that vision and you need to work with that vision and and and get the buy-in from the senior stakeholders.
00:15:39
Zak
And through that, once you have the buy-in, then implementing it and trying to sort of see the benefits of it, yeah which takes a bit of time.
00:15:45
James Carter
definitely
00:15:46
Zak
Yeah.
00:15:47
James Carter
Do you think that might be a challenge that senior stakeholder ah buy-in from with just going back to ah payments? um Because, um you know, and i've I've heard it being a frustration in a lot of businesses whereby CAS oversight officer doesn't necessarily feel like they're getting the tools that they need to ensure, you know, that CAS is where it should be.
00:16:16
James Carter
um yeah Do you think that that might be a challenge for some of the payments firms when obviously, you know from a cost perspective and a resource perspective?
Management Buy-in and Culture Assessment
00:16:26
Zak
Yeah, absolutely. i think cost perspective, resource perspective, ah trying to get buy-in from the senior managers, trying to make them realize, because look, look learn now not everyone's going to be aware of all the changes in the regulations in the way as intimately as perhaps a practitioner in the space is, right? And so trying to take that message and then portray it back to the board and then you know you You have another part of the business that's taken another regulation, another change, and then trying to, again, portray it back to the board.
00:16:57
Zak
it's It's an evolving space, the whole the the regulatory space, right? And the landscape is changing you know in terms of regulations are going up generally. ah So it's trying to get the focus and the attention whilst all the changes are happening and making sure that they are then giving the right level of attention amongst all the other changes ah to to sort of not just not just the regulatory space, even within the business, right? The changes happening in the business as priorities from a strategic perspective, from an operational perspective.
00:17:28
Zak
um so Again, even getting the buy-in can be a bit of a difficult and a bit of a long game, right? And so you you do need to have patience, um have the conviction and sort hope and pray that that strategy works. And then once you've got that buy-in part, um you should be able to then implement that strategy more seemingly.
00:17:50
James Carter
Yeah. and And just going back to to culture for a moment. um Do you have any of tasks or exercises that CAS leaders can undertake to measure the culture across the business?
00:18:09
Zak
um there are There are ways of doing it. Certainly one quick way is sitting and observing committees. So whether that be board or whether that be one of the committees that reports into the board, so it can be the risk committee or perhaps when you first start off and it might just be the CAS committee.
00:18:28
Zak
ah seeing whether the border the board members are aware of CAS, are they asking the right types of questions, are they linking CAS to the various changes and the various updates within the business?
00:18:42
Zak
and and And from there, you can get a sense of, you know is there enough knowledge across the across the board, across the senior management team? um And are they able to link CAS to the various topics? Are they asking the right questions? Are they inquiring? Even if they don't know, are they inquiring and trying to make the link to get the answer?
00:19:00
Zak
mean, that's sufficient.
00:19:00
James Carter
Mm-hmm.
00:19:00
Zak
ah do You know, there's no expectation that board members must know everything about CAS and know all the linkages. But I think just observing a couple of these committees, board level, and and and certainly some of the committees reporting to the board, is it probably a good way of just trying to assess how the CAS culture is.
00:19:18
Zak
And... Another good way is probably um at a you know that's the top level and then at the more operational level, looking at your policies and procedures, are they quite mature?
00:19:29
Zak
ah has been Has there been quite a lot of thought put into it Have there been quite a lot of eyes that have been ah have sort of read and reviewed these policies and procedures? Do they seem to cover off the various bases?
00:19:40
Zak
and and And a combination of that will give you an indicator of operationally is their maturity and from a governance and broader culture a perspective is their maturity ah from a caste perspective.
00:19:52
James Carter
okay Okay, that's
Transitioning Roles and Technology Timing
00:19:53
James Carter
great. That was one of the questions actually that was um that was sent in and the other question One of the other questions that was sent as well was what challenges do you foresee for someone moving from a a pure CAS role into a safeguarding role?
00:19:55
Zak
oh yeah
00:20:09
James Carter
So I would imagine there will be people who make the move over from maybe be investments um over to payments into that CAS safeguarding role.
