During the COVID-19 pandemic, FMO has demonstrated it is resilient and can carry out its mission while operating in a robust, effective and efficient way. In 2020, we focused on business continuity and further embedding KYC processes and governance in our organization.
FMO quickly adapted to a new situation. Employees have been working from home and business continuity plans have been implemented and are working. We adapted our governance structure to ensure quality, agility and multiple perspectives in decision-making. This entailed combining existing decision-making bodies and establishing new task forces to monitor the impact of COVID-19 on our markets and customers, so as to provide support where needed, and on the liquidity and financial situation of FMO. To support customers requesting temporary payment deferrals or a waiver of financial covenants, FMO agreed a joint approach with its partners (in particular other European DFIs and Multilateral Development Banks). In addition, we streamlined our processes by delegating approval authority to investment teams on providing payment deferrals on principal and interest payments, by providing pricing guidance for new transactions that reflect new market realities and by providing guidance on which type of investments are eligible for digital ESG due diligence.
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 embedded this value into its policies, products and procedures. The KYC Framework, the Anti Bribery & Corruption Policy as well as Gifts, Entertainment & Hospitality Policy address the minimum standards our stakeholders, including our employees, should adhere to.
In 2020, all new FMO employees were required to complete the Compliance e-learning that addresses personal integrity topics such as bribery and corruption. In addition, new investment staff were also required to complete the KYC e-learning as part of their onboarding. All investment staff were also required to undertake additional training related to the FEC program and remediation project.
KYC remediation and incidents. In August 2020, FMO restarted the KYC remediation effort to align with the latest KYC and FEC requirements. Since then, we onboarded temporary KYC staff to support the KYC remediation effort; they followed an intensive training program to get up and running. At the end of 2020, we released 290 files for remediation and completed 67 files, in line with 2020 expectations.
In 2020, we registered 2 KYC incidents at existing customers (2019: 2 incidents). In both cases the KYC procedure was not fully followed. Remedial actions were taken.
Alleged customer-related integrity issues. This refers to any indication of suspected money laundering, corruption, fraud, terrorist financing, or non-compliance with sanctions programs (OFAC/EU/NL/UN) by customers or other counter parties (such as guarantors, custodians, UBOs). In 2020, a total of 20 new alleged customer-related integrity cases were reported to the Compliance Committee (2019: 21 cases). Issues were raised by investment staff, other DFIs and International Finance Institutions (IFIs) (e.g. with local offices) or whistle blowers. FMO investigates each case together with partner DFIs/IFIs where needed, to verify its legitimacy and to determine solutions. During 2020, we closed 24 alleged customer-related integrity cases (2019: 9 cases), meaning either the issues were resolved or FMO decided to end the relationship.
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 2020, 1 case was reported to the Compliance Committee (2019: 2 cases), which has been closed.
Reported data leaks. Over the course of the year, no data leaks were reported to the Data Protection Authority (2019: 2 data leaks).
FMO continued to invest in an effective and efficient organization through its project portfolio. In 2020, we realized 92% of our project deliverables (2019: 87%), above our target of 85%.
The impact of COVID-19 on the project portfolio appeared to be minimal and varied between projects. Effects mostly related to the availability of resources, increased efforts on alignment and onboarding of new staff. In some cases, projects were negatively impacted due to illness of or caretaking by project staff. Some projects were positively impacted due to increased focus resulting from working from home.
In 2020, we strengthened our portfolio monitoring and control processes with improved reporting and time registration. This was enabled by the change made to project (portfolio) governance in 2019, which entailed greater involvement from the MB and accountability for project delivery at the Director level, as well as support by a dedicated Project Portfolio Management Team. This is reflected by an increase in the realized project deliverables from 87% in 2019 to 92% in 2020.
At year end, we finalized projects addressing regulatory requirements. This includes the implementation of tools that improve monitoring and reporting on troubled loans to the Dutch Central Bank, the establishment of governed data for our Financial Reporting System, and the adjustment of the Financial Reporting System to comply with the latest reporting requirements (e.g. implementation of EBA regulations). In addition, we finalized projects related to the operationalization of specific financial products like underwriting, secondary sales, funded and unfunded risk participation and blended debt finance. Furthermore, we set up Venture Capital as a new business line and adapted our equity system accordingly.
In 2020, we also worked on priority areas such as KYC remediation, enhancing FEC policies, operationalization of Invest International and developing tools to support the KYC process and reporting on impact and ESG.