On 20 September 2016, Megan Butler, Executive Director of Supervision Investment, Wholesale and Specialists at the Financial Conduct Authority (FCA), delivered a speech on behalf of the FCA at the British Bankers' Association's (BBA) Financial Crime and Sanctions Conference. This summary highlights some key points in her speech.
Megan Butler reminded the BBA that everyone has an important role in combatting financial crime. She explained that members of the BBA have a crucial role in supporting policy making and intelligence sharing. Ms Butler referred to the economic cost of financial crime, which was assessed to be 24 billion in the UK, and has been estimated as US$1.6 trillion globally. These figures emphasise the need for the UK financial system to be hostile towards such criminal activities.
Furthermore, Ms Butler explained that there are areas where policy makers could improve and indicated that the FCA have taken the Better Regulation Executive Review on board. She said that the FCA knows that banks have concerns about whether FCA inspections and investigations are sufficiently risk-sensitive. She also indicated that the FCA is aware that it is perceived as sometimes supplying inconsistent advice and lacking flexibility. She said that she hoped to address these perceptions.
Ms Butler indicated that the FCA is committed to a proportionate approach to regulation. She indicated that the FCA's approach to anti-money laundering (AML) supervision is risk-based. She explained that risk is sometimes concentrated in smaller firms despite their size and explained, accordingly, that these firms are targeted for visits and AML supervision due to their levels of money laundering risk. She said that the FCA has fined seven banks and one Money Laundering Reporting Officer (MLRO) for AML failings. Ms Butler also explained that the FCA does not want the costs of AML compliance to affect the ability of firms to combat financial crime.
She indicated that the FCA is attentive to industry concerns about Suspicious Activity Reports (SARs) since SARs are important for information-gathering purposes and should be submitted when appropriate; rather than as part of a `defensive' strategy that may be used by some MLROs to avoid criminal liability.
Moreover, Ms Butler indicated that the FCA supports and encourages innovation in relation to AML arrangements. For example, she highlighted the FCA's Sandbox scheme which allows firms to test new business models without the risk of regulatory consequences. She said that the FCA is supportive of technological and innovative solutions to problems in this area which maintain market integrity. She encouraged the BBA to share such ideas with the FCA, and indicated that the FCA would not prevent such advancements.
Ms Butler also discussed the role of the banks in combatting financial crime. She recognised that banks have been making progress with regard to AML processes and have become more aware about the damage that financial crime can cause to society. She said that the FCA does not want banks to take a legalistic `tick box' approach to combatting financial crime and encouraged banks to adopt a sense of social responsibility.
Ms Butler emphasised that de-risking is a problem in the context of financial crime compliance. She highlighted that some charities have been left without banking services and some Politically Exposed Persons have been subjected to probing due diligence questions. She indicated that derisking and the associated practices may have been caused by the release of the Panama Papers. She also indicated that the FCA wants to encourage better communication between banks and their customers and encourage information sharing between banks.
Ms Butler concluded that the FCA remains committed to working with other firms and regulators in combatting financial crime; especially given its global nature. She said that the FCA "will continue to pursue international solutions to what is an international problem", and she encouraged engagement with the FCA to combat financial crime.