FCA’s New Three-Year Strategy Targets Fraud, Sanctions Evasion And Money Laundering

April 8, 2022
Resources at the UK's Financial Conduct Authority (FCA) are to be focused on preventing serious harm, setting higher standards and promoting competition, with 80 new roles created to shut down problem firms.

Resources at the UK's Financial Conduct Authority (FCA) are to be focused on preventing serious harm, setting higher standards and promoting competition, with 80 new roles created to shut down problem firms.

The FCA has launched a new three-year strategy aimed at improving outcomes for consumers and markets throughout the UK.

The strategy contains a number of commitments to mitigate fraud, market abuse, sanctions evasion and terrorist financing, and contains a greater focus on crypto-assets and money laundering.

For the first time, the FCA will also hold itself accountable against published outcomes and performance metrics, in an effort to make its activities more “data-led”.

Another key focus of the strategy is shutting down problem firms that do not meet basic regulatory standards.

The FCA has committed to being more proactive in its supervision, and will closely scrutinise firms during the authorisation process so that they meet the correct standards before they are allowed to proceed further.

With this goal in mind, the FCA is recruiting 80 new employees to work on the initiative, which aims to protect consumers from potential fraud, poor treatment and other financial service risks.

In the development of the strategy, the FCA has calculated that for every pound spent on its operations, consumers and small businesses will benefit by at least £11.

Crypto, cost of living: new areas of concern at FCA

In its latest strategy, the FCA has taken the rising cost of living into account, noting that this could drive greater demand for credit products and lead consumers to look for new and riskier ways to manage and invest their money.

One such destination for that money is cryptocurrency, whose role in facilitating money laundering is now firmly in the crosshairs at the FCA.

The FCA has said it will closely supervise the compliance of crypto-asset firms with money laundering regulations, and will intervene and potentially prosecute if necessary.

It will target crypto-asset firms that are at risk of being used as conduits for illegal activity and it will target firms that pose harm to consumers or market integrity.

Dr. Henry Balani, global head of industry and regulatory affairs at Encompass Corporation, said that tackling financial crime will require a concerted effort from all industry actors.

“Financial crime in the UK is surging exponentially,” he said. “While it’s positive to see the FCA ramping up the pressure against money launderers and fraudsters, there is no doubt that more must be done to put a significant dent in the dirty money that is channelled through the UK.”

Noting the constantly evolving regulatory landscape and the latest challenge of complying with Russian sanctions, Balani said: “To ensure AML and KYC processes are robust, firms should look to the sophisticated technology at their disposal as a matter of priority.

Building on FCA chief’s commitments

The strategy builds on activities launched by the FCA last July when chief executive, Nikhil Rathi, committed the regulator to becoming more innovative, assertive, adaptive and “data-led”.

So far, the FCA said this approach has led to successful reforms of the general insurance market, saving consumers an expected £4.2bn over ten years.

Among other achievements, the FCA praised itself for bringing to trial the first criminal prosecution under anti-money laundering (AML) regulations, leading to a £264m fine for NatWest in December last year.

Anne Fairweather, head of government affairs and public policy at Hargreaves Lansdown, praised the FCA for its focus on consumer protection and empowerment.

“In particular, we welcome the fact that the FCA sees informed and empowered consumers as an important defence against bad conduct,” she said.

“Over time, consideration needs to be given as to how this aim is measured. Data from firms, collated under the consumer duty, could really drive this ambition.”

Going forward, Fairweather said that firms can and should do more to improve outcomes for consumers, ensuring that they are building their resilience over time.

“Preventing harm, such as from investment in inappropriate high-risk products, is the first step here," she added.

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