The FCA had a busy year in 2021 as it sought to fight wars on several fronts against fraud, scams and anti-money laundering. Here’s what those actions can teach us…
£568 million – that’s the level of fines levied by the FCA in 2021 according to its
recent report. It reflects a busy year in which fraudulent behaviour has risen and companies have struggled to maintain compliance. What lessons can we take from the details of the action which
the regulator has taken?
Scams are on the up
The regulator made a record 1,300 warnings about scams as fraudsters seek any opportunity to take advantage of the pandemic. The FCA says its contact centre has prevented £4 million being lost to scams and that it has secured £5 million to be paid back to
people who invested in companies which were not authorised to undertake financial activity. Both businesses and individuals have to be aware of the scale in which fraudulent activity is escalating and the type of attacks which are being used. As one of the
top targets for cybercriminals, financial institutions have to be doubly careful.
Pandemic problems
The scale of the fines and the number of actions taken show what a busy year 2021 was. This should not come as too much of a surprise - the pandemic has been challenging for all sorts of reasons. It gave fraudsters an opening and has made it more difficult
for companies looking to ensure compliance. Even the regulator experienced difficulty keeping operations going.
In those early days, the regulator issued an intention to be understanding about the challenges businesses faced. However, any leeway has been only temporary. As new ways of working became the new normal, the regulator gave notice that it expected businesses
to adapt to the new regulations and bring their compliance mechanisms up to speed.
The high number of actions taken by the regulator suggests some businesses were better at this than others. With remote and hybrid work likely to stick around for some time, businesses will have to show how they are adapting their processes.
AML actions kick in
This year saw the regulators first major criminal action against a company for money laundering when it
fined NatWest £264.8 million for anti-money laundering failures. The bank was found not to have been complicit, but it was ‘functionally vital’ for the money laundering to occur. The bank was found to have failed to properly monitor the activity of a commercial
customer, Fowler Oldfield, between 2012 and 2016. When taking on the customer, the bank understood it would not handle cash from the business, but over the course of the relationship around £365 million was deposited with the bank of which £264 million was
in cash.
Staff taking the deposits raised concerns with those responsible after identifying red flags such as deposits of notes carrying a prominent musty smell, significant numbers of Scottish bank notes being deposited around the country and depositors acting suspiciously.
Despite this, no action was taken.
The fine demonstrates the importance of businesses to monitor transactions made using their bank and to act promptly when red flags are raised.
Use it or lose it
The regulator removed approval from 176 firms which had not carried out regulatory activity within the previous 12 months. It’s a use it or lose it approach which aims to ensure that customers aren’t fooled into a false sense of security by companies which
say they are regulated, but whose products do not come with any FCA protection.
The landscape, then, remains volatile. Fraud is on the up and companies are struggling to adapt to threats, new technologies and changes in regulation. To avoid problems, firms should work hard to ensure their systems are up to spec and learn from other
examples. Some of the action taken by the FCA gives clear guidance on the direction the regulator is moving in, and the expectations it places on the companies it regulates.