FCA calls on firms to be bolder in the fight against financial crime

It comes as the FCA recently provided an update on its strategy to combat financial crime. The FCA has identified four focus areas to “shift the dial on financial crime”. These areas are data and technology, collaboration, awareness, and metrics.

The update builds on the FCA’s three-year plan that prioritised tackling fraud, money laundering, market abuse and sanctions evasion. The FCA has already made some progress in certain areas, particularly in cracking down on illegal financial promotions and scam adverts but “whether this latest call to action spurs more meaningful action in the face of ever more sophisticated frauds using AI remains to be seen,” Anthony Harrison, financial services regulatory expert at Pinsent Masons said.

The latest publication “intensifies focus on systems and controls to detect financial crime, with a strong emphasis on data testing,” Harrison said. That focus is consistent with the FCA holding itself out as a “data-led” regulator, looking to adopt bolder and more innovative solutions to prevent financial crime. That approach is reflected in the FCA’s use of advanced analytics and machine learning algorithms to detect patterns and trends in financial transactions that could indicate fraudulent activity or market abusive practices. Businesses are also urged to use similar preventative measures.

“The FCA made clear that firms need to take steps to assure themselves that surveillance procedures which identity and report such activities are robust, particularly with regard to targeted surveillance,” he said.

Overall, the FCA urges a collaborative approach in the fight against financial crime. It aims to foster collaboration between regulatory bodies, financial institutions, tech companies and law enforcement agencies to share information and best practices and ways in which financial crime has been prevented and addressed by firms. This collaborative approach sets out to enhance the effectiveness of all anti-financial crime measures.

The authority also plans to educate consumers about the risks of financial crime. This includes raising awareness about common scams and promoting safe online banks practices. Customer-facing firms, such as those in retail financial services, are expected to fine-tune measures of consumer protection in line with this. “Scams and other types of fraud can often be an important indicator of systemic issues, highlighting control weaknesses which may need to be investigated and addressed to mitigate regulatory exposure. Failure to address these early and effectively can lead to much more significant and costly regulator interventions for a firm further down the line,” Harrison said.

The FCA will continue to enforce strict compliance with financial regulations as a deterrent against financial crime. Financial institutions will be held accountable for their role in preventing financial crime, with stringent penalties for non-compliance. The FCA’s executive director of markets, Sarah Pritchard, said that the FCA is “changing” as an organisation in response to increasing threats of financial crime against consumers as living costs rise.