The Financial Conduct Authority (FCA) has been increasingly proactive in its enforcement actions,
sending a clear message to the financial services industry. Recent cases highlight a shift toward
faster, more targeted investigations and a greater focus on individual accountability, particularly for
senior managers. By analysing these trends, firms can learn valuable lessons to strengthen their
compliance frameworks and avoid becoming the next case study.
1. Robust Financial Crime Controls Aren't Optional, They are Essential
A recurring theme in recent FCA enforcement actions is the failure of firms to maintain adequate
financial crime systems and controls. This includes issues with anti-money laundering (AML),
sanctions screening, and know-your-customer (KYC) procedures. The FCA isn't just looking for a
policy on a shelf; it's demanding that firms have a robust, embedded framework that evolves with
their business.
Case in Point: A digital challenger bank was recently fined for serious failings in its financial
crime framework. The bank's rapid growth outpaced its ability to scale its controls, leading
to a breakdown in transaction monitoring and customer onboarding processes. A key
takeaway is that growth is not an excuse for poor controls. Firms must ensure their
compliance infrastructure can keep pace with their commercial ambitions. The FCA also took
issue with the bank's breach of a voluntary requirement (VREQ) that was previously
imposed, underscoring the seriousness with which the regulator views non-compliance with
its supervisory interventions.
The Lesson: Financial crime controls must be a core part of a firm's business strategy, not an
afterthought. This means investing in fit-for-purpose technology, conducting regular and
realistic testing, and ensuring that policies are understood and consistently applied across
the organization. Senior management must also be actively involved and accountable.
2. Individual Accountability is a Reality, Not a Threat
The FCA's Senior Managers and Certification Regime (SMCR) has shifted the burden of accountability
squarely onto individuals. The regulator is increasingly willing to fine, ban, or prosecute senior
managers and other key personnel for their roles in a firm's failings. This isn't just about the "tone
from the top"; it's about clear, demonstrable responsibility.
Case in Point: A former compliance officer was sanctioned for failing to challenge a firm's
board on the accuracy of financial promotions. The FCA found that the individual signed off
on documentation despite having misgivings, effectively turning the process into a "tick-box
exercise." This case reinforces that individuals cannot simply follow orders if they believe a
course of action is non-compliant.
The Lesson: Senior managers must fully understand their responsibilities and actively
challenge their firm's practices where necessary. They need to ensure they have access to
accurate information and are not just rubber-stamping decisions. Failing to exercise due
care, skill, and diligence can lead to serious personal consequences.
3. Don't Just Have Policies; Follow Them
Many FCA enforcement actions reveal a gap between a firm's written policies and its actual
practices. The regulator consistently finds that even well-drafted procedures are ineffective if staff
don't follow them or if the firm's systems make compliance difficult.
Case in Point: In an enforcement action against a large audit firm, the FCA found that
despite having internal policies, the firm failed to act on information that indicated potential
fraudulent activity. The company's staff didn't follow the documented procedures for
escalating concerns, leading to a breakdown in controls.
The Lesson: Policies and procedures are only as good as their implementation. Firms must
conduct ongoing monitoring to ensure that their controls are working as intended and that
staff are properly trained and supported to follow them. This includes regular internal audits
and stress-testing of systems.
4. Communication and Cooperation with the FCA are Crucial
The FCA has repeatedly emphasized the importance of firms being open and cooperative during
investigations. While this may seem obvious, a firm's attitude and actions during a regulatory inquiry
can significantly impact the outcome, including the size of the financial penalty.
Case in Point: In a recent case, a firm received a public censure but no fine because it had
voluntarily taken significant remediation actions and compensated affected investors. While
the firm was not spared from public scrutiny, its proactive approach to addressing the harm
mitigated the final penalty.
The Lesson: When something goes wrong, a firm's best course of action is to engage
constructively with the regulator. This includes self-reporting issues, providing accurate and
timely information, and taking swift and effective action to remediate the harm and prevent
recurrence. Demonstrating a genuine commitment to putting things right can make a
material difference.
The author, Vince Harvey, has worked in financial services for many years and has been running his
compliance consultancy for more than a decade. His specialist areas within the Compliance Alliance
are investment advice and management.
You can contact him on 07890311875 or at vince@compliancecubed.co.uk