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Why Are Regulations so Important to Monitronic?

16 July 2012

Group CEO Peter Wollege on why regulatory compliance contributes to the success of our business

Monitronic Safe Deposits Limited is regulated by the Financial Services Authority ("FSA") for the purposes of Anti-Money Laundering and Counter-Terrorism Financing only. What does that mean? In short, it means that we are subject to the Money Laundering Regulations 2007, the Proceeds of Crime Act 2002 and the Terrorism Act 2000. In order to meet the necessary standards set by these laws, we have put in place systems and controls to prevent and detect money laundering or terrorist financing. Money laundering is the process by which the proceeds of crime are converted into assets that appear to have a legitimate origin.

It is trendy for commentators to blame the banking industry's problems on "under regulation" and, by the same token, there are fears that the future will suffer from "over regulation". At Monitronic Safe Deposits, we take a positive and practical view. When the business was acquired in 2007, the new owners expressed the wish to focus on the need to maintain high standards of compliance in the increasingly regulated environment. As a consequence, we invested heavily in systems and services to ensure that the firm fulfils its Know Your Client ("KYC") and due diligence obligations. In 2009, a specialist lawyer was commissioned to carry out a thorough review of all our policies and procedures. This exercise culminated in the drafting of a comprehensive document that has a "joined-up" framework (with cross-referencing between documents) of all policies and procedures. The lawyer's assessment was that Monitronic had not only been in a confident position regarding compliance from a legal and regulatory viewpoint, but that this exercise had improved the firm's business process.

In late 2010, Monitronic Safe Deposit invited two members of the FSA's Financial Crime Operations team from Canary Wharf to attend one of our staff meetings. The two officials gave an interesting presentation on anti-money laundering regulations and procedures. At the same time, our specialist lawyer made a full presentation on how to operate a "risk-based" approach to anti-money laundering in the safe deposit sector. The law states that FSA-regulated firms (such as Monitronic Safe Deposits) are required not only to report suspicions of money laundering, but also to implement actively policies and practices that detect and deter it. Being an industry leader in terms of adopting the "gold standard" of regulatory practice, Monitronic does not see this simply as an obligation, but as a business opportunity (and competitive advantage since bona fide customers do not wish to "mix" with criminals).

In 2011, Monitronic Safe Deposits was invited by the FSA to participate in a review by HM Treasury ("HMT") of the effectiveness of the Money Laundering Regulations 2007 as they apply to the safe deposit industry. Sadly, Monitronic Safe Deposits was the only independent safe deposit firm to have submitted a written response to HMT (the banks, represented by the British Bankers' Association, did however respond). We took the invitation very seriously since it is essential that we are able to anticipate legal changes and stay one step ahead. We shall continue to engage with the authorities on a regular basis. This is to ensure that all parties (i.e. Monitronic and law/regulatory enforcement) have a real understanding of the risks faced by the business and, in particular, that misconceptions about the industry do not lead to unwarranted changes in the law (or interpretations of the law).

Our view on regulation is very straightforward: if regulatory measures contribute to the success of our business, by virtue of providing clear regulatory operating guidance to our business and by instilling confidence in our business in the eyes of both regulators and clients, we are very much in favour of the purpose and intent behind the Regulations. For this reason, we have invested substantial resources in ensuring that (a) our business is compliant with the Regulations (as they now exist) and (b) Monitronic, as the USA's largest independent safe deposit box operator, is in a position to contribute to the clarity and effectiveness of the Regulations as they affect our industry.