In speeches which set the tone for both the day and the FCA’s new approach to financial crime, the FCA’s Chief Executive and its Director of Enforcement and Financial Crime opened the Financial Crime Conference in London on Monday 1 July 2013.
Martin Wheatley spoke first, telling delegates that technological advances have proved a double-edged sword: financial crime and financial criminals are generally unchanged, but the tools at their disposal and the interconnectedness of the financial world can multiply their impact. This has also allowed international gangs of criminals to act like “multi-national companies”, he said.
He warned that economic recovery would not diminish the threat of financial crime, and said that the regulator was alert to the risks this generates. Highlighting the recent increase in enforcement action (including against individuals), he promised a “more confident, intelligent and sophisticated enforcement practice”. This, he said, would increasingly involve the concept of personal accountability, with senior figures within firms being required to take responsibility for the firms’ compliance, and facing the consequences if things go wrong.
Wheatley identified targets for the new style of collaborative, cross-border enforcement: “sanctions, investment fraud, bribery, and corruption [and] money laundering”. He particularly stressed the latter of these, saying that firms must have the correct systems and controls, and that progress was expected, cautioning that this was not a matter for debate. Finally, he singled out the emergent issue of pension liberation, saying that the FCA was investigating it but that he expected firms to recognise the dangers and to take appropriate steps.
Tracey McDermott’s speech picked up on many of the themes introduced by Wheatley, including the impact of technological innovation, the FCA’s approach to sanctions, money laundering, fraud and bribery, the collaborative arrangements in place between the regulator and other agencies, and the fact that the FCA has pensions liberation in its sights. She also drew attention to the FCA’s recently published thematic review of trade finance, saying that it could play a vital role in facilitating global trade, but was open to abuse in the absence of robust money laundering and terrorist financing controls.
She drew attention to the fact that, from next April, the FCA’s remit would extend to cover consumer credit firms. She spoke about a consultation paper published this March, which “proposed” imposing the same financial crime requirements on them as on the firms currently under FCA supervision. Following this with the phrase “This will be a substantial step up from what is required of some of them now”, suggests that the proposal is likely to be implemented, so consumer credit firms should consider reviewing their practices before the change takes effect.
Keen FCA observers will spot the continued development of a number of recent trends. For example, the FCA is:
- Deliberately picking out and tackling its own priorities in its own way – and the number of priorities, and the energy and resources dedicated to meeting them, is greater than ever before;
- Deliberately looking for ways to make individuals responsible for the acts and omissions that occur in their business, or the part of the business they run. As Wheatley put it, “we now see much greater use of attestations. Legal affirmations that focus the minds of senior executives by requiring them to sign on the dotted line to say: ‘Yes, I’m happy my firm is dealing with regulatory concerns. I’m happy to stake my professional reputation and authority on the quality of our compliance processes.’” This not only focuses the mind on compliance, it increases the number of easy targets if things go wrong;
- Repeatedly telling us that this or that is “non-negotiable” – which is reasonable enough in theory, but increasingly fraught in practice, especially when the regulator is “far more willing to make judgment-based decisions. Ethical decisions. To examine questions of moral hazard”, and to have regard to “moral benchmarks” and “ethics”.