Are You Prepared for the FCA’s Crackdown?

The FCA has taken a decisive step forward in its regulatory approach, as highlighted in its latest annual report and outcome metrics. The FCA’s message to the financial services industry is clear: firms must strengthen governance, risk management, and AML compliance—or face serious consequences. This tougher stance reflects the regulator’s strategic shift toward becoming more proactive, assertive, and data-driven, as it grapples with increasing concerns around consumer protection, financial crime, and market integrity.

In recent years, the FCA has consistently signalled its intention to take firmer action against firms that fail to meet their regulatory obligations. The latest data in the FCA’s annual report issued last week illustrates how this approach is playing out, particularly in the realm of financial crime. The numbers paint a picture of a regulator that is not only willing but ready to act when it detects harm or serious breaches, using a wide range of intervention tools to stop misconduct in its tracks.

A More Assertive FCA: Key Metrics in the Annual Report

One of the standout revelations from the FCA’s 2023 report is the significant increase in enforcement activity, particularly around financial crime. Since April 2023, the FCA has charged 21 individuals with financial crime offences — the highest number of charges in a single year. This surge underscores the regulator’s increasing focus on addressing financial crime as a core part of its mission to protect consumers and ensure market integrity.

There is also a 37% increase in the number of financial crime cases opened during the 2023/24 fiscal year compared to the previous year. Many of these cases relate to issues in the provision of banking services, and the sharp rise is attributed to the FCA’s improved use of data and technology, enabling it to more efficiently identify risks and prioritise cases. By leveraging advanced data analytics, the FCA is better positioned to pinpoint and address potential harm earlier.

Skilled Person Reviews: The S166 Surge

In 2023/24, the FCA also significantly increased its use of skilled person reviews under Section 166 (S166) of the Financial Services and Markets Act 2000. These reviews allow the FCA to appoint external experts to scrutinise specific areas of concern within regulated firms, such as governance, AML compliance, or market conduct. According to the latest figures, the number of S166 reviews rose from 45 in 2023 to 83 in 2024, with 23 of those directly related to financial crime compliance.

The rise in S166 reviews indicates that the FCA is doubling down on its oversight of firms, particularly those with potential weaknesses in their financial crime controls. This is a clear sign that firms cannot afford to be complacent when it comes to maintaining strong governance and compliance frameworks. Those found lacking are increasingly subject to skilled person reviews, which can be both costly and reputationally damaging.

Own-Initiative Interventions: The FCA’s Growing Toolkit

Another notable shift in the FCA’s approach has been its increased use of own-initiative interventions (OII). These interventions allow the FCA to take immediate action against firms that it believes pose a risk to consumers or the financial system. The FCA’s report shows a marked rise in OIIs compared to the previous two years, with the regulator deploying 268 intervention tools between July 2023 and April 2024 that had not been previously reported.

These interventions can range from requiring firms to take specific actions, to stopping or restricting their activities, withdrawing permissions, or imposing conditions on their approval to operate. The spike in OIIs demonstrates the FCA’s willingness to act swiftly and decisively, using the full spectrum of its powers to prevent serious harm before it occurs. For firms, this means that even minor regulatory breaches can now lead to significant regulatory scrutiny and, potentially, major operational restrictions.

Technology and Data: The FCA’s Future

A critical aspect of the FCA’s strategy moving forward is its reliance on data and technology to enhance its regulatory oversight. As financial crime becomes more sophisticated, particularly with the rapid adoption of new technologies such as cryptocurrency, artificial intelligence, and digital banking, the FCA is urging firms to keep pace with these developments.

The regulator’s data-driven approach allows it to identify risks earlier and more accurately, enabling it to intervene before issues escalate. This strategy is aimed at improving consumer outcomes and protecting the financial system from systemic risks. For firms, this means that investing in technology and data analytics is not just a regulatory requirement — it is a competitive necessity.

Killer Questions: Are You Ready?

In its February 2024 update, the FCA presented a series of “killer questions” that all firms should be asking themselves to ensure they are adequately managing the risks posed by financial crime. These questions reflect the FCA’s increasing focus on accountability and responsibility within firms. They include:

• Do you know how criminals use new technologies to target your customers and your firm?
• How does your firm stay updated on new techniques or typologies used by criminals?
• Is your firm continuously learning from industry best practices and adapting accordingly?
• Is your firm investing in technology and data to effectively combat financial crime?

Firms that cannot confidently answer these questions may find themselves at risk of falling behind in their compliance efforts, making them more vulnerable to regulatory scrutiny and enforcement actions.

The Rise of Financial Crime: Is Your Training Up to Standard?

With the FCA stepping up its enforcement activities and using data more effectively to detect financial crime, firms need to ensure that their financial crime compliance frameworks are robust and fit for purpose. A key component of this is ensuring that staff are adequately trained to recognise and respond to potential financial crime risks.

Training should not be seen as a box-ticking exercise but as a critical line of defence in protecting your firm from both internal and external threats. Effective training helps employees understand the evolving tactics used by criminals and ensures they are aware of the latest regulatory requirements.

Strengthen Your Financial Crime Compliance with Great Chatwell of Learning

Is your firm’s financial crime compliance training as effective as it should be? Are your staff equipped with the knowledge and tools they need to detect and prevent financial crime?

If you’re unsure, it’s time to act. Great Chatwell of Learning (GCAL) offers expert financial crime compliance training designed to help firms meet regulatory expectations and stay ahead of evolving risks. With tailored training programs and ongoing support, GCAL can help your team stay informed and proactive, reducing the risk of regulatory breaches and enforcement actions.

Don’t wait until it’s too late. Get in touch at info@greatchatwellacademy.com today to ensure your firm is fully prepared to meet the FCA’s growing expectations. The cost of non-compliance is too high—make sure your training is up to the challenge.