Therese Chambers, joint executive director of enforcement and market oversight at the FCA, told the AFME Annual European Compliance and Legal Conference that the FCA plans to take a hard line on financial crime. In particular she spoke about how the FCA are approaching “the lightning rod” of greater transparency and gave an update on recent enforcement outcomes.

Transparency – ‘name and shame’

Following industry backlash and the rare government intervention by the former UK Chancellor Jeremy Hunt to urge the FCA to rethink its decision to name and shame companies under investigation, Chambers was eager to explain to the conference that the FCA is listening to industry concerns.

While consumers groups, whistleblowers and some other regulators welcomed the prospect of greater transparency, the companies the FCA regulate “were overwhelmingly against” its proposals, she said.

Accelerating investigations and adopting a “laser focus” on cases has been widely welcomed, but Chambers acknowledged “the lightning rod has clearly been proposals for greater transparency on who we are investigating and why.”

Chambers assured the conference that the FCA is listening and that the regulator’s staff have analysed more than 130 responses to the consultation. “And we are not going to rush this,” she said.

The current enforcement approach, bar ‘exceptional circumstances’, is for the FCA to remain silent during the period between looking into a potential issue and reaching an outcome. In practice, Chambers explained, “is that ‘exceptional circumstances’ has usually translated into ‘computer says no’ in response to requests for further information.” This is why the FCA have put forward a proposal for greater transparency on their investigations into firms, where it was in the public interest.

“The lightning rod has clearly been proposals for greater transparency on who we are investigating and why.”

Therese Chambers, joint executive director of enforcement and market oversight at the FCA

In defending the FCA’s stance, Chambers gave the example where “a fellow UK regulator can announce an investigation, but we would be unlikely to be able to announce – also in a factual and measured way – that we too were running enquiries.” In the recent investigation resulting in a fine for PwC the FRC was able to announce an investigation running parallel to the FCA’s around 2 years before the FCA confirmed their findings.

Chambers expressed her intent that this does not mean “a blanket ‘computer says yes’ approach.” The FCA’s future plans are “a case-by-case approach following assessment of clearly defined criteria – including consideration of the potential impact on the firm and market.” She added, “but we heard loud and clear that the criteria we consulted on were too high level and lacked specificity.”

In the autumn, the FCA will meet with trade associations, firms and those on all sides of the debate, to explore how the FCA’s transparency proposals can be developed. This will include developing a “greater definition on any new public interest test.”

And in late autumn the FCA will provide further detail on how it could work in practice and will also publish case studies examining how the criteria might apply and what announcements could look like, as well as more information on the numbers of cases that might be affected.

“We said we believed the proposals were disproportionate as they could result in firms suffering real damage to their reputation and valuation.”

UK Finance

Chambers reassured the conference that the FCA has heard the concern that firms felt they would not have sufficient time to make representations, and they will respond to the constructive feedback they have received. The FCA are proposing to allow firms time to provide their views on “whether, what and when” the FCA makes an announcement.

Chambers said: “We are committed to achieving this in the right way for UK consumers and markets, so we won’t be rushing into any decisions. We want the right solutions, not the quickest ones. And rest assured, as we work to find those solutions, we will be mindful of all our objectives – including supporting the international competitiveness of the UK’s financial services and the medium to long term growth of the economy.”

Mixed reactions from industry

However, many in the industry have not welcomed the continuance of the FCA’s proposals on transparency.

Nathan Willmott, partner at Ashurst specialising in regulatory investigations and enforcement told GRIP: “It is deeply disappointing that the FCA Board hasn’t taken the decision to quietly shelve these proposals over the summer, as they have become a real distraction from the regulator’s day job of investigating suspected wrongdoing and taking appropriate action. 

“Regardless of the comforting noises from Therese Chambers, it is clear that none of the reasons put forward for wanting to introduce this new policy stand scrutiny.”

Explaining his reasons, Willmott said: “It is abundantly clear to the industry that the real reason for Therese Chambers pushing for this power is to enable the FCA to frontload its enforcement ‘outcomes’ through media reports of ‘suspected wrongdoing’ by named financial services firms. 

“Massive reputational damage will be suffered by firms at that point, even where (as happens in two out of every three cases) the FCA ultimately concludes that there has been no wrongdoing. The policy would therefore have the effect of significantly undermining public confidence in the sector and would also put the UK financial services industry at a huge competitive disadvantage against other financial markets.”

“Regardless of the comforting noises from Therese Chambers, it is clear that none of the reasons put forward for wanting to introduce this new policy stand scrutiny.”

Nathan Willmott, partner at Ashurst specialising in regulatory investigations and enforcement

UK Finance, a British trade association for the UK banking and financial services sector representing over 300 firms has been measured in their response to GRIP. A UK Finance spokesperson said: “In our response to the FCA’s consultation on its plans to publicly name firms under investigation, we highlighted a number of issues.

“We said we believed the proposals were disproportionate as they could result in firms suffering real damage to their reputation and valuation, given the majority of FCA investigations are closed with no further action.

“We are due to meet with the FCA and look forward to engaging with them as they take on board feedback and further develop their plans.”

2024 enforcement highlights

Reducing and preventing serious harm from financial crime is a primary focus of the FCA’s current strategy and Chambers said this will be continued into 2025.

Recent successful outcomes

• In September the FCA fined PWC £15m ($20m)for failing to alert the regulator to suspected fraudulent activity at London Capital & Finance.
• The FCA brought charges against 9 “finfluencers” for promoting foreign exchange trading schemes on social media without authorization.
• An investigation into Coinbase Group for breaking restrictions and allowing thousands of high-risk customers to make cryptoasset transactions totalling around $226m was concluded. The investigation was completed in just 16 months and the firm received a multimillion pound fine.
• Prosecuting an individual for running a network of illegal crypto ATMs – a thorough and focused investigation which took 15 months to complete.
• The FCA worked with the French regulator, the AMF, to censure asset manager H2O LLP for failures which had left investors unable to access their funds since 2020, securing €250m ($280m) in redress for the investors who had lost out.
• Together with the PRA, the FCA fined Citigroup £61.6m($82.5m) for failures in the firm’s systems and controls. These failures had allowed a trader to erroneously sell $1.4bn of equities in European markets in May 2022 when they should not have been able to do so.
• 45 people are currently facing FCA criminal proceedings, covering offenses ranging from fraud to forgery, and from insider dealing to money laundering. 

Data and technology

The FCA’s Market Oversight teams are using digital tools to monitor the market and detect misconduct in real time. Their recent successes include:

• Trading data coverage has doubled from 500m to around 1 billion records per day; 
• The FCA has refreshed its analytical tools which have helped spot complex patterns including those involving organized crime groups;
• The Cyber Forensics Unit is equipped with the latest technology and expertise to handle complex digital forensic tasks.

Chambers said, “I may be biased, but I think they [Market Oversight teams] are the unsung heroes at the FCA!”