During the Financial Crime Summit in London on 5th September 2024, Sarah Pritchard, the Executive Director of Markets and International at the FCA, outlined the regulator’s renewed and vigorous commitment to combating financial crime. Her speech laid out how the FCA is taking a more aggressive stance, leveraging partnerships and technology, and placing heightened scrutiny on firms seeking authorisation.
Here’s a closer look at the highlights of her address and what they mean for the investment and payment services sectors.
A stronger focus on prevention
Pritchard emphasised that tackling financial crime remains one of the FCA’s top priorities within its three-year strategy. While prosecuting financial crime remains challenging, the FCA is determined to make progress, utilising a full suite of enforcement and supervisory tools.
In the previous year, 21 individuals were charged with financial crime-related offences. The FCA issued three times as many freezing orders as before. Notably, the regulator took action against PwC for failing to notify the FCA of fraudulent activities, a move that reflects the FCA’s increasingly assertive stance. These efforts, however, are now being matched with a stronger emphasis on preventive measures. The FCA aims to stop wrongdoing before it happens, reducing the need for punitive actions after the fact.
Increased scrutiny on firms seeking authorisation
Firms applying for FCA authorisation are under increased scrutiny. Pritchard made it clear that those without the necessary anti-financial crime systems and controls in place from day one are unlikely to receive approval. The numbers from the past year reinforce this—36% of Annex 1 firms applying to register with the FCA for AML purposes either withdrew their applications or were rejected.
The FCA now expects firms to follow its detailed guidance closely when preparing their applications. Any firm entering the regulated space must show that it is fully prepared to meet anti-financial crime obligations required from the outset.
Harnessing data and partnerships to tackle crime
The FCA is increasingly using data to spot potential issues. Pritchard shared that the FCA now scans over 100,000 websites daily to detect illegal financial promotions. As a result, more than 10,000 misleading adverts were either amended or removed in 2023, helping to safeguard consumers from scams and fraudulent investments.
Collaboration with tech giants like Google, Meta, and Apple has also been critical in this fight. These partnerships have enabled the FCA to block unapproved financial service adverts and remove apps that breach promotional regulations, extending consumer protection into the digital realm.
Warning signs and FCA interventions
Several risk factors signal to the FCA that a firm may pose a threat. These include frequent turnover of money laundering reporting officers, frequent name changes, or substantial changes in the services a firm offers after gaining FCA authorisation. These red flags trigger deeper scrutiny, and the FCA has demonstrated its willingness to intervene swiftly.
Over the past 18 months, unannounced visits and spot checks have enabled the FCA to gather evidence and take action where necessary. These interventions have included placing restrictions on firms’ permissions, freezing assets, and, in more serious cases, halting financial services altogether.
What this means for investment and payment services firms
For investment firms, Pritchard’s speech signals a need for greater care around promotional activities. As the FCA continues its campaign against illegal financial promotions, firms should ensure that their marketing complies with regulatory standards. Misleading or non-compliant ads could lead to enforcement actions, such as bans on platforms like Google and Meta.
Firms must be fully prepared to face heightened scrutiny. With the FCA’s data-driven approach and increased use of unannounced inspections, maintaining robust AML systems and controls will be more important than ever.
Conclusion
Sarah Pritchard’s speech makes it clear that the FCA is ramping up its efforts to combat financial crime by combining assertive enforcement with proactive prevention. Investment firms and payment service providers should be ready for tighter regulations, more frequent checks, and a greater emphasis on technology-driven oversight.
Need help?
C&G’s consultants have a deep understanding of anti-financial crime systems and controls as applied to the investments and payment sectors. Please contact us if you need any help in strengthening your firm’s defences.
References
- A targeted and outcomes based approach to tackling financial crime, Financial Conduct Authority, September 2024.
