On the 24 September 2024, the Financial Conduct Authority’s (FCA) Joint Executive Director of Enforcement and Market, Therese Chambers, published a speech on the FCA’s evolving approach to enforcement. The speech provided an opportunity to highlight the pillars of the FCA’s current Strategy 2022-25 and key focuses for the next phase of strategy, as due in 2025. Charlotte Gregory, Partner in our Financial Services team and Phillippa Ellis from our Business Crime and Investigations team report on the key themes of the speech below.
Tough stance on financial crime
The FCA reaffirms its commitment to taking a tough stance on the ongoing fight against financial crime. Ms Chambers makes clear that this focus is one that will continue as a significant pillar into the next phase of strategy due in 2025. If to be seen is to be believed, then the recent outcomes go some way to illustrate this hard line.
For example, in September the FCA fined PWC £15 million for a failure to alert it of suspected fraudulent activity at London Capital & Finance. Further enforcement of financial crimes include issuing a fine of £29m to Starling Bank for financial crime failings relating to financial sanctions screening. Illustrating the enforceability of its new guidance on financial promotions on social media, the FCA also issued charges against 9 ‘finfluencers’ this year, the trials of which are fixed for 2027 due to Court timetabling. The recent decision to charge the first individual with running a network of illegal crypto ATM’s further suggests the FCA is not shying away from expanding its remit of enforcement.
Despite this, the FCA is aware that any deterrent effects associated with enforcement are hindered with the passage of time from the misconduct occurring. Contextualizing this, in 2023/24 FCA investigations took on average 42 months to complete. Whilst the FCA clarifies these timelines have good reasons, it acknowledges room for improvement. The FCA states that already in 2024, 24 outcomes have been reached in comparison with 26 for the whole of 2023.
Streamlining caseload
The speech also places importance on the FCA’s approach to streamlining its caseload. This includes conscious decision making in identifying cases which present the greatest risk of harm and can operate as deterrents. As a result of this strategy the FCA may be opening fewer investigations. However, Ms Chambers made a point to clarify that a ‘reduction in the number of investigations does not mean a reduction in effort’. We anticipate this will come as welcome news to firms who have endured lengthy and time-consuming correspondence with the FCA whilst investigations are resolved, However, with increasingly robust supervision queries incoming from the FCA, firms can expect continued engagement from the regulator.
Embracing Innovation
Ms Chambers refers to Data and Technology being the ‘unsung heroes’ of the FCA. Therefore, perhaps unsurprisingly, it is clear there is a continued focus on embracing innovation within the FCA’s work. The speech provided a reminder that behind the enforcement work of the FCA, lies the Cyber Forensics Unit, which is equipped with the latest technology to provide results. Results which will only continue to benefit from utilising growth and improvement of technology.
Transparency
A final theme of the speech is that of transparency. The FCA acknowledges a welcome response to increased transparency on investigations from some stakeholders. However, it also concedes that the majority of regulated firms are ‘overwhelmingly against’ the proposed publication of investigations at an earlier stage, as the FCA announced as a potential tool in its consultation paper in February 2024. The FCA clearly is not prepared to row back completely from its intentions around publicity, citing its inability to report the investigation into PwC when the Financial Reporting Council announced its investigation much earlier, as an ‘odd situation’. Ms Chambers used the speech to signal further engagement with stakeholders in autumn 2024 to develop a more detailed public interest test. In addition, the FCA will publish detailed plans on proposals and case studies examining the criteria that may apply and what announcements could look like.
The bottom line stressed in the speech is that the FCA’s approach to enforcement is evolving. Some may consider that this approach has been in train for some time now, but one thing remains clear: firms can expect increased visibility from the regulator.
How can we help?
If your business requires assistance or further information on dealing with the FCA, or other financial bodies including the Serious Fraud Office, please contact our Financial Services or Business Crime & Investigations teams.
