Regulatory Round-up - Dec 24

Regulation in 2025 and beyond

The new year marks the final year of the FCA’s three-year strategy, so the focus will be on demonstrating the success of its initiatives, not least around operational resilience, financial crime and the Consumer Duty.

A speech delivered on 24 November confirmed that the FCA is planning a new, five-year strategy, which will focus on four key themes: economic growth and innovation, financial crime, consumer resilience and how they can work to become a more efficient and effective regulator.

Consumer resilience as a concept builds on the foundation set by the Consumer Duty and boils down to customers having access to, and the confidence to use, products and services that work for them.

How this will be measured is hinted at in the speech, with the financially excluded and those with low financial resilience used as examples. It is likely that the regulator will be looking at how firms support customers at the fringes and will undoubtedly take action in future to ensure those customers are well supported.

Changes to the Financial Crime Guide

Changes to the Financial Crime Guide have been published:

• The sanctions chapter has been updated with clarifications and updates to terminology so that firms are clear on the expectations, particularly around manual and automated sanctions screening and the scope of screening processes.

• The requirement to conduct Proliferation Financing risk assessments has been included within the Guide. The FCA do not think that a separate chapter on PF is required at this stage.

• Key guidance for firms on the implementation and monitoring of Transaction Monitoring systems has been included. The use of technologies and AI is also now covered, with refreshed case studies included.

• The Guide makes clear that firms should consider whether their systems and controls are consistent with their obligations under the Consumer Duty.

• Firms should now consider any changes they may need to make in light of the updates.

Credit Reporting: Interim Working Group

The Interim Working Group – a temporary advisory group – has produced a report on Progress on Industry Remedies. In relation to the raising and resolution of disputes, they report that the Notice of Correction templates now being used across the three CRAs are being widely used by consumers.

In response to the FCA’s expectation that consumers are better able to access and engage with their credit information with the minimum amount of friction, the CRAs have undertaken “analysis into the signposting across lenders’ web pages looking for references on how consumers can apply for a copy of their credit report.” They found that almost one fifth of lenders made no reference to how to obtain a credit report. They have created a proposal for a minimum standard for lenders to support consumer awareness and access to credit information:

Option A: where the content can be adapted to mirror a lender’s own branding and includes hyperlinks to the 3 CRA websites or Money Helper website; or

Option B: linking to an agreed form of words hosted by each of the 3 large CRAs. Finally, there is a link which directs consumers to the webpage to request a copy of their statutory credit report.

They will now reach out to stakeholders for views.

Enforcement Action

Barclays Bank plc and Barclays plc were issued a financial penalty of £10m and £30m respectively, related to capital raisings that took place in June and October 2008. The regulator found that Barclays failed to disclose fees to be paid, under agreements, to other entities, as well as their participation in the capital raisings. The FCA said that the information would have been “highly relevant information to shareholders and investors and the wider market in October 2008 when the capital raising required approval by shareholders, the disclosed costs were already perceived to be very expensive and there was financing available from the UK Government.” It found that the information in prospectuses issued at the time of the capital raisings were misleading, false and/or deceptive and in breach of the rules.

Macquarie Bank Limited have been fined just over £13m for breaches of PRIN 3. In early 2022, the Bank discovered that a trader had recorded a large number of fictitious trades on internal systems to conceal trading losses. These fictitious trades had not been prevented or detected due to deficiencies in the bank’s systems and controls. Although the FCA acknowledges that the fictitious trades had “no market impact”, it considers the breaches to be serious: “it is of fundamental importance that a firm has effective oversight of its traders and can accurately assess trading positions”.

Actions against individuals continue, with a SMF in MedDen Financial Services LLP, which provides financial advice to the medical and dental community, fined £6,037 (reduced from £58,437 due to financial hardship), for breaching Individual Conduct Rule 1 (integrity) in recklessly transferring funds from one of MedDen’s accounts to his own account in breach of the terms of a 2020 Asset Requirement imposed.

The FCA have also updated their Consultation on the transparency of their enforcement investigations. The regulator now proposes minor changes to the assessment of whether to announce an investigation and the name of the firm, giving firms 10 days notice of an announcement, and that they will not make proactive announcements of investigations that are on-going when the proposals come into effect, although they may reactively confirm on-going investigations that are already in the public domain, if this is in the public interest. Comments should be submitted by 17 February 2025.

The total amount of fines issued in 2024 now stands at £175,706,385; quite an increase from the £53,354,600 total in 2023, but not as high as the £215,834,156 handed out in 2022.

Joint Regulators’ Supervisory Statement on Critical Third Parties

The Supervisory Statement, issued jointly by the PRA, FCA and the Bank of England sets out expectations around how a critical third party (CTP) should comply with its obligations under the Financial Services and Markets Act 2000 as amended by the Financial Services and Markets Act 2023. While each regulator has the power to create individual regulations, they jointly have a statutory duty to co-ordinate their approach. The statement is part of the final rules package in the critical third parties regime.

The rules will apply where firms use outside providers for ‘systemic third party services’; those that if disrupted could threaten the stability of the industry. HM Treasury will designate CTPs following an assessment of factors including market concentration and impact drivers, but firms that are already subject to FCA, PRA or Bank authorisation for operational resilience of their services won’t fall into scope.

FCA issues update on Product Sales Data

The FCA say "In April 2024 we introduced 3 new Product Sales Data returns for consumer credit agreements in Policy Statement 24/3. We have worked closely with industry on implementation, and responded to feedback with proposed amendments to clarify or improve the wording. We are now consulting on these minor amendments to the Handbook in CP24/26: Quarterly Consultation Paper No 46.

Firms and software vendors can use the RegData Industry Test Environment (ITE) to test data item submissions using test data. For access to the ITE, please email RegDataTest@fca.org.uk."

ICO issues call for firms to share personal information responsibly to protect customers from scams and fraud

The statement comes as the ICO is concerned that firms are too reluctant to share personal information to tackle scams and fraud. They say that “data protection law does not prevent organisations from sharing personal information, if they do so in a responsible, fair and proportionate way.”

The Information Commissioner’s Office has also published new practical advice to provide clarity on data protection considerations in tackling scams and fraud.

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