00:20:21
Zak
Yeah, that that that there will be and um there will be, you know, SMFs that will need to start um taking on those roles and senior management roles within these payment service ah firms. and um Certainly, toy ah an obvious challenge would be if you but are in a relatively mature environment from a CAS perspective, and then you're now moving into a payment services firm who has been under a, um if I may say, ah not as of not as not as stringent of a regulator regulatory framework as the CAS regulation, then naturally,
00:20:56
Zak
that culture piece and maturity piece will come in and perhaps there'll be some frustrations and and challenges when it comes to, you know, getting your points across, getting your messages across in terms of getting the firm up to you the level that it needs to get up to.
00:21:10
Zak
And those relationships will almost be starting, you know, even if it's not from zero, certainly a relatively ah low level because, you know, say the safeguarding regulations, once they're they are you know relatively still strong regulations and the CAS regulations are you know a few notches up and that that shift in in in mindset and and approach but within the firm, it will take a bit of time for that person to perhaps potentially adapt to that um unless they happen to go into a very mature organization that's fully ready for it. But um as as we know, there are so many moving parts within a business, there are so many strategically, operationally, nevermind all the external
00:21:51
Zak
regulatory changes that it's very difficult to be on top of everything at the same time.
00:21:55
James Carter
Yeah, definitely. um Do you think that there's an opportunity for to make things a little bit easier with the investment of tech? Because there's number of different so whether it be from a reconciliation perspective or whether it's, um you know, sort of um regulatory technology to to support with regulatory compliance.
00:22:19
James Carter
Is that something that a lot of payments firms should consider um implementing it earlier, you know, rather than later?
00:22:29
Zak
Yeah, I mean, tech tech definitely helps. Naturally, it will help at least um but has the potential to save you time and and potentially save you some of some of the thinking.
00:22:42
Zak
But certainly at the start, the investment has to be understanding those changes and and and the processes and what that means to the business. and And once you've understood it, then you can look at perhaps how technology can be a sort of a catalyst to make that process easier or or perhaps a catalyst to save you some time
00:23:00
James Carter
Yeah.
00:23:03
Zak
um when it comes to it. But i think know if you move to that tech stage too quickly without understanding the changes in the processes and what that means to your business, there's a risk of disconnect and and and that exploitative process could result in adapting and adopting these technologies.
Recruitment Challenges and Firm Rebranding
00:23:20
Zak
But actually when it comes to the audits, they then find that actually you're not really meeting the requirements And then that could be very costly afterwards if you're then having to change something significantly or you realise that the provider that you've gone with, if it if it is an external provider, then they don't simply just match up to the expectations from a regulatory perspective.
00:23:41
James Carter
Yeah, I guess um like you know make a good point about introducing it at the right time because the data has to be there you know in order to ensure that the tech is utilised in the right way.
00:23:56
James Carter
um So maybe maybe that's something that once the framework's in place and it's you know that it's where it should be, then it's potentially the right time to to introduce tech.
00:24:06
James Carter
um Okay. And then just with regards to, um I guess, you know, sort of, um you know, any other challenges that you foresee this year, whether that be, you know, in in other sectors from a cash perspective.
00:24:24
James Carter
um One of the things that I'm finding is that it's, I think there'll be a challenge with actually candidate attraction, I think, because ah you know it's it's it's can be seen as quite daunting moving into a firm where everything is you know needs to be built from the from the ground up um i think that that will be a potential challenge is bringing people in who are happy to to do that and i think they will definitely want assurances that they will get the the tools um and the investment that's needed
00:24:48
Zak
Yep.
00:25:02
James Carter
um But yeah, I think that will probably be the the main the main challenge for for payments firms that are um going to be recruiting for a client asset oversight officers. Do you see any other potential challenges throughout this year?
00:25:18
Zak
um the The personal side, absolutely. You definitely the right people who understand the regulation, understand the business as well, to be able to make sure that the business and regulation marry up within your within your um the the so yeah within your business and the frameworks are built up.
00:25:34
Zak
ah um and and And some of the broader topics that we've discussed, you know, of culture will remain a big big big so topic and challenge. um But I think certainly resourcing side, because again, the the payment services firms, the EMI firms,
00:25:52
Zak
the CAS regulation being so much more stringent, ah there's a level of expertise and level of expertise that's expected from the regulator for these firms to have.
