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Crisis Management: Dawn Raids

Practical Response Tips

Financial, Executive and Professional Risks (FINEX)
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By Hollie Mortlock | March 24, 2020

Are you sufficiently prepared in the event of a surprise onsite inspection by a regulator, commonly known as a “dawn raid”?

Dawn raids can be stressful for everyone involved. How your employees react during a dawn raid may have an impact on the outcome of any regulatory investigation.

It is therefore important that your staff know what to expect and how to handle the situation should a dawn raid occur. It is important to co-operate with the regulators. We recommend that you consult with your legal advisers in preparation for a dawn raid. It is essential that you instruct your in-house legal team or external legal advisers if you are required to respond to any inspection by a regulator.

Processes and procedures

Here are a few things you may want to consider as part of your own company procedures when it comes to managing a dawn raid:

  • If the building in which your business is located is occupied by more than one company, clarify which company the regulatory officials are here to see.
  • Do you have a ‘crisis cascade’? If not, you may want to consider putting one together so you can easily identify who should be contacted when regulatory officials arrive unannounced. You should include your chosen lawyers so that they can provide immediate advice.
  • It is considered good practice to notify staff that an inspection is about to commence and that they should not disclose the fact of the inspection, or any details relating to it to anyone outside of the company, including the Press.

Actions to consider

  • Check that the business name is correct on the search documentation
  • Request information from the officials as to whether they are conducting inspections or investigations at any of the company’s other sites, or at the homes of any company employees. If they are, you may want to arrange for legal support to be sent to such site or such employee’s home
  • Make a copy of any relevant official documentation in connection with the inspection
  • Make a list of each individual official’s name and request to take a copy of their identification
  • Give each official a name badge to identify them clearly to staff
  • Assign an appropriate member of staff (or security) to assist each official whilst they conduct their inspection.

Your legal team may want to discuss with the officials the nature of the inspection and discuss and agree how the inspection is going to be carried out. It may be good practice to obtain certain information such as:

  • Whose records will be reviewed and in what order
  • Will any interviews of personnel be taking place during the visit
  • Will any records or documents be photocopied or confiscated
  • How will IT be involved with regards to electronic records and information
  • Discuss with your legal team regarding any concerns about legal privilege or relevance regarding certain documents, or whether you are required to sign any documentation
  • Have the IT team readily available to deal with access issues
  • Make a note of what electronic documents, files and emails are accessed, examined and/or printed
  • Keep a record of the physical documents which are inspected or searched or examined. It may be advisable to take a copy of any documents removed by the officials, if agreed by the officials

After the Inspection

Here are a few steps you may want to consider once the inspection has finished:

  • Inform all employees that the inspection has ended
  • Collect notes and reports from employees who accompanied the officials or notes of any interviews between employees and officials
  • Hold a debrief session as soon as possible with your legal team to discuss next steps
  • Work with your internal and external communications teams to decide how to deal with any reputational and publicity concerns from an internal and external perspective.

Insurance implications

Dawn raids are on the rise and you may want to consider discussing the following with your broker:

  • What costs can I incur in an emergency situation and what consent is required?
  • Is my insurance coverage adequate for my needs?
  • Are the policy limits adequate and are there any sub-limits in coverage I need to be aware of?
  • What are the notification requirements within my insurance policies?
  • How do I manage any reputational issues and costs as a result of the inspection?

How can we help you?

Talk to your Willis Towers Watson broker to discuss the effectiveness of your insurance cover to assist you in managing your risk in the event of a dawn raid.

Contacts

GB Head of FINEX Financial Institutions

Martin Oscroft
Director, Financial Institutions

Head of FINEX Financial Institutions Product Development

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