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FCA Evolving Strategy to Combat Financial Crime – The Force Multiplier Effect

26 September 2022

On 7 September, in a speech delivered by FCA Executive Director of Markets, Sarah Pritchard, at the FCA's Financal Crime Summit, she detailed the FCA's evolving strategy for combating Financial Crime, placing more emphasis on the role of 'first responders in the fight against financial criminals'.

"Financial crime is a bit like Covid… a virus that mutates to evade destruction" and the agile actions and effort from the public, governments, pharmaceutical companies, medical professionals etc., showed that curtailing a mutating virus required a coordinated multi-pronged attack from an agile information sharing community. "That is how you defeat a complex and ever-evolving enemy. No one group can do it on their own" said Ms Pritchard.

Force multiplier effect

The FCA's strategy focuses more on the collaborative efforts required for effective prevention, with Ms Pritchard stating that "we must respond systematically, in order to limit and defeat it…Whether you work in one of the 50,000 firms regulated by the FCA in the UK or are a member of a professional body that we oversee – an effective defence is needed". The FCA calls for professional firms scanning and being alert to red flags, using their knowledge and instinct to interpret the clues from conversations and customer behaviour, technology identifying unusual patterns of activity, and information shared with/between regulators and law enforcement.

The FCA's role

Ms Pritchard sign-posted that the FCA are seeking to become more agile with its supervision and use of regulatory powers. "We are changing… We are unleashing our tools more rapidly, driving improvements in firms' controls and issuing warnings where we see harm, flagging up names on our warning lists more quickly and firing up our Scamsmart campaigns… We are sharing more of what we are seeing so that everyone can learn and improve their response".

Continuation of robust defences and actions

With crypto firms continuously being targeted as a potential soft target for elicit funds, the FCA has set robust standards for anti-money laundering measures, to which Prichard noted that "so far 37 firms have met these standards and must continue to do so in order to keep their registration".

The cost of living

The risk of financial crime is further exacerbated by the cost of living crisis, and the FCA are asking firms to have plans in place to respond to the risks presented by the cost of living crisis. The FCA are already seeing more scams such as; loan fee fraud, ghost broking and false access to rebates from utility companies. They also anticipate a potential rise in money mules.

A whole system response

Reiterating the need for a systemic and community response to limit effectively the increasing financial crime threat, the FCA are working with government partners, international regulators and industry professionals and bodies. Particularly, the FCA together with the Payment Systems Regulator and industry partners want to understand tech solutions that could prevent authorised push payment fraud in real time.

Conclusion

The FCA continues to place Financial Crime Compliance at the forefront of its supervisory and enforcement strategy, and greater expectations are being placed on firms to have an adequate and robust Financial Crime Compliance framework.

How DWF can support you

We understand tackling financial crime presents significant commercial challenges for financial insitutions. The complex regulatory landscape and the threat posed by determined and often sophisticated criminal enterprises places resources under increasing strain.

In terms of areas where we help clients, we focus on AML frameworks, client take-on and risk assessment to name just a few areas. Our Economic Crime & Fraud offering also includes a range of financial crime prevention services such as:

  • Anti-Bribery & Corruption expertise
  • Fraud prevention and sanctions assistance

We are also assisting clients meet their obligations relating to The Money laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 amendments.

We are uniquely placed with our combination of lawyers and regulatory consultants and can help with your Financial Crime Compliance needs. Whether you want adhoc support of various questions or an independent third party review, our team can provide one integrated soltution with a blend of knowledge and expertise across the regulatory spectrum which puts us in a leading position in the market.

Further Reading