In 2019, we continued to build a robust, effective and efficient organization. We did this by further embedding ESG into our operations, improving our Know Your Customer (KYC) procedures and through data and systems that support our decision-making.
In 2019, we introduced an Executive Committee (ExCo) to support the Management Board in the day-to-day management of the organization. In addition, impact and ESG were further embedded into our governance structure. IESG became a new department with its own Director who has a seat on the Executive Committee. The Supervisory Board also set up a dedicated Impact Committee.
FMO opened joint offices in Nairobi and Singapore, in addition to our Johannesburg office. A stronger local presence enables us to connect with clients and to explore opportunities in the region.
One of FMO’s core values is integrity. FMO believes it is important that this value is internalized and lived by its employees as well as its customers. FMO has translated this into its policies, products and procedures. The Know Your Customer Framework, the Anti Bribery & Corruption Policy as well as Gifts, Entertainment & Hospitality Policy address the minimum standards our stakeholders should adhere to.
In 2019, all new FMO employees were required to complete the Compliance E-learning that addresses personal integrity related topics such as bribery and corruption. All investment employees attended face-to-face sessions hosted by our Compliance Department on the updated KYC Policy and Manual. Employees were also required to complete an updated KYC refresher E-learning that addresses client integrity risk factors, which could indicate the likelihood of corruption, bribery or fraud occurring at a client.
Indicator: number of alleged client-related integrity issues
Alleged client-related integrity issues refer to any indication of suspected money laundering, corruption, fraud, terrorist financing, or non-compliance with sanctions programs (OFAC/EU/NL/UN) by clients or other counter parties (such as guarantors, custodians, UBOs). In 2019, a total of 21 new alleged client-related integrity cases were reported to the Compliance Committee. Issues are raised by investment staff, other DFIs/IFIs (e.g. with local offices) or whistle blowers. We investigate each case together with partner DFIs/IFIs. Investigation could result in the conclusion that there is no issue. If there is, we investigate solutions together with our partners. During 2019, we closed 9 alleged client-related integrity cases (either the issues were solved or FMO decided not to proceed with the relationship). Currently, the Financial Economic Crime (FEC) enhancement program is being developed and rolled out. The program involves further increasing staff awareness, conducting additional and deeper checks when onboarding customers and closer monitoring through periodic reviews.
Indicator: number of alleged employee-related integrity issues
Alleged employee-related integrity issues refer to any indication of suspected involvement with bribery, corruption, fraud, privacy violation, conflict of interest due to outside positions, gifts/entertainment/ hospitality, or use of price-sensitive information. In 2019, a total of 2 cases were reported to the Compliance Committee. One case has been closed and the other is under investigation.
Indicator: number of KYC incidents due to not adhering to KYC procedure
In 2019, we registered 2 KYC incidents at existing clients. In both cases the KYC procedure was not fully followed. Remediating actions were taken.
Indicator: reported data leaks
Over the course of the year, 2 data leaks were reported to the Data Protection Authority. Both data leaks were adequately solved, and measures have been taken to prevent similar leaks in the future.
Know Your Customer
In August 2018, the Dutch Central Bank (DNB) conducted an on-site inspection of FMO’s Systemic Integrity Risk Analysis (SIRA) and Know Your Customers (KYC) procedure. These should ensure that FMO does not facilitate corruption, organized crime, or terrorism. DNB concluded that our KYC process was not up to standard and issued recommendations. In 2019 FMO took various actions to follow up. This has resulted in a revised approach to conducting the Systemic Integrity Risk Assessment (SIRA) and enhanced KYC procedures. FMO has begun to bring all existing KYC files in line with the updated policy.
As FMO did not achieve the number of remediated KYC files as intended of year end 2019, FMO initiated a Root Cause Analysis (RCA) of this limited progress. Main conclusions of the RCA consist, among others, of underestimation of FMO’s FEC risk profile and complexity and required governance, including the appropriate level of sponsorship. As a result, in 2020 more effort will be put in enhancing the FEC framework, as well as awareness and training of the investment departments. FMO will continue to enhance the Compliance Framework and controls in 2020.
Processes, data and systems
FMO continued to invest in an effective and efficient organization. In 2019, we realized 87% of our project deliverables, above our target of 85%. We made progress in the following areas:
We improved the governance of our project management. This entailed strengthening project owner accountability and involving the Executive Committee in decision-making of key projects. We added Project Management Office staff to liaise more strongly with projects. Also, we set up the Architecture Board to ensure that new processes, systems, data and products fit long term within our envisioned IT architecture. Standardized monthly reporting and focus on project deliverables has further supported effective project management.
We finalized the Information Management program according to plan. Managing data as a business asset is expected to be fully embedded in the organization from 2020. We set up a Data Governance organization and introduced a Data Management Policy. We also established new data management processes, such as the Data Quality Issue Management process, to ensure root causes are analyzed and resolved to prevent re-occurrence. Moreover, we delivered information products which support effective decision-making throughout the organization.
We further implemented several system solutions. We optimized our equity administration system and implemented a tool to improve monitoring and reporting to the Dutch Central Bank on troubled loans. In addition, we prepared systems to administrate NASIRA instruments. As IT security is at the basis of well-functioning systems and reliable data, we further strengthened our IT security practices and implemented security-logging-monitoring.