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FCA: An Effective Approach to Financial Crime Prevention

The FCA informs in their latest speech "It is vital the UK financial system has the right safeguards to prevent financial crime” with much focus falling upon banks for an effective approach to prevention.

22nd September 2016

FCA Speech on Financial Crime Prevention

This week, the British Banker’s Association (BBA) held a Financial Crime and Sanctions Conference. It was here that Megan Butler, the Executive Director of Supervision, Investment, Wholesale and Specialist Division at the FCA gave a speech on combating financial crime.

Impact of Financial Crime in the UK

Ms Butler advised that the UK social and economic costs of serious and organised crime “were assessed in the past at £24billion, whilst the cost of global money laundering has been previously estimated at US$1.6trillion.”

Given the enormity of these figures, Ms Butler stated that “it is vital that the UK financial system has the right safeguards to prevent financial crime.” In addition she informed it is important that the regulator and other agencies, both domestic and international, work with the industry “to ensure the UK financial system is a hostile sector for such criminal activity”.

Financial Crime: An effective approach

The main topic of Ms Butler’s speech was how to focus on a more effective approach to combating financial crime, thus her main question was “What makes for an effective approach to financial crime?”

This in itself poses various compliance-specific challenges and, it seems that the FCA sees a number of challenges in this area principally falling upon UK banks, whilst others are jointly held within the industry.

Proportionate Approach: Risk-measured Regulation

Ms Butler also stressed that whilst much focus fell upon banks, that the FCA will remain committed to a proportionate approach to regulation with the FCA focusing on “the firms which pose the greatest risk as a priority” with the FCA’s financial crime supervisors being “extremely careful to work with banks in a measured fashion.”

Some statistics shared from the last few years informed that “since 2012, [the FCA] have fined 7 banks and 1 Money Laundering reporting Officer for AML failings,” thus the FCA will look to take targeted enforcement action in appropriate cases.

Once concern within the industry shared by Ms Butler were concerns around the effectiveness of Suspicious Activity Reports - and that potentially those of lesser quality or more conservative in nature may be due to the criminal liability attached to the position of the MLRO. This is something the FCA is ‘alive to’ and looking to ‘promote innovative methods being deployed by banks’.

An area where there seems room for innovation to make compliance processes smoother, effective and more efficient is the increase and improvement in technology and Ms Butler encouraged firms to get involved with the FCA’s thoughts on RegTech.

In summary, Ms Butler re-inforced the FCA’s commitment to closer engagement with the Government, enforcement agencies and other regulators to ensure the following key points:

 the UK financial system is a hostile sector for money launderers

 AML requirements are proportionate and operate efficiently

 the unintended consequences of AML regulation are minimised, and

 firms’ AML processes do not exclude people unfairly or unreasonably from using financial services

Financial Crime Reporting Requirements

There have been recent developments to the reporting requirements for financial crime, previously discussed in our article on the New Financial Crime Reporting requirements. Firms should be reminded that the new requirements come into effect from 31st December 2016.

Compliance & Client Due Diligence Support

If you would like assistance in reviewing your current anti-money laundering processes such as your client due diligence or client-on-boarding procedures or if you would like to arrange tailored AML training for your firm, please contact our experienced team of compliance specialists who would be happy to help.

We can assist with:

• Client Due Diligence (CDD)
• Client On-boarding Procedures
• MLRO’s Annual Money Laundering Risk Assessment
• Tailored and Refresher Training:

-  AML & Prevention of Financial Crime,

- Role of the MLRO

Compliance & Client Due Diligence Support

If you would like assistance in reviewing your current anti-money laundering processes such as your client due diligence or client-on-boarding procedures or if you would like to arrange tailored AML training for your firm, please contact our experienced team of compliance specialists who would be happy to help.