Isle of Man firms have improved their measures to prevent financing weapons of mass destruction.
A report has been published by the Financial Services Authority (FSA) following its three-phase plan launched in January 2024.
Firms were inspected based on their Proliferation Financing (PF) measures. PF is the act of providing funds or services which facilitate use of nuclear, chemical, or biological weapons.
The first and third phases involved running two questionnaires in 2024 and 2026, involving 586 and 579 firms respectively. Between them the FSA ran a series of webinars and onsite visits to improve measures.
The second questionnaire found “an enhanced understanding” of the matter, including a 22 per cent increase in staff training around PF.
Shortcomings were still present, the report found. While references to PF in business risk assessment (BRA) documentation increased by 35 per cent, 133 of the 579 firms fell short.
Commenting on this, the FSA emphasised that “all firms must refer to PF separately within their BRA to evaluate the overall PF risk associated with the activities undertaken by the firm”.
Phase two involved onsite inspections of seven firms chosen out of a group of 517 believed to be at the highest risk of facilitating WMDs.
The overall picture was strong with the report finding that “all 7 inspected firms were found to have documented PF procedures, controls, and related staff training in place, and several demonstrating sector-specific best practices.”
The report did find “a number of contraventions” among these firms largely related to isolated errors rather than systematic failures.
The FSA observed only a 78% compliance with measures related to carrying out customer risk assessments. A total of 14 instances were found of failing to carry out sufficient background checks.
Eleanor Stephenson of the FSA thanked businesses for taking part before stating: “Firms are expected to apply the same standard of rigour to the assessment of proliferation financing risk as they do for money laundering and terrorist financing.”
She added: “We would encourage people to read the PF report and consider any action necessary to ensure their firm’s processes and procedures are effective, up-to-date and properly documented.”
Read the full report here.