November 6, 2023 by Clare Curtis

FCA Fine ‘Equifax’ Over £11m

The UK’s Financial Conduct Authority (FCA) has fined the UK arm of US Credit Agency ‘Equifax’ in excess of £11million for cyber-security failures. The failures, born by a significant breach of cyber-security, exposing personal data of circa 13.8M UK customers, has been dubbed one of the largest in history. Even after Equifax had been deemed to have treated customers unfairly by failing to maintain quality assurance checks for complaints following the incident, the company continued to announce differing numbers of consumers affected.

FCA Issues 146 Alerts In 1st 24 Hours Of New Crypto Marketing Regime

On 8th October the FCA became responsible for overseeing the promotion of crypto assets in the UK.  The FCA announced that in the first 24 hours of this new regime they issued 146 alerts regarding unauthorised marketing activities.

Businesses issued with the alerts included social media platforms, app stores, search engines and payments firms and the FCA expect those that receive the alerts to take appropriate action and either become authorised or registered with the FCA or have their marketing approved by an authorised firm. The regulator also advises consumers to check the warning list prior to considering investing in any crypto-asset products.

Chair Of The FCA Board Speech Re-UK Regime For Asset Managers

At the Investment Association’s Annual Dinner, the FCA board’s chair, Ashley Alder, delivered a speech regarding the regulator’s plans to update and improve the UK regime for Asset Management, outlining their priorities. The key points being:

  • Proportional regulation alongside seeking ways to use regulation to propel innovation, which sits behind much of the thinking regarding investment management.
  • The FCA will be pursuing three main priorities for reform
    1. Making the regime for alternative fund managers more proportionate.
    2. Redesigning the regime for retail funds.
    3. Corroborating with technological innovation.
  • The FCA are also looking at reforms to promote medium to long-term growth of the UK economy.

Securitisation Rules

The FCA have published a consultation paper (CP), regarding their proposed rules for the UK securitisation markets, which are due to replace the firm-facing provisions from the UK Securitisation Regulation (UKSR). The UKSR is a chapter within the Treasury’s Smarter Regulatory Framework, and is soon to be included into new UK legislation and a majority of firm-facing provisions of UKSR will soon be covered by new FCA and PRA rules. Any opinions on the FCA CP (PRA have issued a separate paper), are to be expected by or before 30/10/2023.

FCA & PRU Changes To Remuneration Ratios

The FCA and Prudential Regulation Authority (PRU), are jointly introducing changes to the ratio between fixed and variable components of total remuneration. Seeking to reinforce the effectiveness of the remuneration regime, the regulators will increase the proportion of compensation that can be subject to the incentives setting tools within the framework. This will enable firms to adjust variable remuneration to assist in absorbing any losses, for material poor performance and misconduct of members of staff.

The requirements will be applied on 31/10/2023 and will concern current and future performance years.

Detecting And Preventing Money Mules

The FCA have published their crucial findings regarding account providers’ systems and controls to fight against Money Mule activity. Money Mules are a major issue when it comes to transporting proceeds of fraud et al and the regulator is seeking ways to disrupt this enterprise. The regulator expects relevant firms to employ a commensurate and risk-based approach to assist in shoring up their platforms so as not to be victim to exploitation.

In alignment with a Home Office money mules action plan due imminently, the FCA are working to assist Financial Services firms comprehend what is expected of them and how to deploy any necessary actions.

With fraud responsible for circa 40% of all crime, mule accounts continue to be a problem. Although it was found that some firms have employed proportionate measures using innovative solutions to the issue, not all have responded with the same application and the FCA expect these firms to do more to help tackle the problem.

Actions expected of firms to take include reinforcing controls during onboarding, wielding enhanced transactions monitoring and honing reporting mechanisms to enable rapid action. They also anticipate firms to proactively elevate consumer awareness about potential risks of Money Mules. The regulator, in any instance of identifying any firm failing to maintain requisite systems and controls, will without any doubt, employ their full regulatory tools including enforcement action.

Artificial Intelligence (Ai) & Machine Learning

The FCA has published feedback statement on input received regarding how supervisory authorities should support safe and responsible affectation of AI in UK Financial Services.

The feedback includes:

  • Potential benefits and risks regarding the employment of AI in UK Financial Services.
  • How the current framework applies.
  • Whether additional elucidation of existing regulations may be of benefit.
  • How policy can best underpin further safe and responsible AI adoption.

FCA Statement Re-Natwest Group

Following the issues regarding NatWest and Coutts earlier this year in relation to the closure of the former Ukip leader’s, Mr Nigel Farage, bank account the FCA has conducted a review and have highlighted potential regulatory breaches and several areas where improvement is necessary. These include:

  • The firms’ procedures, systems and controls when contemplating potential account closures.
  • How the firm handle customer complaints.
  • The assignment of responsibilities and effectiveness of the firms’ governance structure.

The investigation continues but the above provides some clear pointers as to changes needed not just in Natwest but also in other similar firms where this may also be highly relevant.