Business plan

What the FCA’s Business Plan and Strategy Really Mean: Financial Crime | Allen & Overy LLP

Financial crime has been a key area of ​​focus for the UK’s Financial Conduct Authority (CIF) for a number of years, incurring some of the heaviest financial penalties, and it is expected to continue. With improvements to FCA’s data collection and expected increased levels of intervention, there are a number of steps companies can take to guard against future surveillance or enforcement action.

Companies as a vital first line of defense

The FCA highlights the vital role businesses play as the first line of defense in preventing and reducing financial crime through “strong prevention cultures and effective systems and controls”. Businesses have an obligation to manage the risk of financial crime and operational disruption. This is something the FCA has also highlighted in recent portfolio letters. Increased vigilance is required in times of major geopolitical uncertainty when the threat to consumers and markets posed by unwanted incidents such as, for example, cyberattacks is heightened.

The FCA strives to take strong action against market abuse and focuses its attention on ensuring companies have strong controls over, for example, inside information. We can expect to see a prudential review of companies’ systems and controls regarding market abuse and, in particular, their ability to detect and report market abuse to the FCA.

The FCA has explored the use of synthetic datasets to test corporate financial crime controls. He continues to work on this with a view to making the data more widely available.

Designated representatives (AR) regime also finds itself in the spotlight. The FCA has committed to improving RA monitoring, requiring major companies to provide the FCA with additional and more timely information about their RAs and how they are monitored, to help detect risks earlier .

FCA invests more resources in intelligence gathering

With its enhanced data coverage and analytical capabilities, the FCA plans to increase its ability to detect and take more immediate and aggressive enforcement action against financial crime and market abuse.

Over the next two years, the FCA plans to significantly upgrade its market surveillance systems, enabling it to keep pace with evolving market abuse techniques and capitalize on advances in market abuse analysis. big data. This will include bringing its market monitoring capability closer to real time and improving data capabilities so that it can better monitor a wider range of asset classes.

The FCA hopes that improvements to its data and analytics infrastructure will also make it easier for it to identify and track potentially large-scale fraudulent activity and reduce the average amount of money lost to scams.

Expect higher intervention levels

Our 2021 analysis of financial services application trends highlighted some of the effects of the FCA’s promise to be more innovative and assertive. Continuing this approach, the FCA promises to “intervene quickly where companies are at risk of being used as vectors for illegal activities“or where companies”harm consumers or market integrity”.

The FCA has identified a number of specific outcomes it hopes to achieve when it comes to reducing and preventing financial crime and taking strong action against market abuse, including the following.

  • Slow the growth of investment fraud and authorized push payment fraud.
  • Reduce the incidence of money laundering through FCA supervised businesses.
  • Increase resilience to market abuse, install robust systems and controls, improve the quality of reporting practices and establish a strong anti-market abuse culture.
  • Increase timely and accurate disclosure of corporate information.

Progress towards these outcomes will be measured in a number of new and different ways. For example, the incidence of money laundering will be assessed by reference to the proportion of applications rejected, withdrawn or refused by the FCA under the Money Laundering Regulations for reasons of financial crime. While data on market cleanliness will be considered alongside the number of FCA interventions to track market abuse and the disclosure of corporate information by listed companies.

The FCA says it will continue to use its enforcement powers to disrupt, prosecute and punish those who commit financial crimes, fraudsters and their enablers and will use its “a full suite of monitoring and enforcement tools, including criminal or civil penalties where appropriateto prosecute offenders and provide effective deterrents.

be ready

  • Regularly review and reassess existing financial crime and market abuse systems and controls. Any changes to a company’s profile (e.g. as a result of the Covid-19 pandemic or the current situation in Ukraine) should inform the scope of the company’s financial crime systems and controls, including , for example, applicable risk assessments, governance and training.
  • Consider the risk culture strategy and framework as a key part of the financial crime risk management approach. Developing and maintaining a healthy risk culture that enables a business to identify and understand financial crime risks, while openly and proactively discussing its current and future financial crime risk profile, are crucial elements of a strong risk management approach. Consider how senior management can demonstrate a consistent role model, supporting rapid escalation of threats and concerns, supported by a well-communicated financial crime risk strategy.
  • Qualified Person Opinion. A high proportion of recent reviews conducted by qualified persons have focused on financial crime issues/issues related to controls and risk management frameworks. Always seek specialist advice and support through a qualified person review, which can sometimes be a precursor to a law enforcement investigation.