FCA updates on reducing and preventing financial crime

FCA is now half way through its 3 year strategy on reducing and preventing financial crime, and has summarised its work over the last 18 months. It notes that:

• when it set its strategy, there was no national plan (the Government published both the Economic Crime Plan 2 and the Fraud Strategy in 2023), so its priority was to reduce growth in fraud before aiming for an outright reduction – and to pay particular focus to investment and APP fraud;
• FCA is pleased with the impact of its work although there is more to be done.  FCA’s focus is on prevention, including issuing increasing scam warnings and investing in media campaigns as well as persuading platforms to tackle illegal financial promotions and scam ads;
• it has conducted and published reviews on how firms mitigate fraud risks and will support implementation of mandatory APP fraud reimbursement;
• it is working with Treasury and PSR on changes to allow firms to slow down payments when they suspect fraud;
• on the enforcement side, it has charged 15 individuals with fraud offences, and will be charging more imminently;
• it has taken a “robust and proportionate” approach to authorisation and MLR registration applications – including approving only 60% of Annex I applications (as well as barely over 10% of crypto ones); and
• it continues to work with OPBAS to improve supervision and compliance of OPBAS firms.

Going forwards, FCA will focus on four areas:

• data and technology: FCA says firms must ensure their systems and controls keep up with the sophistication of criminals and must calibrate how they use technology for maximum efficiency – it gives an example of how a firm might use behavioural biometrics to tackle APP fraud, and suggests questions boards might ask to challenge how their firms are using tech to help fight against financial crime;
• collaboration: FCA’s example of its engagement with platforms such that the major platforms will not now accept unapproved “paid for” ads shows how working across sectors can be effective;
• consumer awareness: FCA gives the example of its “finfluencers” campaign to raise awareness and understanding, and notes its upcoming refreshed social media guidance; and
• metrics – measuring effectiveness: it wants firms to be able to measure their own effectiveness at preventing financial crime through using outcomes and metrics.

FCA will also support Government proposals to reform the AML supervisory regime, and favours a single professional service supervisor.