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New figures suggest 2019 was a big year for the FCA when it came to fines, as it gets increasingly tough on a range of oversights. From mis-selling, to company culture and failing to protect customers, the regulator is making good on its commitment to clean up the financial sector. The lesson for financial institutions is that compliance is becoming increasingly central to their business.

According to a report in the Financial Times, penalties levied by the FCA totaled £391 million in 2019 – six times higher than in 2018 and the highest since 2015. A growing number of those fines were in “block buster” territory with nine fines being higher than £10 million, compared to just two in 2018.

The dubious honour of the top offender goes to Standard Chartered who were fined £102 million in April as part of a wider $1.1 billion set of penalties for violating sanctions and failing to heed red flags about its customers, even when one of them opened an account with $500,000 stuffed in a suitcase.

The biggest fine for an individual was £76 million for Stewart Ford who was behind the so-called death bond firm Keydata.

The most common breach has been mis-selling with Carphone Warehouse and Standard Life both receiving fines of around £30 million.

Lessons to learn

The FCA is flexing its muscles and showing a greater willingness to use its powers and fight cases. That will mean a number of things going forward…

Costs of compliance is likely to grow: A recent survey from risk.net found that 62% of firms expect their total compliance budget to increase over the next 12 months and 64% expect the cost of senior compliance staff to increase.
Personal liability will rise: The same survey finds that 70% expect the personal liability of staff to rise. The arrival of SMCR is going to put senior managers directly under the spotlight.
Culture will need to improve: The FCA has made a number of statements about the value of culture and their intention to use it as a risk evaluator for compliance. Risk.net’s survey finds that 71% of firms expect more compliance involvement in establishing a compliant tone.
Leading by example: Senior figures will have to lead from the top. They must ensure an environment where positive behaviour is rewarded
Oversight: A common theme in breaches over the year has been a lack of oversight. Firms will be expected to demonstrate that they have done everything they can to ensure a positive culture is put in place and people on the front line are adhering to that culture day in day out.
Reporting and transparency: As a look at the breaches on our Global Regulatory database demonstrates, failure to respond quickly and be transparent exacerbates the scale of fines. Firms will need to be open about measures they are taking and to demonstrate that they have taken all reasonable steps to comply with the rules.

A busy year ahead

2020 is likely to be an extremely busy year as firms get used to new regulations and the stance taken by regulators. Compliance will be a constant issue and will be a drain on resources. Firms will help themselves by putting compliance front and centre, staying up to date with developments, learning lessons from the mistakes of others and establishing a positive culture which minimises the chances of further non-compliance.


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