FCA reinforces commitment to tackle UK financial crime
Published on 11th Sep 2024
Targeted, outcomes-based approach keeps financial services firms at the centre of push for corporate crime enforcement
Sarah Pritchard, a Financial Conduct Authority (FCA) executive director with responsibility for market integrity, spoke at the Financial Crime Summit in London on 5 September setting out the UK regulator's approach to tackling financial crime.
The speech emphasised that fighting financial crime is a priority for the FCA and restated a number of themes that it has repeatedly sought to drill home over recent months as part of its three-year strategy.
However, Ms Pritchard highlighted a number of points that will be of note to the firms regulated by the FCA; in particular, its renewed emphasis on taking a targeted and outcomes-focused approach, with assertive and strategic interventions, which indicates that further sector reviews and enforcement action are likely to follow over the coming months.
Fighting financial crime
The FCA's approach to tackling financial crime is a targeted one, using data to spot any outliers and issues. This will come as no surprise to firms' now used to the FCA's mantra that they are a data-led regulator, to which the conduct and publication of no fewer than five sector reviews of firms' financial crime controls in the past 18 months pays testament.
Ms Pritchard emphasised that the reviews share good and poor practices across the sector, allowing firms to target their approach and "know what good looks like", but, in many cases, these reviews have acted as a wake-up call to some in the industry. As a result, it appears the FCA intends to continue that trend.
Targeted enforcements
The FCA is using its powers more assertively. In 2023, it secured three times as many freezing order as in 2022, restraining more than £21 million in assets of individuals under investigation. In the last financial year, it charged 21 individuals with financial crime offences – the highest number achieved in a single year. And, in August, it fined PwC £15 million for failure to alert it to suspected fraudulent activity.
This position confirms that the FCA remains committed to high-profile deterrent enforcement action.
Innovative and data led
The FCA acknowledged that it must "embrace change to stay ahead of the criminals". According to Ms Pritchard, the FCA has increased its capacity to identify illegal promotions on websites and social media. It is able to scan 100,000 websites per day and over 10,000 potentially misleading adverts were amended or withdrawn in 2023, a 17% increase on 2022.
Financial promotions have been high on the FCA's agenda in the past year, and it’s the case whether they are merely misleading or actively fraudulent.
The FCA has created a dedicated financial crime function within the consumer investments departments, whose work is "proactive and highly targeted: identifying outliers, spotting trends earlier and snuffing out threats". This new team carries out unannounced spot visits and placed requirements on firms' permissions, imposed asset restrictions and stopped firms providing financial services where necessary.
System-wide approach
The FCA has taken a risk-based approach, working across multiple sectors to manage risk collectively. For example, it has been working with different firms and agencies as part of the government's national economic crime plan and fraud strategy, including with Big Tech firms to remove apps that breach financial promotion rules and on banning paid-for adverts for UK financial services that are non-approved by an FCA-authorised firm.
The FCA has also highlighted that the most recent Office for National Statistics crime figures demonstrate the "system-wide work to block fraud at source, educate consumers and disrupt those engaged in fraud, is having an impact". Fraud has decreased by 10%, reported losses suffered by victims reduced by 40% in 2023 and the growth rate of investment fraud victims slowed from 28% in 2022 to 4% in 2023
Osborne Clarke comment
The government through this legislation has intentionally made it easier to prosecute commercial organisation and the financial services industry should expect to see more scrutiny over the months to come. In response, businesses should be taking all necessary steps to ensure that they are following the FCA's guidance and statement of expectations issued to avoid becoming exposed to the risk of financial crime enforcement action.
