FCA Enforcement 2017/2018 – A More Permissive Regime?

In July 2018, the UK Financial Conduct Authority (FCA) published its annual performance report on the FCA’s enforcement activities during 2017/2018 

The overview of the FCA’s regulatory enforcement activities during this period provides invaluable insight into how and where the regulator uses its enforcement powers.

The 2018 performance report showed a significant downtrend in financial penalties levied by the FCA. Since the formation of the FCA in April 2013, the total fines imposed by the regulator in the year of 2017/2018 was the lowest ever, at £69.9m, this is less than half the fine of 2016/2017 of £181m, and a decrease of 61.4% from the total fine imposed by the regulator in 2015/2016. This reduction in fines should not be viewed as a more relaxed regulator, rather it conveys that the regulator's approach to enforcement has changed variably.

The FCA’s proactive approach has rather led to more regulated institutions engaging more closely with the regulator when issues are at an early stage of their progression rather than issues escalating far beyond control without the regulator’s knowledge. Thus, early intervention is a factor for the drop in financial penalties imposed. The 2017/2018 report also highlighted the 20% increase in the regulator’s caseload, compared to that of 2016/2017. This has raised concerns in regard to the time frame in which cases are concluded. Whilst the FCA have increased their caseload, this has not been accompanied by a surge in resourcing, leading to concern that this could result in poorer enforcement decisions.  The report already shows that there is an increase in the time it takes for the regulator to currently conclude its cases.

Anecdotal evidence suggests the FCA is now using its S166 powers to appoint a skilled person to carry out a review of a firms regulatory framework as the regulatory does not have the resource to carry out the reviews by itself.

The data in the report showed a sharp hike in the number of cases opened on culture and governance, four times the number of culture and governance cases that were opened in 2016/2017. This comes as no surprise, as the regulator has repeatedly emphasised culture and governance being a key focus, and the increase in the number of cases opened around this, emphasise the extent of which the FCA are keeping culture and governance a priority. Financial crime also appears to be a key focus area, as cases open at March 2018, had risen by 36% compared to cases open at April 2017. The report ultimately reinforces the message that the regulator will not be hesitant into opening investigations where it suspects wrongdoing even with its current resources.  

 

How Lysis Can HELP? 

Section 166:

Lysis has significant experience in assisting clients with complex and contentious regulatory issues. We can help our customers by supporting the firm through the review itself or by helping to design, manage and execute as.166 remediation programme if the company is under enforcement. We will engage with the Board and senior management to shape each project and then produce a detailed Programme plan which will provide the delivery roadmap. We build on that with a project delivery methodology to maintain absolute control over the tasks and objectives.

We work with executive and senior management to build the team required and respond to the initial challenges by providing essential subject matter expertise and experience.

 

Financial Crime:

Lysis work with Financial Crime compliance functions to review the firm’s financial crime provisions and to design and implement improvements. We can review and enhance policies on PEP’s, proceduralise them and provide training on those policies and procedures and on general AML themes.

Lysis can also review the coverage and capabilities of a firm’s AML regime and recommend improvements

 

AML health Check:

Lysis can review the coverage and capabilities of a firm’s AML regime and recommend improvements. The AML Health Check and Maturity Assessment is a review of the internal governance, policies and operational framework that is in place as well as sample-checking the output of AML operations to ascertain if the quality of files meets internal policy, regulatory requirements and industry best practice