Part 4A regulated firms are those authorised by the FCA under Part 4A of the Financial Services and Markets Act 2000 (FSMA), granting permission to conduct regulated activities such as investment...
Part 4A regulated firms are those authorised by the FCA under Part 4A of the Financial Services and Markets Act 2000 (FSMA), granting permission to conduct regulated activities such as investment management, insurance or banking. These firms are subject to the Senior Managers and Certification Regime (SMCR). UBOs, defined under MLR 2017 as individuals with significant control (for example more than 25% ownership or voting rights), are distinct from SMF applicants or controllers but may overlap in smaller firms. Below we analyse whether UBOs of Part 4A firms require DBS checks.
FCA Requirements for UBOs
- SMCR and the fit-and-proper test. The FCA's SMCR applies to SMF applicants and Certified Persons in Part 4A firms, requiring Standard DBS checks for SMFs (for example SMF1 Chief Executive, SMF16 Compliance Oversight) as part of the fit-and-proper test. UBOs are not automatically subject to SMCR unless they also hold an SMF role or are classified as controllers under FSMA.
- Controllers under FSMA. A controller is an individual or entity acquiring or increasing significant influence over a Part 4A firm (for example more than 10% voting power). The FCA requires criminal background checks for controllers as part of the change-in-control approval process. If a UBO is also a controller, a Basic DBS check is typically sufficient unless they perform an SMF role.
- UBOs not acting as controllers or SMFs. For UBOs who are passive investors, the FCA does not mandate DBS checks unless they trigger a controller notification or are subject to SMCR. However, firms may voluntarily conduct Basic DBS checks as part of enhanced due diligence.
MLR 2017 Requirements
Under MLR 2017, Part 4A firms must conduct customer due diligence on UBOs, which may include identity verification and screening. While MLR does not explicitly mandate DBS checks for UBOs, Basic DBS checks are increasingly used to verify unspent convictions, especially for higher-risk sectors like cryptoassets or investment management. Annex 1 firms such as cryptoasset businesses and lenders should take the same approach.
When DBS Checks Are Needed
UBOs of Part 4A firms need Basic DBS checks if they are controllers requiring FCA approval, or if the firm's AML policy mandates criminal background checks for UBOs to comply with MLR 2017. Standard DBS checks are only required if the UBO also holds an SMF role. Many firms conduct Basic DBS checks on UBOs as part of enhanced due diligence even where not strictly required, to demonstrate compliance with the FCA's financial crime prevention rules.
Conclusion
UBOs of Part 4A regulated firms do not universally require DBS checks, but need Basic DBS checks if they are controllers subject to FCA change-in-control approval or as part of MLR-compliant due diligence. Standard DBS checks apply only if UBOs hold SMF roles. Fundsure can provide Basic and Standard DBS checks, digital ID verification, AML/KYC screening and adverse financial checks for controllers, certain UBOs, certified persons and senior managers subject to the SMCR.