00:26:04
Zak
And so for payment services firms, they need to be able to quickly adapt to that and say, okay, well, we need to bring in the right level of expertise that we can't really have a you know a relatively junior person taking on these SMF roles or the senior management roles, right?
00:26:19
James Carter
yep
00:26:19
Zak
we need to get the right profile and getting the right profile um from from an existing pool that's, you know, the cast pool of SMEs, it's not huge, i mean, it's not small, it certainly has grown, ah but nonetheless, trying to bring them over to the payment services side would be a challenge for these firms potentially.
00:26:42
James Carter
definitely um yeah and just finally uh zach it'd be uh great just to talk through um the recent changes and that you that you've had actually this week with with the business.
00:26:54
James Carter
um So, ah you know, a complete rebrand, which is very exciting. So if you just want to talk us for a little bit about what the changes are there and yeah, the how that how that, you know, can can be offered to to potential clients in the CAS world.
00:27:11
Zak
Yeah, thanks, James. the The rebrand was ah trying to keep up with the sort of changing world and trying to make so make make the brand a little bit more relevant.
00:27:23
Zak
When I started the company, I just used my surname, so Karim Consultancy, and I felt like I need to now make a sort of differentiation between me, the personal brand, and the company brand.
00:27:33
Zak
And so I felt like that was a good time to do it, where I make that um differentiation, you know the the company brand has its own brand equity. um I have my own profile and and and and that's fine, but but by keeping that so distinct, but positively distinct.
00:27:49
Zak
and And through that, we've also looking to increase our offerings as well. So CAS and safeguarding, of course, remains to be ah key one of our key spaces. We're also moving into the regulatory authorisation space and financial crime and risk management as well.
00:28:05
Zak
These are areas that continue to be, we've seen, high demand areas and areas that we can certainly help and support businesses with.
00:28:14
James Carter
Great. Yeah, well, I must say the rebrand looks great. I think I mentioned to you, yeah, but the ah when i so when I first launched, I kind of tried the branding piece myself and, yeah, it didn't last very long. It looked pretty awful. I'll i'll send you a yeah a photo of what my my first uh logo looked like um so yeah quick shout out to to brad who we've both worked with um who's done done a great job with both of our uh branding and and website and so on um but yeah if you're if you're looking for any support in the regulatory space then zach um yeah drop drop him a note and uh i'm sure you'll uh he'll be able to help um
00:28:55
Zak
Thank you.
00:28:55
James Carter
But ah yeah, no, appreciate your time, Zach. That's half an hour, which has flown by. um so appreciate you setting aside your Friday afternoon. ah Very much appreciated. and Yeah, so thank you for those that have listened. um it you know It really is ah appreciated. Any feedback and would be great. and This is obviously the first of hopefully many. Plan to do one every month. um Actually, Zach, do you um have a particular topic that you think we should maybe look at in the in the next one? And I'll i'll try and try and source an expert to to to speak to about it.
00:29:33
Zak
and Just broadly in any regulation, James, or CAS? or
00:29:37
James Carter
any Any regulation? Yeah. and Anything you think?
00:29:39
Zak
Yeah.
Future Podcast Topics - Financial Crime
00:29:40
Zak
ah I mean, I think financial crime would be a good topic. I think that hits ah quite quite a lot broad number of firms as well.
00:29:44
James Carter
Yeah.
00:29:47
Zak
and And the impact of financial crime continues to be very prevalent.
00:29:50
James Carter
Okay.
00:29:51
Zak
So, yeah, perhaps financial crime
00:29:53
James Carter
Brilliant. Okay. Well, i'll I'll get to work on that. And yeah, I hope you have a great weekend.
00:29:57
Zak
crime.
00:29:59
Zak
Nice one. Thanks, James. Pleasure to be invited and i yeah speak to you soon.
00:30:03
James Carter
Cheers, Zach. Thanks, everyone.
00:30:04
Zak
Yeah.
00:30:06
James Carter
Bye.